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| Frequently Asked Questions |
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Table of Contents
- Program Description
- Why should I invest in the Equity Capital Fund, Inc.?
- How does the fund work?
- Is Equity Capital Fund, Inc. a Venture Capital Fund?
- What is the primary objective of the fund?
- What actions will management take to reduce risk?
- What is the annual management fee?
- In what companies will the Fund invest?
- How are the Members informed of the activities occurring in the Fund?
- When does the fund end?
- Is the Fund IRA qualified investment?
- Funding Process
- Investment Terms
- What if I forgot my Username or Password?
1. Program Description
A $50,000,000 Fund that offers investors the opportunity to participate in a equity position in a portfolio of growth, pre-IPO and public companies to obtain substantial capital appreciation. In most cases, investment principal is also secured by a by the company’s assets. The fund will acquire operating businesses of strategic importance with the expressed intent of future sale at a profit.
Initial offering price: $5,000 per Unit – Minimum 1 Unit
Management Team: The Managing Member will ensure that each investment adheres to proven guidelines for success and in addition will perform hands-on oversight of the Fund’s interest in the Invested Company.
Suitability Requirements: An investor must be aware of the risk factors of the fund and meet the suitability requirements in the Memorandum.
| Capital Appreciation Potential |
Fund will make direct placement investments
or outright acquire existing and growth
or pre-IPO companies.
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| Reduction of Risk |
Diversification across a portfolio of companies
Investments secured by Seasoned Investment Grade Life Insurance Policies
and the underlying assets of the invested companies. |
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| Income Objectives |
Invested company interest, dividends and/or available
Profit distributions paid quarterly. |
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| Set Term |
The Fund liquidates in 120 months. |
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| 100% DISTRIBUTION |
Fund Members receive 100% of distributable assets up to their initial investment and 75% of all remaining assets. |
2. Why should I invest in the Equity Capital Fund, Inc.?
There are five features that investors should consider: 1) possibility of above average appreciation, 2) current income, 3) tax benefits, 4) reduced risk, and 5) liquidity. Management believes the highest possible appreciation is obtainable by investing in companies in the pre-Initial Public Offering (IPO) stage and then guiding them through the IPO process; or acquiring highly undervalued companies at bargain prices and then positioning them for re-sale at substantial profits.
3. How does the fund work?
It acquires operating companies, wholly or in part, which are in need of business management and financial expertise, which the Fund Manager can provide. These equities are then positioned for re-sale, at a substantial profit, in either the public or private sectors. In exchange for providing financing, the Portfolio Company issues to the Fund equity shares and, in some cases, a Bridge note secured by the assets of the Portfolio Company and/or owner guarantees. It is anticipated that $50,000,000 in funds will allow investment in a portfolio of 15 to 20 companies in strategically important industries at below asset value.
4. Is Equity Capital Fund, Inc. a Venture Capital Fund?
Yes. Equity Capital Fund, Inc. invests its own funds and those of other principles through bridge financing and the outright acquisition of asset based companies. It is distinguished from the usual investment or venture groups by the combined financial, operating and management skills brought to the Portfolio Company. These enhance the investor’s expectation for significant return on investment.
The Fund’s primary objective is to maximize returns through a discipline of strategically acquired existing companies and/or the placement of short-term bridge loans to qualified pre-IPO candidates and existing public companies seeking secondary offerings.
5. What is the primary objective of the fund?
To yield the highest possible return for each dollar invested on a fully secured basis.
6. What actions will management take to reduce risk?
The Management of the Equity Capital Fund and its industry-specialized advisors conduct in-depth due diligence to evaluate the Portfolio Company management team, financial statements, the reality of the business plan, and assess the risk-reward of investment in prospective portfolio companies.
- In bridge loan cases, the Fund will obtain a bridge note collateralized by the Portfolio Company’s assets and/or personal guarantees.
- The Fund may have a seat on the Portfolio Company’s Board of Directors.
- Potential acquisition candidates will be analyzed for future profit potential essentially under four categories:
- Business fundamentals
- Is the business simple and easily understood?
- Is there a consistent operating history?
- What are the long-term prospects?
- Management strengths
- Is management honest and responsible?
- Will they respond to shareholder interests?
- Can they think for themselves?
- Prospects of remaining with the company.
- Financial strengths and weaknesses
- Are profit margins adequate?
- What events can make or break the opportunity?
- What conditions affect return on equity?
- Who will buy this business in the future?
- Will increases in retained earnings add at least twice as much in market value?
- Will earnings pass through to the shareholders?
- Market conditions
- Is this the right time to buy this company?
- What is the value of the business?
- Can the business be purchased at a significant discount to its value?
- Are the conditions causing the discount acceptable?
As with any investment, there are significant risks associated with the Fund. Each investor should consult the Offering Memorandum for a complete discussion of these investment risks.
7. What is the annual management fee?
Two percent (2%) of the Fund’s asset value as determined annually. Managing members and Executive Advisory Committee members receive industry-standard consulting fees and travel or out of pocket expenses.
8. In what companies will the Fund invest?
Established companies with sales between $1 million and $20 million. It is anticipated that the fund may invest in some start-up situations on case-by-case basis.
9. How are the Members informed of the activities occurring in the Fund?
Each quarter, a report will be provided to the Fund Members with information and developments on existing and prospective Portfolio Companies. An annual financial statement will be sent to each investor at the close of the fiscal year. Factual investment reports will be prepared on each portfolio company, updated quarterly, and will be available to investors and advisors upon request. As shareholders in the Fund, the Members will also receive applicable press releases and other pertinent information issued by the trustees of the fund.
10. When does the fund end?
The Fund is Closed-End and will terminate in 120 months. This termination date may be extended an additional twelve months by the Managing Member. All remaining assets will be fully liquidated and/or distributed to the Members at the time of the dissolution in the following proportions. The investors will receive 100% of their initial investment and 75% of the remaining assets of the fund.
11. Is the Fund IRA qualified investment?
Yes. The Fund meets the guidelines for qualified IRA, SEP’s, 401K and Profit Sharing Plan Investments.
The material does not constitute an offer to sell or a solicitation to buy and security. The use of this material is authorized only when preceded or accompanies by the current Memorandum of Equity Capital Fund, Inc.
12. Funding Process
13. Investment Terms
| Seasoned Investment Grade Insurance Policies |
Policies that are in effect for over two years which have an actuarial maturity date of 10 years or less. |
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| Returns |
Variable margin amounts assigned to the company, and specific investor groups, based on the type of investment, project, and terms. |
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| Investments |
Liquid, and/or fixed, asset sums that are committed to the company through the design of specific fund participation. Also to include private and/or public offerings that are sponsored by the company. |
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| Funds |
The organization of monies that are set in place to support the operational investment activity of the company and it's portfolio companies. |
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| Management |
Administrative body of the company that is responsible for the design and implementation of the overall operational plan. |
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| IPO |
Initial Public Offering - A underwritten public offering which allows the company to use NASD Broker/Dealers as the sales force for the public offering. |
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| DPO |
Direct Public Offering - A self underwritten Initial Public Offering which allows the company to use NASD Broker/Dealers as the sales force for the public offering. |
14. What if I forgot my Username or Password?
If you forgot your user name or password, please email info@equitycapitalfund.com, indicating the user name you signed up with as well as your name.
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