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JEREMIE Holding Fund Greece: Clarifications on the Call for Expressions of Interest JER-001/2011/2

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    Date: 17 June 2011 - 30 June 2011

Jer001_2010_2

Clarifications on the Call for Expressions of Interest (“CEoI”) No. JER-001/2011/2 to select Financial Intermediaries that will receive resources from the European Investment Fund, acting through the JEREMIE Holding Fund for Greece, to implement the Risk Capital Financial Instruments in the Information and Communication Technologies (“ICT”) sector.

Reference number: CEoI No. JER-001/2011/2

Question 1 (Q1):

ANNEX 3 to the Call for Expression of Interest of JER-001/2011/2, Part I : Seed/Technology transfer ICT Fund Description , Indicative Summary Transaction Terms

Regarding the term: “Indicative maximum amount of funding foreseen for the Financial Instrument (JHF contribution) of EUR 15 million”, please clarify whether such indicative maximum amount of EUR 15 million relates to the maximum amount to be committed by EIF to each Financial Instrument or to all Financial Instruments.

EIF Answer:

This amount refers to the specific Financial Instrument i.e. Seed/Technology transfer ICT Fund(s). Each participant in the CEoI can request the entire or part of this amount depending on the investment strategy that it is proposing. Upon the completion of the selection procedure, the number of Financial Instruments and the allocation of funds will be decided by the EIF.

Q2:

What is the duration of selection process and communication style during this process?

EIF Answer:

The duration of the selection process cannot be determined at the current stage. Communication during this process will be made through formal letters to participants.

Q3:

What is meant by the wording: "The Fund manager is expected to act independently"? (ANNEX 2)

EIF Answer:

According to the best market practices implemented by EIF when selecting financial intermediaries for managing a venture capital fund, independence is notably defined as the control by the fund manager’s team over investment/divestment decisions and over managerial decisions (recruitment / dismissal of team members, budget decisions, distribution of profits if any). 

Q4:

What is the expected / permitted legal structure of the Fund and the Financial Intermediary? Shall they be incorporated in EU? In Greece?

EIF Answer:

The legal structure should be established within the European Union and in compliance with the EIF’s Policy on Offshore Financial Centres & Governance Transparency. For more details, please refer to the EIF's Policy on Offshore Financial Centres & Governance Transparency.

Should an existing General Partner be ineligible, it is possible to set up a new eligible legal structure prior to the signature of the Operational Agreement. Applicants concerned should make this specification as part of the Expression of Interest.

Q5:

What shall be the composition of the investment committee overseeing the investment process of the Fund? Would EIF require representation?

EIF Answer:

The structure of the investment committee is an integral part of applicant proposition, thus EIF cannot advise on the structure or composition. Such structure should follow the best market practices.

EIF will not require a seat on the investment committee, however it will ask for an advisory board, in which EIF will requires representation.

Q6:

Please clarify the phrase: "6% cumulative annual rate of return" (ANNEX 2)

EIF Answer:

It means “a 6% annual compounded rate on investors’ net contributions (i.e. contributions that have been paid-in to the Financial Instrument, less those that have been repaid from the Financial Instrument”.

Q7:

Would it be possible to provide further explanations on the Schedule of Disbursements? (ANNEX 2)

EIF Answer:

The Schedule of Disbursements details in which order repayments from the Financial Instrument shall take place. It is self-explanatory.

Q8:

Are there any specific requirements that derive from the term “ financial intermediary” in accordance to Banking Directives or MiFID, do such requirements need to be met by the applicant or the entity to be established for the management of  the Fund?

EIF Answer:

There is no such requirement. However, the entity to be established shall comply with all requirements set out under applicable law for the activities carried out by said entity.

Q9:

What are the guidelines or expectations as to the team size and composition related to the size of the Fund?

EIF Answer:

This forms part of a candidate’s application and thus EIF cannot advise. Nevertheless, it is expected that the team is able to deal with all necessary tasks in a responsible manner and therefore, adequate staffing is required.

Q10:

Are there restrictions on having the same Team members in both Seed ICT Fund and Early Stage VC Fund?

EIF Answer:

No.

Q11:

Does a fully owned subsidiary of a credit institution with the sole purpose of providing investment and financial advice at group level qualify as a financial intermediary and as an applicant for the requirements of the Call for expression of interest?

EIF Answer:

Yes (subject to other restrictions that may apply).

Q12:

Is the geographic allocation a fixed hard limit or a target?

EIF Answer:

Geographic allocation of investments are hard limits and should be as described in the Call of Expression of Interest.

Q13:

Translation in English of all the supporting official documents will be accepted for the submission of the Expression of Interest (EoI) if made by a lawyer or is it mandatory to be provided only by the Greek competent Authority (e.g. the Department of the Greek Ministry of Foreign Affairs)?

EIF Answer:

Such official translation is not mandatory.

Q14:

Is there any limitation on the nationality of the possible/candidate Investors (legal entities or other person)?

EIF Answer:

There is no limitation in the nationality of Investors or their type. The only limitation is that they have to be private.

Q15:

Is it necessary that the Fund be already set up and registered at the Register of the competent Authority when submitted the Expression of Interest or at a later stage/phase?

EIF Answer:

The Fund can be set up at a later stage.

Q16:

Please clarify what documentation is satisfactory for the duly submission of the CEoI, in case the Applicant has not by, the time of submission of the EoI, set up and consequently there is not yet “Copy of Articles of Association” nor the “Applicant’s VAT Certificate”?

EIF Answer:

Any company being in the process of being set up should have some preliminary draft of articles etc., which would be sufficient but signature would anyhow not occur prior to finalisation of the set up.

Q17:

Please clarify the “Measures proposed to deal with conflicts of interest”.

EIF Answer:

This forms part of a candidate’s application and thus EIF cannot advise.

Q18:

Please clarify, if the eligible SMEs can be registered in other country then Greece or in a non-EU country and have their place of business in other country then Greece or in a non-EU country.

EIF Answer:

Target SMEs must be registered and have their main place of business in Greece.

Q19:

What is the deadline for reaching the minimum limit of private commitments? Also can more commitments be added in the time between this deadline and when the fund's final closing is announced?

EIF Answer:

The selected Manager will be required to do the first closing of the Fund when a minimum level of commitments (to be agreed upon between the selected Manager and EIF) has been subscribed (including the JEREMIE funds). Final closing of the Fund can take place at a later stage.

Q20:

Is convertible debt considered as eligible form of investment?

EIF Answer:

Convertible debt is considered as a quasi-equity investment and thus it is eligible.

Q21:

In ANNEX 2 and ANNEX 3, at Part I -> Private investors, it is mentioned that as the private investors reach 50% of the committed capital, the EIF may agree to cap its returns. When can the EIF enter such discussions and define the exact terms of this cap?

EIF Answer:

The exact cap rate will be defined during due diligence and legal negotiations with the selected managers.

Q22:

How does the EIF evaluate that the private investors have the capacity to provide the mentioned minimum 30% of the total capital?

EIF Answer:

This forms part of the due diligence process.

Q23:

Please clarify the “Measures proposed to deal with conflicts of interest”.

EIF Answer:

Conflicts of interest are regularly addressed through an investor advisory committee.

Q24:

Please explain if it is necessary to submit confirmation/certificate for the fulfilment of obligation relating to the payment of social security contributions regarding the supplementary security funds.

EIF Answer:

During the due diligence, EIF will examine if the applicant is compliant with the obligations to all mandatory (i.e. by law) payments to social security.

Q25:

Please clarify if by the term “senior management” it is stated: a) the Members (and more specifically the executive members if the company is listed) of the Board of Directors or b) the President and the CEO of the Applicant.

EIF Answer:

For EIF, relevant in terms of eligibility are first of all the legal representatives of the fund. At a later stage, the key members of the team will be subject to integrity checks, but as EIF ultimately defines such key members, this is not yet relevant in the context of the eligibility assessment.

Question 26 (Q26):

Could you please clarify the meaning of “financial intermediary” in the Call for expression of interest to select Financial Intermediary to implement the Risk Capital Financial Instruments in the ICT sector?

EIF Answer:

Financial Intermediary means the Fund including all its structural elements, in particular, its sponsor and/or management company.

Q27:

Is there a preferred structure of the Fund?

EIF Answer:

The structure of the Fund should comply with specifications set in the CEoI.

Q28:

Does the Greek Venture Capital Mutual Fund (Greek AKES structure) meet requirements of the EIF?

EIF Answer:

A Greek AKES meets the requirements of EIF. 

Q29:

Are there restrictions on the structure, ownership or the activities of the Fund Manager?

EIF Answer:

The management team should be independent in its investment and divestment decisions. The Fund Manager should be owned, structured and operating in such way so to provide for alignment of interests between Investors and Fund Manager and more importantly provide for avoidance of conflict of interests.

Q30:

Is there any qualitative or quantitative limitation or any restriction regarding the possibility of “Subcontract or Delegation” of part of the activities undertaken by the Applicant and/or the Financial Instrument?

EIF Answer:

Fund Manager should apply VC best market practices when operating. Answer to Q29 also applies.

Q31:

Please clarify if the “Information on members of the advisory or investment committees, if applicable” refers to the Applicant and/or the Financial Instrument.

EIF Answer:

It refers both to applicants and the Fund.

Q32:

Please clarify if an “investor” means a private and/or a public investor.

EIF Answer:

When there is no “Private Investor” or “Public Investor” in the text, “investor” means any investor.

Q33:

Please clarify the “Measures proposed to deal with conflicts of interest”.

EIF Answer:

This forms part of a candidate’s application and thus EIF cannot advise.

Q34:

What is the process for extending the Investment period beyond 2013 and what are the potential risks of not being able to do so?

EIF Answer:

Investment period and its extension should follow VC best market practices. However, the availability period of the JEREMIE funding will end 31/12/2013, or 31/12/2015, if  Reg. 800/2008 is extended. Please refer also to the term “Schedule of disbursements” in the CEoI.

Q35:

There is a cap of EUR 1.5m per 12 months for the early stage fund. Are there other caps envisioned?

EIF Answer:

There are no other caps on invested amounts envisaged. Please also refer to Q36.  

Q36:

Will the fund be able to spend no more than 20% of the fund's capital in a company?

EIF Answer:

This forms part of a candidate’s application and thus EIF cannot advise. However an acceptable portfolio diversification should be presented in the application.

Q37:

Will the Fund be able to use the fund to invest in foreign jurisdictions? Will there be the possibility for a company to be held by a foreign jurisdiction (common or continental law)?

EIF Answer:

Portfolio companies must be registered and have their main place of business in Greece [JN: make a reference to the Call].

Q38:

Will there be the possibility to have a different hurdle rate for the private investors?

EIF Answer:

No.

Q39:

Will the selected applicants have a soft-commitment (e.g. LOI) from the EIF (acting in JHF capacity) to try to raise more money than originally committed from private investors in the first submission?

EIF Answer:

Selected applicants will have a confirmation of their selection from EIF and a mandate to close the Fund under terms and conditions agreed beforehand.

Q40:

Online casinos are specifically excluded from the class of potential targets for investment. It will be helpful to have a firm declaration that online games such as social, casual, combat oriented or role playing are not considered gambling?

EIF Answer:

The EIF has defined gambling as undesired sector for its financial support. This means (online or other) situations, where money is not exchanged for a commercially measurable consideration, but for a mere chance to receive such consideration. The situation with online games, as mentioned is different, as these games have a defined commercial value, which is expressed in the price paid once and for all for the acquisition of such good or paid for the occasional use of such good.

Q41:

How does the EIF evaluate that the private investors have the capacity to provide the mentioned minimum 30% of the total capital?

EIF Answer:

This is part of EIFs due diligence that will be performed on the applicants.

Q42:

Potential deal flow is confidential; to what extent are we required to disclose details?

EIF Answer:

During the due diligence, EIF may request all information at any level of detail including deal flow.

Q43:

"Project Relevance, Quality and Coherence" has a weighting of 40. How exactly this weighting is split between the sub-criteria of 2.1.and 2.2?

EIF Answer:

This forms part of EIF internal selection process and cannot be disclosed.


 
 

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