EVCA Governing Principles

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123. Examples3.2.7. Presentations to investorsQuestion:What responsibilities arise with respect to marketing presentations?Explanation:Presentations and information provided by the initiators which influence investors' decisions are often subjectto the law of all jurisdictions where an initiative is promoted. These laws will often apply to information providedto investors, irrespective of the media by which it is communicated.In some circumstances, presentations may be made to potential investors at an early stage and the informationprovided to them may influence their decision to invest, even though they have not yet received anydocumentation. It is important that potential investors are made aware of any changes to information providedto them at any point during the fundraising process, so that they are able to make a balanced investmentdecision based on correct information.Recommendation:Initiators must comply with local laws which relate to the marketing of funds in all jurisdictions wherethe initiative is promoted and appropriate professional advice should be obtained.Initiators should ensure that information provided to potential investors and promotional statements madeto them in whatever form (e.g., in telephone calls, meetings, slide or PowerPoint presentations, letters, e-mails,websites, etc.) even at an early stage, is correct and fairly presented. Any subsequent material changes tosuch information should be communicated to potential investors.3.2.8. Track records and forecastsQuestion:What information should be provided about the track record of the management team and how far shouldforecasts be made?Explanation:Potential investors are generally interested in the track record of the management team and the initiatorsmay also wish to make forecasts regarding likely performance in the fund's chosen sectors, target IRR, etc.It is very easy for such material to be misread or to mislead potential investors, particularly in view of changingcircumstances or if there is selective presentation of material.Recommendation:Statements and forecasts set out in the information memorandum or in other documents should not be madeon the basis of selective data which is unrepresentative, misleading or incomplete. The basis of all such statementsand forecasts should, in any event, be fully disclosed in the fund documentation. In particular, the period to whichany track record information relates should be disclosed.Governing Principles - EVCA Professional Standards - May 2003 (reprint January 2009)
13Initiators should ensure that when there is any material change that affects such information prior to final closing,it is disclosed to all investors.Track record information may be confidential (for example, to previous employers or portfolio companies)and the initiators should ensure that appropriate consent is obtained before it is used.3.2.9. Time period for fundraisingQuestion:Is there any specific period during which fundraising must be completed?Explanation:It is important that the initiators do not allow fundraising to continue indefinitely, as this can prevent the managerfrom implementing the fund's investment strategy whilst resources continue to be committed to marketing.Recommendation:The fund documentation should specify a date when fundraising will be completed.If it does not do so, the initiators and the manager should ensure that fundraising is completed within areasonable time after first closing of the fund.Consideration should be given to charging interest or equivalent compensatory payments to those who investlate in the fundraising cycle.3.3. InvestingWhen making investments on behalf of the fund, the manager must implement the fund's investment policy withdue skill, care and diligence.3.3.1. Due diligenceQuestion:What due diligence should be done when evaluating an investment and to what level of detail?Explanation:The due diligence process undertaken by the manager is vital. The information acquired during the process,together with the manager's own knowledge and expertise, will form the basis of any investment decision.The due diligence process will usually have a number of objectives: obtaining 'corporate' information aboutthe investee business (such as the extent of its assets and liabilities and the likelihood of litigation against it)and also evaluating any technology, research or business opportunity that may play a part in the manager'sinvestment decision, assessing the market for the product or service being offered and likely exit opportunitiesfor the fund.Governing Principles - EVCA Professional Standards - May 2003 (reprint January 2009)
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EVCA Governing Principles

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