2011-08-02T12:06:08-05:00 2010-09-30 KPMG LLP 345 Park Avenue New York NY 101540102 990 2009-10-01 133786524 WESTERN NIS ENTERPRISE FUND WEST 3129397003 175 WEST JACKSON BLVD STE 2225 CHICAGO IL 60604 Lenna Koszarny 3129397003 2011-08-01 true KPMG LLP 2127589700 2009 2016-02-24 21:20:13Z Natalie Jaresko 175 West Jackson Blvd STE 2225 Chicago IL 60604 2439807 false X WWW.WNISEF.ORG X 1994 IL Western NIS was created and funded by the US Congress, and is overseen by USAID, to invest in and attract private capital to Ukraine, Moldova, and Belarus, to promote entrepreneurship and open markets. 8 7 2 0 0 0 0 4639044 -1597200 550532 233026 50112 53294 5239688 -1310880 0 0 0 0 2096327 1126304 0 0 0 1315817 583167 3412144 1709471 1827544 -3020351 90285409 104712487 469799 551646 89815610 104160841 See Schedule O, Attachment 1 false false 1447612 0 647087 WESTERN NIS ENCOURAGES, THROUGH LENDING, INVESTMENT, AND TECHNICAL ASSISTANCE, THE CREATION AND EXPANSION OF SMALL AND MEDIUM-SIZED ENTERPRISES IN UKRAINE AND MOLDOVA. WESTERN NIS ALSO FULFILLS ITS MISSION OF ATTRACTING ADDITIONAL PRIVATE CAPITAL TO THE REGION THROUGH ITS USAID-APPROVED ROLE AS A SPONSOR OF THE EMERGING EUROPE GROWTH FUND, LP, A PRIVATE EQUITY FUND LAUNCHED IN 2006. 1447612 true false false false false false false false false true false true false true true false false false false false false false false false false false false true false false false true false false false false false true true false true true 12 0 true 2 true false true UP MD false false false false false false false 8 7 true true false false true true true true true false false true true true true true true true true true true IL X LENNA KOSZARNY 3129397003 175 WEST JACKSON BLVD STE 2225 CHICAGO IL 60604 NATALIE A JARESKO 1.0 X X 109305 0 0 Dennis A Johnson 1.0 X X 0 0 0 Richard I Arthur 1.0 X 0 0 0 Jaroslawa Zelinsky Johnson 1.0 X 0 0 0 Whitney MacMillan 1.0 X 0 0 0 Patrick H Arbor 1.0 X 0 0 0 Jeffrey C Neal 1.0 X 0 0 0 Robert M Cotten 1.0 X 0 0 0 MARK A IWASHKO 1.0 X 109305 0 0 LENNA KOSZARNY 1.0 X 67606 0 0 Peter B Charchalis 1.0 X 29913 0 0 Christina Harea 1.0 X 17950 0 0 334079 0 0 2 false false false Horizon Capital Associates LLC 175 W Jackson Boulevard Suite 222 CHICAGO IL 60604 Management fees 929732 1 0 INTEREST FROM PROGRAM RELATED INVESTMENTS 523000 634781 634781 REALIZED LOSS FROM PROGRAM RELATED INVESTMENTS 523000 -2244287 -2244287 DIRECTOR FEES FROM PROGRAM RELATED INVESTMENTS 523000 12306 12306 -1597200 227338 227338 0 0 5688 0 5688 5688 5688 0 0 0 CURRENCY TRANSLATION 900099 183 183 MISCELLANEOUS 900099 53111 53111 53294 -1310880 -1597200 0 286320 0 0 0 0 0 1008900 1008900 0 0 77293 44629 32664 0 16332 8166 8166 0 17960 8980 8980 0 5819 3024 2795 0 0 69207 45360 23847 0 167131 109542 57589 0 0 0 0 28134 18440 9694 0 0 38535 24971 13564 0 1714 1111 603 0 0 29287 18915 10372 0 115980 69275 46705 0 0 0 0 0 4898 3174 1724 34900 22615 12285 MEMBERSHIPS 5761 3733 2028 0 ANNUAL REPORT 5727 3711 2016 0 TEMP WORKER AND OUTSOURCING 2880 1866 1014 0 DUES AND SUBSCRIPTIONS 155 100 55 0 OTHER OPERATING EXPENSES 78858 51100 27758 1709471 1447612 261859 0 117363 101405 18909971 13821755 151671 75836 283464 310901 246469 239219 11010 7250 70010763 89545841 801167 849499 90285409 104712487 102375 196377 367424 355269 469799 551646 X 89815610 104160841 89815610 104160841 90285409 104712487 X false true true X false X 13744125 2555875 0 0 0 16300000 4861229 10843448 1452181 4639044 647087 22442989 18605354 13399323 1452181 4639044 647087 38742989 38742989 579784 1309487 718298 541144 227338 3376051 579784 1309487 718298 541144 227338 3376051 27172 1035367 44867 50111 53294 1210811 19212310 15744177 2215346 5230299 927719 43329851 0.89414 0.93006 0.07791 0.05188 X OTHER INCOME CONSISTS OF BOARD OF DIRECTORS FEES FROM PORTFOLIO COMPANIES, CURRENCY TRANSLATION GAINS, WRITE-OFFS OF FIXED ASSETS, AND EXPENSE REIMBURSEMENTS FROM INTERESTED PERSONS (AS SET FORTH IN SCHEDULE L, PART IV). 1850 593 1257 243615 237622 5993 1004 1004 0 7250 EQUITY & DEBT SECURITIES 74307318 F EMERGING EUROPE GROWTH FUND LP 15238523 F 89545841 0 EXIT BASED INCENTIVE PAYABLE 15417 DEFERRED INCOME 14852 DEPOSITS RECEIVED ON SALE 325000 355269 -1310880 1709471 -3020351 17353388 12194 17365582 14345231 16054702 17353388 12194 17365582 -1310880 -1310880 1709471 1709471 1709471 Form 990, SCH D, Part XI, Line 8 and Part XII, Line 2d Reconciliation of Changes in Net Assets and Revenue Deferred exit-based incentive $12,194 SCHEDULE D, PART X TAX STATUS HISTORICALLY, THE FUND HAS BEEN EXEMPT FROM FEDERAL INCOME TAXES UNDER SECTION 501(C)(3) OF THE U.S. INTERNAL REVENUE CODE (THE CODE), AND, BECAUSE IT WAS FUNDED THROUGH U.S. GOVERNMENT GRANTS, HAS BEEN CLASSIFIED AS AN ORGANIZATION THAT IS NOT A PRIVATE FOUNDATION AS DEFINED IN SECTION 509(A)(1) OF THE CODE. DURING THE FISCAL YEAR, THE FUND CHANGED ITS CLASSIFICATION FROM AN ORGANIZATION THAT IS NOT A PRIVATE FOUNDATION UNDER SECTION 509(A)(1) TO A PUBLIC CHARITY AS DEFINED IN SECTION 509(A)(2) OF THE CODE, GIVEN THAT ITS INCOME IS NO LONGER DERIVED PRIMARILY FROM GRANTS. THE FUND CONTINUES TO MAINTAIN ITS 501(C)(3) DESIGNATION. IN ADDITION, DURING THE FISCAL YEAR, THE FUND REGISTERED AS A CHARITABLE TRUST IN ILLINOIS AND COMPLETED ALL REQUIRED FILINGS. THE FUND IS EXEMPT FROM PAYMENT OF STATE AND LOCAL INCOME TAXES. Russia and the Newly Independent States 2 8 Program Services General Operations 1230437 Russia and the Newly Independent States 0 0 Program Services Debt Investments 10000000 2 8 11230437 SCHEDULE F, PART I, LINE 3 Foreign Activities Western NIS has an office in the US, but most of its operations are in Ukraine and Moldova, given its tax-exempt mission. (See Schedule O for additional details.) Western NIS has one office in Ukraine and one in Moldova. We also note that the debt investments included in Part I of Schedule F are program related investments that further its charitable mission. FOREIGN FORMS - SUPPLEMENTAL INFORMATION WESTERN NIS ENTERPRISE FUND 2009 RETURN OF ORGANIZATION EXEMPT FROM INCOME TAX STATEMENT FILED PURSUANT TO TREASURY REGULATION SECTION 1.368 BY WESTERN NIS ENTERPRISE FUND, EIN 13-3786524. UNDER INTERNAL REVENUE CODE SECTION 368(A)(1)(F), IMB GROUP PUBLIC LIMITED CHANGED ITS NAME TO PT PLATINUM PUBLIC LIMITED. Horizon Capital Adv Fixed asset sale X 379178 75836 false true true 75836 Horizon Capital Associates LLC MGMT OVERLAP - SEE SCH O 1054270 Management services false Horizon Capital Advisors LLC MGMT OVERLAP - SEE SCH O 17111 Fixed assets lease false Horizon Capital Advisors LLC MGMT OVERLAP - SEE SCH O 36000 Use of Chicago office false Horizon Capital Advisors LLC MGMT OVERLAP - SEE SCH O 12306 Portfolio inv co directors fee false Form 990, Part VI, Line 2 Business Relationships There was a business relationship during the year between Natalie A. Jaresko (President/CEO, and voting director), Mark A. Iwashko (Executive VP and CIO), and Lenna Koszarny (CFO & Administrative Officer), as they are owners and/or officers of Horizon Capital Associates LLC (HCA), the management company which has entered into a contract approved by the Western NIS Board of Directors and USAID, to provide management services to Western NIS. These three individuals are also owners and/or officers of Horizon Capital Advisors, LLC (HCAD), a subadvisor entity providing services to the management company. Form 990, Part VI, Line 3 Delegation of Management Duties Western NIS has a management agreement with Horizon Capital Associates LLC to provide advice and make recommendations. See also Schedule O for Form 990, Part VI, Line 7b - Approval by Members. The Board of Directors retains full decision-making authority. Form 990, Part VI, Lines 6 & 7a Members The corporate members of Western NIS consist of the directors who are US citizens. The members have the rights to elect and remove directors. Form 990, Part VI, Line 7b Approval by Members USAID has the authority to, and in fact does, approve certain Western NIS' decisions, including the long-term equity incentive plan, the privatization of Horizon Capital in 2006, the terms of the HCA management agreement with Western NIS, and the contribution of certain investments to the Emerging Europe Growth Fund, LP, a regional private equity fund launched in 2006. USAID conducts semi-annual reviews of Western NIS and reviews monthly reports and annual audited financial statements and annual reports submitted by Western NIS. Form 990, Part VI, Line 11 Form 990 Review Policy Western NIS Enterprise Fund's Form 990 is prepared by an independent accounting firm in conjunction with its finance staff. The Chief Financial Officer (CFO) reviews, edits, and approves the draft Form 990 prior to review by the President/Chief Executive Officer (CEO) and the Senior Vice-President/Chief Investment Officer (CIO). Once the CIO and CEO review the draft Form 990 and their comments are incorporated, it is distributed to a subcommittee of the Board formed to review and approve the Form 990 on behalf of the full Board of Directors. Once their comments are incorporated and the Form 990 is approved, a copy of the Form 990 that will be filed with the IRS is provided to all members of the Board of Directors, as well as external corporate counsel, prior to filing. Form 990, Part VI, Line 12 Conflict of Interest Policy Officers are appointed on an annual basis by the Board of Directors of Western NIS Enterprise Fund, and the terms of appointment include compliance with the policies and procedures of the Fund, including the conflict of interest policy. The Grant Agreement with USAID includes the conflict of interest policy and identifies which matters must be discussed with USAID. Compliance is monitored via the annual audit process, conducted by an independent big 4 public accounting firm, through review of transactions, including related party transactions and internal control procedures. Any potential conflict would be reviewed and handled by the board of directors and outside legal counsel. If a conflict was related to a board member, then that board member would be required to abstain from discussion and vote on the conflicted matter. Form 990, Part VI, Line 15 and Part IX, Lines 5 - 10 Compensation Western NIS has a special compensation structure that reflects its tax-exempt mission. As noted in Part III of Form 990, one of Western NIS' key accomplishments was fulfilling the directive from USAID to establish a private follow-on fund, Emerging Europe Growth Fund LP (EEGF). This directive followed the precedent of USAID-financed enterprise funds in Central and Eastern Europe, which successfully attracted significant private capital. As described in Schedule O, Western NIS is nearing its wind-down phase, and the founding of EEGF was a significant accomplishment towards Western NIS' mission. A private management company, Horizon Capital Associates LLC (HCA), was formed to manage the investments of EEGF and Western NIS until it dissolves. Following the founding of EEGF, all employees of Western NIS (except those located in the US) became employees of HCA's subadvisor entity, Horizon Capital Advisors, LLC (HCAD), resulting in the transfer of employee compensation, operating and other expenses from Western NIS to HCA and HCAD. Accordingly, Western NIS currently has no employees, other than an administrative assistant and a part-time accountant in the US. Both the formation of the Horizon Capital entities and outsourcing of management functions to HCA were approved by USAID. Western NIS pays HCA an annual management fee, as disclosed in Schedule L. The management agreement with HCA was approved by the Board of Directors of Western NIS, after review and approval of its key terms, including the management fee, by USAID, which had prior experience reviewing and approving similar management agreements entered into by other enterprise funds that it regulates. The management fee formula is identical to that in the management agreement between HCA and EEGF, which also was reviewed and approved by the WESTERN NIS Board and USAID (as well as by other investors in EEGF). In 2002, the board members of Western NIS established a long-term equity incentive plan ("LTEI"), which was based on similar arrangements at other USAID-financed enterprise funds and was approved by the US Congress and USAID. The LTEI Plan is not compensation from government grant funds but a separately USAID-approved incentive plan funded from investment sales proceeds. LTEI compensation is not contingent on revenues or net earnings, but rather on a profitable exit of a portfolio company that exceeds the baseline value set by the board of directors and approved by USAID. Upon the spin-off of employees to HCAD, the LTEI plan remains in effect as long as 1) the management agreement between Western NIS and HCA continues; 2) the specific employee remains in the employ of HCAD and 3) the board of directors does not amend, alter or terminate the plan. This is intended to maximize Western NIS' returns on its remaining portfolio. There were LTEI payments during the 2009 calendar year, as set forth in the following paragraph. The Statement of Functional Expenses in Part IX shows $12,194 of expenses under the long-term equity incentive plan that was paid out during fiscal year 2010. In the compensation sections we report $316,129 paid under the LTEI during the 2009 calendar year to current and former officers, because those sections report compensation paid during the 2009 calendar year. We also note that during the 2009 calendar year $179,199 was paid under the LTEI to former key employees, but given that no such compensation reached $100,000, these amounts are not required to be reported in Part VII. In addition, we note that the grant agreement with USAID provides that US government grant funds may not be used to compensate employees of Western NIS, or employees of an organization in which it owns a majority interest, over $150,000 per annum. The LTEI Plan is not compensation from government grant funds but a separately USAID-approved incentive plan funded from investment sales proceeds. Form 990, Part VI, Line 16 Joint Ventures The tax-exempt mission of Western NIS Enterprise Fund established by the US Congress and USAID is directly furthered by the Fund's investments in small-to mid-sized companies in the Ukraine and Moldova, and also by its investment in EEGF, a regional private equity fund whose establishment was encouraged, reviewed and approved by USAID. Under the terms of its grant agreement from USAID, Western NIS takes a commercial approach to its investment activities in portfolio companies in the Western Newly Independent States, as a matter of operating philosophy. The written grant agreement also provides numerous terms and conditions to ensure that the portfolio companies it invests in further its tax-exempt mission and USAID guidelines. Western NIS has a written policy that requires, among other things, that all investments be in accord with the grant agreement, which expressly defines permissible investments as well as prohibited transactions consistent with Western NIS' congressionally - mandated charitable mission. In addition to this written policy, Western NIS has adopted various measures that safeguard its exempt status with respect to its investments. These measures include ensuring that investment agreements with portfolio companies are on an arm's length basis and contain provisions to assure compliance with relevant clauses within the grant agreement. USAID specifically reviewed and approved in writing Western NIS' investment in EEGF as an integral part of its tax exempt mission. Form 990, Part VI, Line 19 Disclosures As a USAID recipient, Western NIS' governing documents, including its conflict of interest policy, and its financial statements are provided to USAID and are made available to the public through this organization. The financial statements are also posted on Western NIS' website. Form 990, Part VII, Section B, Line 1 Management Fees Management Fees in the amount of $ 929,732 paid to Horizon Capital Associates LLC represent management fees paid in calendar year 2009 as this is the calendar year ending within Western NIS' tax year beginning 10/01/2009 and ending 09/30/2010. This amount differs from the management fee reported in Schedule L Part IV Business Transactions Involving Interested Persons as this latter amount reflects actual payments made in fiscal 2010. Form 990, Schedule L, Part IV Business Transactions with Interested Persons Natalie Jaresko (officer and director), Mark Iwashko (officer) and Lenna Koszarny (officer) are owners and/or officers of Horizon Capital Associates LLC (HCA), the management company contracted to manage the Western NIS portfolio. As noted in Part III of Form 990, one of Western NIS' key accomplishments was fulfilling the directive from USAID to enable the establishment of a private successor fund, Emerging Europe Growth Fund LP (EEGF). A new private management company, Horizon Capital Associates LLC (HCA), was formed to support EEGF and Western NIS. This approach followed the precedent of USAID-financed enterprise funds in Central and Eastern Europe, which successfully attracted significant private capital. Western NIS is nearing its wind-down phase, and the founding of EEGF was a significant accomplishment towards fulfilling Western NIS' mission. The management agreement with HCA was entered into by Western NIS on pari passu terms as the third-party investment management agreement between HCA and Emerging Europe Growth Fund, LP to ensure that the Western NIS-HCA management agreement was in line with market terms. Under the terms of the grant agreement with USAID, Western NIS is managed by a board of directors comprised of private citizens (a majority of whom must be US citizens), who have demonstrated experience and expertise in those areas of private sector development in which the Fund is involved. The initial members were elected with the advice of the President of the United States or the President's designee, and current members now elect future members. Following the founding of EEGF, all employees of Western NIS (except those located in the US) became employees of HCA's wholly-owned subsidiary, Horizon Capital Advisors, LLC (HCAD), resulting in the transfer of employee compensation, operating and other expenses from Western NIS to HCAD. During the 9-30-10 year, Western NIS also engaged in certain business transactions with HCAD, as approved by the board of directors, and as shown in Part IV of Schedule L. Form 990, Part I, Block G In calculating the Organization's Gross Receipts, the cost of program related investments sold in the amount of $3,750,687 was added back to Form 990, Part I, Line 12. The net loss from these program related sales was recorded on Part VIII, Line 2c of the Form 990. Form 990, Part III, Line 1 Organization Mission The Western NIS (New Independent States) Enterprise Fund (the "Fund") is a not-for-profit corporation formed pursuant to the support for East European Democracy Act of 1989 (the "SEED Act") and the 1992 Freedom for Russia and Emerging Eurasian Democracies and Open Markets Support Act (the "Freedom Support Act"). Western NIS' primary purpose is promoting the development of the private sector, and the policies and practices conducive to such development, of the Western NIS region (the "Region"), which consists of Ukraine, Moldova and Belarus. The U.S. Congress has authorized appropriations of $150 million, which has been committed by the United States Agency for International Development ("USAID") for Western NIS program purposes and administrative expenditures (the "Grant"). Amounts received from USAID are conditioned upon Western NIS' compliance with the requirements of the grant agreement with USAID and the Seed and Freedom Support Acts, which impose certain U.S. policy objectives and reporting obligations. Western NIS is engaged in a broad private investment program in the region which, through equity investments, loans, leases, technical assistance and other measures, emphasizes a commitment to small-and medium-sized private businesses. Western NIS provides technical assistance to companies in which it has invested. Through its direct role in investments in the region's private sector, Western NIS seeks to generate profits that will further support its activities and attract investments by others. As part of its investment operations, Western NIS may obtain representation on management and supervisory councils of investee companies. Western NIS' Grant agreement with USAID states that the success of Western NIS will be characterized by the extent to which it causes or contributes to: (1) The successful establishment, or strengthening of, a wide array of small and medium-sized firms across the different sectors of the economies in the Western NIS Republics; (2) The generation of new employment opportunities in the private sector of the Western NIS Republics; (3) Investment by other private companies in sectors where Western NIS took an initial lead; (4) The completion of a wide array of transactions that develop and strengthen financial markets in the Western NIS Republics; (5) Development by Western NIS of a number of key joint ventures between private companies of the US and the Western NIS Republics; and (6) Consistent with Western NIS' sound business judgment, the conduct of activities intended to further investment in each of the Western NIS Republics. One of Western NIS' key accomplishments was fulfilling the directive from USAID to enable the establishment of a private successor fund, Emerging Europe Growth Fund LP (EEGF). A new private management company, Horizon Capital Associates LLC (HCA), was formed to support EEGF and Western NIS. This approach followed the precedent of USAID-financed enterprise funds in Central and Eastern Europe, which successfully attracted significant private capital. Western NIS is nearing its wind-down phase, and the founding of EEGF was a significant accomplishment towards fulfilling Western NIS' mission. Based on USAID and Congressional approval, Western NIS' board of directors committed $25 million to EEGF and approved the sale of certain investments to EEGF in 2006. EEGF now functions as a mid-cap private equity fund making investments in Ukraine and Moldova. WNISEF is a cornerstone limited partner in EEGF. EEGF seeks to make investments in the range of $5 to $20 million in expansion and buy-out opportunities in the following industries: financial services, fast moving consumer goods, retail and industrial goods. USAID has already distributed the full grant of $150 million to Western NIS, with the final tranche received in fiscal year 2007. According to the grant agreement, USAID may establish the date after which Western NIS shall commence the winding up of its affairs and sale of its assets. Under this authority, USAID originally established Western NIS' termination commencement date as August 26, 2009. During fiscal year 2009, Western NIS requested and was granted an extension from USAID of the termination commencement date to August 26, 2011. In January 2011, USAID further extended this date to August 26, 2013 with the condition that the legacy proposal be presented to USAID by August 26, 2011. The legacy proposal will set forth Western NIS' proposal for establishment of a legacy foundation to be funded by proceeds derived from the sale of assets. In addition, as a condition of the latest revision of the termination commencement date, USAID reiterated their understanding that WNISEF will not make any new investments or commitments, although the Fund may make follow-on investments in companies in its existing portfolio until August 26, 2013, the revised termination commencement date. 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