Seiner Exzellenz Herrn Frank-Walter STEINMEIER Bundesminister des Auswärtigen Werderscher Markt 1 D Berlin EUROPEAN COMMISSION

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1 EUROPEAN COMMISSION Brussels, 18.XII.2007 K(2007)6751 In the published version of this decision, some information has been omitted, pursuant to articles 24 and 25 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty, concerning nondisclosure of information covered by professional secrecy. The omissions are shown thus [ ]. PUBLIC VERSION WORKING LANGUAGE This document is made available for information purposes only. Subject: State aid N 467/ Germany - Risk Capital Scheme 'Creative Sectors Fund Berlin' Dear Sir, 1. PROCEDURE (1) By letter dated 9 August 2007, registered on the same day, Germany notified the aid measure referred to above. (2) By letter of 24 September 2007, the Commission asked for additional information on the measure s subject matter. The German authorities responded by letter of 19 October 2007, registered on the same day. Seiner Exzellenz Herrn Frank-Walter STEINMEIER Bundesminister des Auswärtigen Werderscher Markt 1 D Berlin Commission européenne, B-1049 Bruxelles Belgique - Europese Commissie, B-1049 Brussel België Telefon: (0)

2 2. DESCRIPTION OF THE MEASURE: (3) The German authorities informed the Commission that they consider the notified measure not to constitute State aid in the meaning of Art. 87 (1) of the EC Treaty Objectives of the measure (4) The City of Berlin, which has the status of a German Land, intends to establish a risk capital investment fund VC Fonds Kreativwirtschaft Berlin (thereinafter the Fund ). The Fund s purpose is to provide capital to SMEs which are doing business in so called creative sectors. For the purposes of the Fund, such sectors are: Film, radio and television; Publishing; Music and entertainment; Advertising; Fashion, design and architecture; Multimedia, games and software; Art and culture. (5) Berlin authorities hope that the measure will both directly and indirectly improve the financing conditions for creative-sector SMEs in the City. In particular, the scheme is intended to afford them an easier access to private equity capital and outside capital. Financing will be provided through equity financing, silent participations and shareholder loans. Thus, the Fund is expected to stimulate the economic development of Berlin-based creative industries. Such stimulus, in turn, is expected to bring about a positive economic impact on the entire region Budget of the measure (6) The Fund will be endowed with a capital of EUR 30 million, in annual instalments. 50% of that capital will come from European Regional Development Fund (ERDF)- financing. The remaining 50% will be provided by Investitionsbank Berlin (thereinafter IBB ). IBB is in 100%-public ownership 1. (7) Summary table annual instalments Year Million EUR IBB is an entity under public law with public-sector responsibility. It operates under a refinancing guarantee by the Land of Berlin. The task of IBB is laid down in Verordnung über die Satzung der Investitonsbank Berlin (Regulation on IBB s statutes), as adopted by the Berlin Senate. Accordingly, IBB has structural as well as aid-related functions. It has to assist Land Berlin in its public tasks. In particular, IBB is assigned with carrying out aid measures, in compliance with Community State aid rules. It may do so in specific areas, amongst them risk capital. 2

3 Total budget Duration of the measure (8) Germany committed to implement the notified measure only after the Commission has approved of it. The initial Fund capital is expected to be invested by the end of Return flows of capital could be committed to investments even after 31 December The life time of the Fund is set to expire on 31 December 2018, with a prolongation option of up to two years Legal basis (9) The measure s legal base are the Fund's Investment Statutes - Beteiligungsgrundsätze VC Fonds Kreativwirtschaft Berlin Target enterprises invested in by the Fund (10) According to the German authorities, the Fund will invest only in SMEs falling within the Community definition 2. Eligible SMEs must either have registered office (Sitz) or a business location (Betriebsstätte) in Berlin. Essential parts of the activities financed by the Fund must be carried out in Berlin. (11) Firms in difficulty, as defined in the Community Guidelines on State aid for rescuing and restructuring firms in difficulty 3, do not qualify for financing under the measure. Aid for export-related activities, namely aid directly linked to the quantities exported, to the establishment and operation of a distribution network or to other current expenditure linked to the export activity, as well as aid contingent upon the use of domestic in preference to imported goods is also excluded from the Fund s scope. (12) Financing for the setting-up and operation of a distribution network will only be provided at market conditions. Financing may consist of equity capital with at least a 50%-co-financing by private investors at pari passu-conditions, meaning that public and private investors share exactly the same upside and downside risks and rewards and hold the same level of subordination; or Shareholder loans at market-rates with interest rates commensurate to the risk. (13) Target SMEs must not be listed on a regulated market (börsennotiert an einem geregelten Markt). Target SMEs must be profit-driven and show a great potential 2 OJ L 124, , p OJ C 244, , p.2. 3

4 for appreciation and growth. Further, they must provide a plausible business plan. Lastly, there must be an exit outlook, i.e. the sale of the participation Set-up of the Fund measure (14) The Fund will be invested with the legal form of a limited liability company (Gesellschaft mit beschränkter Haftung GmbH). IBB will be the Fund's only shareholder. Germany explicitly assured that the Fund will not operate independently, but will purely act as an intermediary vehicle. Its exclusive purpose will be the provision of financing to eligible target SMEs in the framework of the notified measure. (15) The Fund will be managed by IBB Beteiligungsgesellschaft mbh (thereinafter "the managing company"), which is a 100%-affiliate of IBB. (16) The measure will be structured as follows: Land Berlin (competent authority: Senatsverwaltung für Wirtschaft, Technologie und Frauen) ERDFresources granting contract Public bank: IBB 30 MEUR 100% affiliation Fund VC Fonds Kreativwirtschaft Berlin GmbH Contract on business activity Fund management: IBB- Beteiligungsgesellschaft mbh Capital provision Target SMEs 2.7. Investment instruments (17) The Fund will resort to equity investments, silent participations and shareholder loans. Thus, the Fund will provide financing of up to EUR 1.5 million in any 12- months period, per SME. Total capital provisions per SME will amount to EUR 3 million at most Equity investments and silent participations: (18) According to the Fund's investment statutes, investments will on principle be made in equity capital (Grund- oder Stammkapital). Such investments may be supplemented by silent participations (stille Beteiligungen) or shareholder loans (Gesellschafterdarlehen). According to the German authorities, the Fund will 4

5 preferentially invest in equity capital and silent participations. Such investments will only constitute minority stakes. (19) Silent participations will be remunerated by both a fixed and a variable interest and may be subordinated Shareholder loans (20) As regards the measure in question, the German authorities consider shareholder loans to be granted at market conditions. In particular, they pointed out that interest rates will be commensurate to the risks. (21) In order to substantiate that argument, Germany informed the Commission of the interest calculation method applied for the purposes of the Fund. As a basic rate, the reference and discount rate for Germany will apply 4. Since shareholder loans will as a rule not be collateralised, this rate will be increased by 400 basis points. The basic rate including that top-up will be increased by a risk premium that will depend on the target SME's rating. (22) The rating method and risk premium allocation will be as follows. The target SMEs' rating will be based on IBB's five-classes rating system. According to Germany, this rating system had been specially conceived in view of young growing enterprises and has proved its worth for years. The rating system is subject to annual evaluation by IBB's chartered accountant, Price Waterhouse Coopers (PWC). Such evaluation is done with regard to the rating system's adequate risk analysis and systemised approach. The latest evaluation was made in February 2007 and found the rating system to be an adequate means to early detect any risks that could compromise IBB's business. (23) Should a shareholder loan be subordinated, an extra 200 basis points will be charged. (24) Applicable floor rates 5 - recapitulatory table: Basic interest rate current reference/discount rate for Germany Non-collateralisation surcharge Rating class surcharges VC-1 (very good) VC-2 VC-3 VC Basis points 4 Published in accordance with Article 10 of Commission Regulation (EC) 794/2004 of 21 April 2004 (OJ L 140, , p. 1), and the Commission notice on the method for setting the reference and discount rates (OJ C 273, , p. 3); the current rate is 5.42% ( 5 For example, the interest rate due for an unsecured, subordinate shareholder loan to a VC-4 rated SME may thus at least amount to 5.42% = 9.82% (based on the reference rate for Germany, as from 1 October 2007). 5

6 VC-5 (unsatisfactory) (ineligible) Subordination surcharge (25) Germany informed the Commission that the interest calculation method, as described above, constitutes a minimum rate only. In cases where a private investor provides at least 50% of one shareholder loan at exactly the same terms and conditions alongside the Fund, the latter will fall in with the same interest rate as determined by the private investor Financing of the scheme - Public and Private Intervention State intervention (26) The Land of Berlin will provide EUR 15 million budgetary funds to its public bank IBB. These funds, in turn, come from EFRE-resources. IBB will match that amount with EUR 15 million from its own resources. These are to be considered as public resources, too. The Fund will be endowed with the total amount thus raised Private sector participation (27) The German authorities informed the Commission that they had evaluated the interest of private investors in acceding to the Fund. That evaluation was based on interviews with private fund-investors and industry experts (Branchenkenner) in 2007, as well as on feedback received during the search for private investors for VC-Fonds Berlin 6. The main reasons that were brought forward for not participating in the Fund in question were: A very high risk, combined with low rates of return, as compared to management-buy-outs/buy-ins or bridge-financing; The monitoring and supervision costs are high in relation to the volume of the transactions; The limited investment radius, due to the need for geographical proximity, which in turn results from high monitoring and supervision expenses; Relatively low management fees, due to the small volume of transactions. (28) Based on that evaluation, the German authorities consider that a market failure is affecting the market segment on which the Fund is intended to operate and that the Fund does not offer satisfactory advantages for private investors. Thus, they perceived only little or even no interest of private investors to participate at the level of the Fund. That is why the German authorities decided to involve private investors at the level of each transaction, alongside the Fund's operations, rather than at Fund level. 6 State aid N 212/2004; Commission decision not to raise objections, of ; OJ C 95, , p.8. 6

7 (29) In each individual case, at least 50% of the equity investment and silent participation concerned will be financed from private resources. In each case, the Fund will only conclude an investment agreement on exactly the same terms as the private investors do. (30) Equity investments and silent participations not exceeding EUR 200,000 over any period of three fiscal years can be concluded without concomitant private investments. Germany declared that this will only be the case as regards investments being in accordance with Commission Regulation (EC) No 1998/2006 of 15 December 2006 on the application of Articles 87 and 88 of the Treaty to de minimis aid 7. In any case, the Fund will resort to such de minimis-financing only in exceptional cases. (31) As concerns the granting of shareholder loans, private investors will not necessarily be involved in each transaction. In this respect, the German authorities referred to the conditions applicable to shareholder loan arrangements (see above), which they consider as market driven. (32) Private investors will be independent of the target enterprises. According to information provided by the German authorities, independence will be ensured by the measures described hereunder: The shareholder structure and existing contractual relations of the potential target enterprise will be scrutinised in the due-diligence process. The possible existence of linked enterprises will be examined on the base of the assessment criteria laid down in Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of small and medium sized enterprises 8 ; The target enterprises' shareholders will be obliged to issue a written guarantee on the correctness of the information they had submitted on affiliates or any other linked enterprises; The proposals submitted to the investment committee, as the mandatory base for each investment decision, must demonstrate that that the private co-investors involved are neither linked enterprises, nor partner enterprises, and that there are no other relations with the target enterprises, e.g. through the position of a managing shareholder. The investment committee will only take a positive decision when the private investors' independence has been scrutinised and demonstrated Investment decisions evaluation of target SMEs (33) The Fund management will take its investment decisions after an ex-ante evaluation of the target SME. According to the German authorities, such evaluation will be strictly based on commercial selection criteria, as enumerated hereunder: Market potential and competition-related situation Management 7 OJ L 379, , p OJ L 124, , p. 36 7

8 Capital demand Potential for appreciation Opportunities/risk analysis Exit strategy. (34) The Fund's investment statutes stipulate that the Fund management shall ensure That capital is only provided for a defined project; That the enterprise invested in must provide a report on the project at the latest three months after completion of the project Fund management decision making (35) Investments will only be made upon unanimous decision by the investment committee. That committee will consist of the executive directors (Geschäftsführer) as well as of competent employees of the managing company IBB Beteiligungsgesellschaft mbh (thereinafter "the managing company"). (36) According to the German authorities, investment decisions will exclusively be taken from a commercial point of view. They further declared that any political influence on the managing company's investment decisions will be excluded. The German authorities corroborated that statement with the following arguments. (37) Firstly, neither the Land of Berlin nor IBB can give instructions to the managing company. Secondly, political interests or IBB-related interests will not have any positive influence on, or participation in, the investment committee. The granting agreement between the Land of Berlin and IBB stipulates that the concluding parties commit to ensure the Fund's and the managing company's independence of any economic policy interests of the Land of Berlin and business policy interests of IBB Fund management - remuneration (38) Remuneration of the managing company will consist of two components. Firstly, the managing company will receive 2.5% of the Fund's committed capital annually as management fee, during the five-year investment phase. After the investment phase has ended, the management fee will be calculated based on the capital invested less the acquisition costs of sold or defaulted shares. The German authorities consider that remuneration to reflect customary market rates. They corroborated that statement by the findings hereunder, as well as and corresponding documentation. (39) As regards the 2.5%-management fee, the German authorities adduced a report on the German venture capital market, done in That report was based on a study of 22 venture capital funds, which are comparable to the fund in question. As a base for comparison, the German authorities informed the authors of the report of the parameters of the planned Fund, in particular its volume, target enterprises, 8

9 investment strategy, duration, and other essential data. The study was carried out by [ ], a Munich-based business consultancy. (40) According to that report, 77% of the funds evaluated receive an annual 2.5%- management fee. 9% receive an even higher fee, and 14% receive a fee that is lower than 2.5%. The fees evaluated are based on committed capital and in most cases are digressive during the respective fund's duration. The German authorities provided a copy of the letter by which the consultancy informs IBB of its findings, dated 7 March (41) According to the German authorities, the Funds examined tended to focus on more mature target enterprises, thus having a larger volume than the planned Fund measure. As larger funds would, as a rule, apply lower management fees, the German authorities assume that the percentage ascertained by the study rather constitutes the minimum for smaller-volume funds such as the Fund in question. (42) The German authorities further provided more recent information on management fees, based on a letter to IBB, dated 8 February 2007, from the Munich-based business consultancy [ ], to IBB. [ ] is focused on the venture Capital und private equity sector. As said by that letter, [ ] had analysed 8 funds, established within the past 18 months by institutional investors. In all cases, the management fee was 2.5% annually. According to [ ], those fees were based on committed capital and applied during the funds' duration. (43) Lastly, [ ], a Munich-based venture capital provider, informed IBB, upon its request, on management fees. With its response letter, dated 7 March 2007, [ ] confirms that a 2.5%-fee in a fund's investment phase is to be considered as a market rate. The letter further confirms that the fee is usually reduced either, for the remaining fund duration, to 2% of the fund capital or, alternatively, by adapting the calculation base to capital invested less the acquisition price of sold or defaulted shares while maintaining the 2.5%-rate. (44) The second component of the remuneration is profit-dependent, being 20% of the Fund's profit Fund management selection of the management company (45) As mentioned above, the Fund will be managed by an affiliate of IBB, namely IBB Beteiligungsgesellschaft mbh. That management company had not been selected by a public tender procedure. According to the German authorities, IBB Beteiligungsgesellschaft mbh is the only management company in Berlin that has the expertise to manage funds with ERDF co-financing in strict compliance with Community and Land-legislation. (46) The German authorities had made an evaluation of the management capabilities available in the region. They focused on the region as they consider proximity to be vital for managing funds of that size and scope. The evaluation yielded that no fund management with a track record comparable to IBB Beteiligungsgesellschaft mbh existed in the region. Business secret 9

10 (47) On 19 October 2007, Germany informed the Commission that the Senate of Berlin is currently preparing a letter to IBB, on the base of Art. 5 (2) of Berlin's IBB-act ( 5 Abs. 2 IBB-Gesetz), to instruct IBB to implement the fund measure in question. According to the German authorities, IBB is authorised to fall back on one of its affiliates to carry out that task, in compliance with the German law applicable, in which Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts 9 had been transposed 10. With reference to IBB's 100% ownership of IBB Beteiligungsgesellschaft mbh, Germany further holds that the commissioning of said management company is to be considered as a so-called in-house transaction, as regards the commissioning of an affiliate which is by 100% owned by the contracting entity. Hence, according to Germany, public tender rules and provisions would not apply. 3. ASSESSMENT 3.1. Compliance with the obligation to notify in Article 88(3) of the EC Treaty (48) Germany has notified the measure in accordance with Article 88(3) of the EC Treaty. The Commission notes that Germany does not consider the measure to constitute State aid in the meaning of Article 87(1) of the EC Treaty. The Commission further notes Germany's commitment to implement the measure only after the Commission has approved it Relevant Community rules (49) The Fund and its investments are directly financed by State resources, namely from the budget of the Land of Berlin, drawing on ERDF-co-financing, and from the own resources of IBB, which is a public bank. (50) The purpose of the measure in question is to provide capital to a limited number of undertakings (SMEs) that are to be selected during its implementation phase. Hence, the measure is selective. In addition, the financing under the programme could improve the overall financial condition and enhances the market position of the parties involved, namely the Fund, the Fund management company, investors operating alongside the Fund and the enterprises invested in. Furthermore, the measure under scrutiny does not rule out the award of aid to firms engaged in economic sectors where intra-community trade takes place. Thus, the fund and its operations could constitute aid within the meaning of Article 87(1) EC. (51) The assessment of this measure could fall within the scope of the Community Guidelines on State aid to promote risk capital investments in small and mediumsized enterprises (thereinafter the Guidelines ) 11. For the Guidelines to be applicable the following conditions, as laid down in Section 2.1 of the Guidelines, must be met: Firstly, the measure must be a scheme, targeting SMEs. Secondly, the 9 OJ L 209, , p The applicable national law is the Act against Restrictions of Competition (Vierter Teil des Gesetzes gegen Wettbewerbsbeschränkungen - GWGB ( 97 et seq. GWB)), and Public Tender and Acquistion Regulations (Vergabeverorordnung; Verdingungsordnung für Leistungen VOL, Teil A). 11 OJ C 194, , p.2. 10

11 measure must not be intended to provide capital to an individual enterprise (ad hocmeasure). Thirdly, the measure must exclude aid to enterprises in difficulty as defined in the Community Guidelines on State aid for rescuing and restructuring firms in difficulty and in the shipbuilding, coal and steel industry. Lastly, the Guidelines do not apply to aid for export-related activities, namely aid directly linked to the quantities exported, to the establishment and operation of a distribution network or to other current expenditure linked to the export activity, as well as aid contingent upon the use of domestic in preference to imported goods. (52) The measure in question is designed as a scheme and does not comprise any element of ad-hoc aid. It will consist of a Fund which provides financing in the form of equity capital, silent participations and shareholder loans to SMEs. The latter will be in their seed- and start-up stage. It is not intended to provide aid to an individual enterprise (ad hoc measure). Furthermore, funding under the measure will not be provided to enterprises in difficulty and enterprises in the shipbuilding, coal and steel industry. Neither will any funding be directly linked to export-related activities. (53) Hence, all exclusionary conditions set out in Section 2.1 of the Guidelines are met. Consequently, the Guidelines apply to the risk capital measure in question. For this reason, the Commission based its assessment of the existence of State aid on said Guidelines Shareholder loans - Presence of State aid within the meaning of Article 87(1) of the EC (54) The measure provides for the financing of SMEs through shareholder loans. According to the Commission notice on the method for setting the reference and discount rates 12 the Commission establishes reference rates which are supposed to reflect the average level of interest rates charged in the market on medium and long term loans backed by normal securities. The notice also points out that this reference rate is a floor rate which may be increased in situations involving a particular risk, for example an undertaking in difficulties or where the security normally required by banks is not provided. In such cases, the premium may amount to 400 basis points or more. (55) As was described further above (2.7.2), the interest rate charged for shareholder loans under the measure will consist of a floor rate, being the applicable reference rate for Germany. This floor rate will be increased in situations involving a particular risk. Such risk premium will be charged depending on collateral, subordination, and in accordance with the IBB rating system. That rating system h had been approved as being an adequate risk-measurement system, by IBB's chartered accountant and will be subject to annual review. (56) It is to be noted, firstly, that undertakings in difficulties will be excluded from any form of capital provision under the measure. Secondly, eligible SMEs must have demonstrably good future prospects. SMEs with an IBB rating VC-5 'unsatisfactory' will be excluded from shareholder loan provision. Lastly, the Commission notes that the interest rates for the purposes of the Fund will only serve as floor-rates and that the Fund will apply the interest rate applied by a 12 OJ C 273 of , p.3. 11

12 private investor, in case such private investor provides 50% of the shareholder loan at exactly the same terms and conditions as the Fund does. (57) The premium for non-collateralisation is 400 basis points, and is thus in line with the Commission notice. An additional risk may arise when loans are subordinated in case of insolvency. In such cases, a further 200 basis points will be charged for. In addition to that, a premium of 100, 150 or 200 basis points will be charged for loans to SMEs showing one of the three risk classes beneath 'very good' and above 'unsatisfactory'. (58) In summary, the measure provides that in situations involving a particular risk a premium of 400 basis points and more will be charged for. Hence, the Commission considers the measures interest rate method to be in line with the indications contained in the Commission notice on the method for setting the reference and discount rates. Shareholder loans under the measure can therefore be deemed to reflect the average level of interest rates charged in the market. Hence, such financing does not constitute State aid in the sense of Article 87(1) of the EC Treaty Equity investments and silent participations - Presence of State aid within the meaning of Article 87(1) of the EC at the respective level of the parties involved in the scheme; compatibility with the common market (59) Pursuant to Section 3.2 of the Guidelines, economic operators (investors) as well as target SMEs may be provided benefits through a risk capital scheme. Said provision further postulates to consider whether the fund or other investment vehicle involved and/or its manager may be benefiting from State aid. The presence of State aid at each of these levels will be considered in the following State aid at the level of investors in the Fund (60) First of all, the Commission notes that the only shareholder of the Fund is IBB, which is a State body. The Commission further notes that the sole purpose of IBB is to execute economic policy activities defined by the government of the Land of Berlin. Neither economic operators, nor private individuals will have a stake in the Fund. (61) Germany confirmed that IBB does not carry out any economic activities outside the execution of the funding policies of the Land of Berlin State aid at the level of investors operating concomitantly with the Fund (62) Section 3.2 of the Guidelines provides that the Commission will consider investments to be effected pari passu between public and private investors, and thus not to constitute State aid, where its terms would be acceptable to a normal economic operator in a market economy in the absence of any State intervention. This is assumed to be the case only if public and private investors share exactly the same upside downside risks and rewards and hold the same level of subordination and normally, where at least 50% of the capital of the measure will be provided by private investors who are independent of the target companies. (63) While private investors are not directly involved at the level of the Fund, at least 50% of equity investments and silent participations concluded under the measure will be 12

13 financed from private resources. The Fund will only conclude an investment agreement on strictly identical terms as the private investors do. (64) Thus, no State aid is present in the sense of Article 87(1) of the EC Treaty at the level of the private investors, in so far as they constitute undertakings in the meaning of Article 87(1) of the EC Treaty State aid at the level of the Fund (65) According to Section 3.2 of the Guidelines, the Commission generally considers an investment fund to be an intermediary vehicle for the transfer of aid, rather than a beneficiary of aid itself, unless there are indications to the contrary. (66) VC Fonds Kreativwirtschaft Berlin will be established and managed only for the purposes of the scheme in question. As the Fund will exclusively serve the purposes of the measure in question, it is excluded that it diversifies into other activities. The Commission therefore does not consider the Fund to be a beneficiary of State aid in the sense of Article 87(1) EC State aid at the level of the management company (67) Pursuant to Section 3.2 of the Guidelines, aid to the fund's managers or the management company will be considered to be present if their remuneration does not fully reflect the current market remuneration in comparable situations. On the other hand, there is a presumption of no aid if the managers or management company are chosen through an open and transparent public tender procedure or if they do not receive any other advantages granted by the State. (68) Employees of IBB Beteiligungsgesellschaft mbh, a subsidiary of IBB, will manage the Fund. The German authorities declared that, given its high degree of specialisation and competence on the Fund s target field, the management company had not been selected by public tender procedure. According to information submitted by the German authorities, no candidate other than that company possessed the combination of qualities and skills which were considered essential in order to fulfil the Fund manager's mission. (69) Germany has provided information on the remuneration for fund management activities in comparable situations. Based on that information, the remuneration for the management company, as described further above (2.11), can be deemed to fully reflect the current market situation. (70) Hence, based on information provided by Germany, the Commission does not regard the Fund management company as a beneficiary of State aid in the sense of Article 87(1) EC. 13 This principle is in line with the Commission decisions on the Viridian Growth Fund (State Aid C 46/2000), the Coalfields Enterprise Fund (State Aid N 722/2000), the Community Development Venture Fund (State Aid N 606/2001), the SMEVCLF (State Aid N 620/2002), the Wales Early Stage Fund (State Aid N 572/2003), the ERDF risk capital fund Berlin (State Aid N 212/2004), the ERDF risk capital fund Schleswig-Holstein (State Aid N 213/2004), the ERDF Risk Capital Fund Thüringen (State Aid N 266/2004) and 'Berlin Kapital Fonds' (State Aid N 330/2006). There, the Commission concluded that even Funds being separate entities, yet with the single purpose to transfer funding to eligible target enterprises, are no beneficiaries of aid in the sense of Art. 87 (1) EC. 13

14 (71) The Commission further notes that, according to the German authorities, the Fund management will take commercially driven decisions and that precaution is made for its independence from State influence State aid at the level of the SMEs invested in (72) Section 3.2, last paragraph of the Guidelines provides for factors to be taken into account for the determination of whether or not enterprises invested in must be considered as recipients of State aid. In particular, where aid is present at the level of investors, the investment vehicle or the investment fund, the Commission will consider that it is at least partly passed on to the target enterprises and thus that aid is also present at their level. (73) Considering the absence of State aid at the level of, firstly, the private investors operating alongside the Fund and, secondly, the Fund and its management as such, an advantage for the SMEs invested can not be presumed either. (74) In conclusion, the measure in question does not constitute State aid in the sense of Article 87(1) of the EC Treaty at the level of the enterprises invested in De minimis financing (75) The Fund may provide equity investments and silent participations without concomitant private investments. (76) The Commission notes that such financing will be granted in accordance with Commission Regulation (EC) No 1998/2006 of 15 December 2006 on the application of Articles 87 and 88 of the Treaty to de minimis aid. Consequently, the Commission finds that de-minimis-support under the measure in question does not meet the criteria of Art. 87 (1) EC Conclusion (77) The Commission concludes that the aid granted under the risk capital scheme 'Creative Sectors Fund Berlin' fulfils the conditions for the legal presumption of the absence of State aid, as set out in the Community Guidelines on State aid to promote risk capital investments in small and medium-sized enterprises. 4. DECISION (78) On the basis of the foregoing assessment, the Commission concludes that the risk capital scheme 'Creative Sectors Fund Berlin' does not constitute State aid in the meaning of to Article 87(1) of the EC Treaty. If this letter contains confidential information, which should not be disclosed to third parties, please inform the Commission within fifteen working days of the date of receipt. If the Commission does not receive a reasoned request by that deadline, you will be deemed to agree to the disclosure to third parties and to the publication of the full text of the letter, in the authentic language, on the Internet site Your request should be sent by registered letter or fax to: European Commission Directorate-General for Competition 14

15 Yours faithfully, Directorate for State Aid State Aid Registry B-1049 Brussels Fax No: For the Commission Neelie KROES Member of the Commission 15