The Ohio General Assembly enacted Chapter 150 of the Ohio Revised Code (the "Ohio VC Statute") for the purpose of increasing the amount of private investment capital available in this state for Ohio-based business enterprises in the seed or early stages of business development and requiring initial or early stage funding.
To accomplish this purpose, the Ohio VC Statute created the Ohio Venture Capital Authority (the "OVCA"), a public body authorized to implement the Ohio VC Statute. The Ohio VC Statute also authorized the creation of a fund of funds to make investments in underlying venture capital funds in accordance with an investment policy to be devised by the OVCA.
The Ohio Capital Fund LLC ("The Ohio Capital Fund") was established to serve as the fund of funds contemplated by the Ohio VC Statute. The OVCA devised the investment policy set forth in Chapter 150 of the Ohio Administrative Code (the "Investment Policy") pursuant to the Ohio VC Statute to govern The Ohio Capital Fund's investment activities.
Buckeye Venture Partners, LLC - Program Administrator
Another of the OVCA's responsibilities under the Ohio VC Statute is to select and retain a program administrator to manage The Ohio Capital Fund subject to the oversight of the OVCA. Pursuant to procedures described in the Ohio VC Statute, the OVCA selected Buckeye Venture Partners, LLC, an Ohio limited liability company ("BVP"), to serve as the program administrator.
BVP, which was formed as a joint venture between Cincinnati based Fort Washington Investment Advisors, Inc., and Cleveland-based Peppertree Partners, LLC, was selected from among the RFP respondents and engaged by the OVCA to serve as program administrator in January 2005. BVP is the sole manager of the OCF and is currently a subsidiary of Fort Washington Investment Advisors, Inc., following its acquisition in 2008 of Peppertree. Fort Washington Capital Partners Group (“FW Capital”) is the institutional private equity division of Fort Washington Investment Advisors.
BVP is the sole manager of The Ohio Capital Fund. The members of The Ohio Capital Fund are BVP and a trust of which the Ohio Development Services Agency serves as trustee. The purposes of The Ohio Capital Fund are to borrow up to money OVCA-approved limits (the "Indebtedness") from institutional investors ("Lenders") and from BVP as the program administrator, and use the proceeds of the Indebtedness to search for, acquire, hold, manage and dispose of investments in venture capital funds in accordance with the Ohio VC Statute and the Investment Policy, with 75% of such investments required to be made in Ohio-based venture capital funds meeting certain criteria ("Ohio-based Venture Capital Funds").
BVP is required to loan to The Ohio Capital Fund (the "Program Administrator Loan") an amount equal to 1% of the total Indebtedness (including the Program Administrator Loan). The Program Administrator Loan must be made on substantially the same terms and conditions as the loans from Lenders. If and to the extent the Indebtedness is not repaid when due ("Losses"), BVP must certify such Losses to the OVCA, and Lenders will be entitled to claim refundable Ohio tax credits equal to the amount of their Losses ("Tax Credits"). However, Losses, experienced by BVP (if any) with respect to its Program Administrator Loan will not be eligible for Tax Credits. The Program Administrator Loan must be funded by BVP simultaneously and on a pro-rata basis with takedowns of Indebtedness from the Lenders.
The Investment Policy
In selecting, structuring and making investments in venture capital funds, BVP and The Ohio Capital Fund are required to comply with the Investment Policy. The Investment Policy specifies, among other things, certain criteria which a venture capital fund must meet in order to be eligible for an investment by The Ohio Capital Fund, and certain limitations on amounts which The Ohio Capital Fund is permitted to invest in any venture capital fund or group of related venture capital funds. At least 75% of The Ohio Capital Fund's investments must be made in Ohio-based Venture Capital Funds, and up to 25% may be made in venture capital funds which are not Ohio-based Venture Capital Funds. In addition, every venture capital fund in which The Ohio Capital Fund invests, whether Ohio-based or not, is required to agree in writing with The Ohio Capital Fund that such venture capital fund will invest at least half (50%) of The Ohio Capital Fund monies it receives in Ohio-based business enterprises in the seed or early stage of development meeting certain statutory criteria ("Ohio-based Business Enterprises").
All underlying venture capital funds must target investments in Ohio-based companies as a part of their investment strategy. The Ohio Capital Fund's commitment to any one venture capital fund or group of related funds may not exceed $10 million.
The Investment Policy contains other detailed requirements and limitations, and interested persons are urged to review the Investment Policy carefully.
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