The original of this document is in Turkish. In case of discrepancies
between the Turkish and the English text, the Turkish text shall prevail.
DECREE OF THE COUNCIL OF MINISTERS ON TRANSFERRING RESOURCES
TO THE FUNDS OF FUNDS
PART ONE
Purpose, Scope, Legal Basis and Definitions
Purpose and Scope
Article 1: (1) The purpose of this Decree is to regulate the selection criteria,
investment areas, auditing and the upper limits of all fees and expenses pertaining to the
resources committed by the Undersecretariat of Treasury and other related issues regarding
the funds of funds receiving resources from Undersecretariat of Treasury, which are formed
to support venture capital funds and other legal persons providing financing to full-fledged
taxpayer companies [in Turkey] through equity injections as well as to support co-investment
funds, which provide co-financing to target companies along with angel investors, sub-funds
formed under these funds of funds and co-investment funds.
Legal Basis
Article 2: (1) This Decree is based on the Additional Article 1 of the Law on the
Regulating Public Finance and Debt Management (Law no. 4749 issued on March 28, 2002,
as amended on April 3, 2013).
Definitions
Article 3: (1) In the application of this Decree, the following terms have the meanings
stated below:
a) Sub-fund: The fund formed under the fund of funds according to an investment and
exit strategy, which receives resources from the Undersecretariat of Treasury,
b) Minister: The Minister, in charge of the Undersecretariat of Treasury,
c) Outstanding Balance: The outstanding amount which is calculated by adding the
profit, deserved according to contribution rates when exiting from the investments
made through the resources transferred to the fund of funds and deducting losses (if
any) and all fees and expenses paid out to venture capital funds by the fund of funds
from commitments,
d) Fund raiser: Real or legal persons who undertake the establishment of the fund of
funds,
e) Venture capital fund: Venture capital investment trusts and venture capital funds
subject to The Capital Market Law (Law no. 6362 issued on December 6, 2012) and
funds as well as legal persons operating in Turkey or abroad which invest in resident
companies in Turkey,
f) Target company: The company which fits in the category stated in the Article 5 of
The Regulation Regarding the Definition, Qualifications and Categorization of Small
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The original of this document is in Turkish. In case of discrepancies
between the Turkish and the English text, the Turkish text shall prevail.
and Medium Sized Enterprises issued with the Decree of The Council of Ministers
(No. 2005/9617 issued on October 19, 2005),
g) Undersecretariat: The Undersecretariat of Treasury,
h) Co-investment fund: The fund formed under the fund of funds and providing cofinancing to target companies which receive investments from angel investors
described in the Regulation Regarding the Business Angel Scheme published on the
official gazette numbered 28560 and dated February 15, 2013,
i) Portfolio manager: Real or legal persons who undertake the management or
advisory functions of the fund of funds or the sub-funds under the fund of funds,
j) Protocol: Contribution agreement governing the mutual rights and obligations,
which is signed between the Undersecretariat and the fund of funds,
k) Fund of funds: Structures with or without a legal personality which provide
resources to co-investment funds as well as venture capital funds and other legal
persons established to provide financing to full-fledged taxpayer companies [in
Turkey].
PART TWO
Selection of Funds, Resource Commitment, Resource Transfer and Profit Sharing
Selection of Funds of Funds and Sub-Funds
Article 4- (1) In order for the Undersecretariat to commit resources to a fund of funds
the following conditions must be met:
a) Fund raiser must have at least 2 years of experience in the management of a
venture capital fund or a fund of funds or serving at the upper level management or
being represented in the board of directors of a company whose annual net sales are
above TL 25 million,
b) Portfolio manager must have a management team including at least one person all
the time who has the qualifications stated below:
1) Having made decisions to invest in at least 5 different companies in the field
of venture capital or venture capital funds,
2) Having made at least one successful exit within the last 5 years by making
profit from the investment decisions made for companies or venture capital
funds.
(2) Provided that the Undersecretariat transfers resources to different sub-funds or coinvestment funds within a fund of funds and these funds have different fund raisers or
portfolio managers, the related criteria, set in the first paragraph of this article, must be
satisfied for each fund raiser and portfolio manager.
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The original of this document is in Turkish. In case of discrepancies
between the Turkish and the English text, the Turkish text shall prevail.
Announcement for funds of funds and the evaluation of proposals
Article 5- (1) Announcements will be made from the web site of the Undersecretariat
in Turkish and English for the existing funds of funds and the ones who will establish a fund
of funds. On each announcement, the upper limits of the resource which can be committed by
the Undersecretariat to funds of funds, utilization purpose of the resource to be allocated and
other related issues are specified. Announcements remain on the web site of the
Undersecretariat for at least 3 months beginning from the publication date. Proposals
received after the removal of the announcement from the web site are not considered.
(2) Proposals sent to the Undersecretariat by the ones who meet the criteria set in the
Article 4 of this Decree are evaluated based on the following figures:
a) Return of the previous venture capital investments made by the fund raiser and/or
portfolio manager,
b) Ratio of the previous technology focused investments to total investments made by
the fund raiser and/or portfolio manager,
c) Ratio of the previous investments made through venture capital funds or directly in
target companies to total investments made by the fund raiser and/or portfolio
manager,
d) Management costs of fund of funds.
(3) The ratio of the amount committed to the fund of funds by the organizations,
institutions and investors other than the Undersecretariat to the amount committed by the
Undersecretariat, is primarily taken into consideration in the assessment of applications by
the Undersecretariat.
(4) With regard to the applications received at the end of each announcement; whether
there will be a commitment or not, the fund of funds to be committed, the amount and the
terms of the commitment are determined by the Minister.
Limits of the Commitment
Article 6- (1) The amount committed to the fund of funds by the Undersecretariat
shall not exceed 70% of the total amount committed to the fund of funds.
(2) The amount committed to a venture capital fund approved by a fund of funds
funded by the Undersecretariat, shall not exceed 20% of the total amount committed to the
fund of funds. A venture capital fund requesting resources from the fund of funds is obliged
to find at least the amount that is committed to it by the fund of funds. (Amendment:
2015/29459 – 28.08.2015 / a.1)
Commitment amount
Article 7- (1) The total amount of the resources committed to the funds of funds by
Undersecretariat until 12/31/2018, shall not exceed TL 500 million, excluding charges, fees
and foreign curency translation loss in case the commitment denominated in foreign currency
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The original of this document is in Turkish. In case of discrepancies
between the Turkish and the English text, the Turkish text shall prevail.
to be paid to the funds of funds. The Undersecretariat may pay this amount at once or in
installments. ((Amendment: 2015/29459 – 28.08.2015 / a.2)
(2) The Council of Ministers determines the amount to be committed for each fiveyear period after 12/31/2018.
(3) The Minister is authorized to determine and transfer the amounts to be transferred
from the commitments to the funds of funds for each period. The payment of the committed
resources is financed from the budget appropriations.
Cash transfers and refunds
Article 8 - (1) The funds of funds, funded by the Undersecretariat shall open an
account at a bank located in Turkey for cash transfers and refunds. For each sub-fund a
separate account shall be opened. The requested cash by the fund of funds, will be transferred
from the relevant account of the Undersecretariat to the fund of funds’ bank account in
Turkey, at most 1 week before the date of cash capital transfers to the target companies to be
done by the venture capital fund or angel investor that are funded by the fund of funds. The
details of the procedures and principles regarding transfer of the resources will be determined
with the protocol signed between the Undersecretariat and the fund of funds.
(2) Venture capital funds shall use the resources provided by the funds of fund
through direct capital investements into the companies and/or buying debt instruments of the
companies structured as combining the features of financial debt and equity instruments.
(Add: 2015/29459 – 28.08.2015 / a.3)
Principal and profit sharing
Article 9- (1) In the case of liquidation of the fund of funds and/or sub-funds and/or
termination of their activities before the duration; the outstanding balance of the resources
transferred to the fund including any incurred profit after deducting the charges and fees paid
to the venture capital funds by the fund of funds; shall be transferred from the fund of funds’
bank account in Turkey to the relevant account of Undersecretariat within the time specified
in the protocol, to be recorded as revenue in the state general budget according to the
contribution rates.
(2) In the case of exiting from investments and/or payments of dividend, the
outstanding balance shall be transferred from the fund of funds’ bank account in Turkey to
the relevant account of Undersecretariat, within the time specified in the protocol, to be
recorded as revenue in the state general budget according to the contribution rates.
(3) The outstanding balance from the the shares transferred by the other public
institutions to the funds of funds as a grant shall be transferred from the fund of funds’ bank
account in Turkey to the relevant account of Undersecretariat by the fund of funds, to be
recorded as revenue in the state general budget.
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The original of this document is in Turkish. In case of discrepancies
between the Turkish and the English text, the Turkish text shall prevail.
PART THREE
Co-investment Fund
The limit of the resources to be transferred from the co-investment funds
Article 10- (1) Within the scope of this Decree the equity shares of a co-investment
fund in a target company, shall not be more than the angel investors’ total equity shares.
(2) (…) (This sub- paragraph has been repealed by the Decree No: 2015/29459
regarding the Amendment of Decree on Transferring Resources to the Fund of Funds, dated
August 28th, 2015)
The operations of co-investment fund
Article 11- (1) Unless otherwise stated in this Decree, the co-investment fund is
subject to the provisions applied for the sub-funds. The rules of the operations relating to
implementation of co-investment funds are determined by the protocol signed between the
Undersecretariat and the fund of funds. A cooperation in the context of the co-investment
fund shall be done only with the networks accredited as Business Angel Network by the
Undersecretariat in the scope of the Regulation Regarding the Business Angel Scheme.
PART FOUR
Investment Areas, Duration of Funds, Fees and Expenses
Investment areas
Article 12- (1) The funds of funds, funded by the Undersecretariat, shall not invest
directly or indirectly to the companies operating directly or indirectly in the areas listed
below or directly or indirectly carrying out research and development activities in these areas.
a)
b)
c)
d)
e)
The production of tobacco and alcoholic beverages,
Excluding defense industry, the production or trade of weapons and ammunition.
The areas whose main field of activity is real estate,
Activities prohibited by law,
Prohibited activities specified in the protocol.
The duration of the funds
Article 13- (1) The investments made by a sub-fund established under the funds of
funds in the scope of this Decree excluding co-investment funds, shall be completed by
exiting, at most within 15 years from the date of sub-fund’s beginning its activities. This
period may be extended for 2 more years by the Minister. The investments made through the
co-investment funds under funds of funds funded by the Undersecretariat, shall be completed
by exiting, at most within 10 years from the date of co-investment fund’s beginning its
activities. This period may be extended for 2 more years by the Minister.
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The original of this document is in Turkish. In case of discrepancies
between the Turkish and the English text, the Turkish text shall prevail.
Fixed costs
Article 14- (1) Excluding start-up costs, all types of fixed fees and expenses paid
annually by the Undersecretariat to a sub-fund under a fund of funds, except co-investment
funds, shall not exceed 1% of the resources committed by the Undersecretariat. Excluding
start-up costs, all types of fixed fees and expenses paid annually by the Undersecretariat to
co-investment fund, shall not exceed 2% of the resources committed the Undersecretariat. A
one-time start-up payment amounting up to 1% of the resources committed by the
Undersecretariat may be paid by the Undersecretariat for the start-up costs of the fund of
funds. Any type of fixed fees and expenses paid annually to a venture capital fund by the
fund of funds, shall not exceed total 2.5% of the resources committed by the fund of funds.
(2) The issues regarding the payment of any type of fixed fees and expenses paid to
the funds of funds are determined by the protocol signed between the Undersecretariat and
the fund of funds.
Performance Fee
Article 15- (1) While exiting from investments made by the fund of funds, excluding
co-investment funds, if profit is incurred the performance fee paid to portfolio manager by
the Undersecretariat shall not exceed 10% of the share of profit deserved by the
Undersecretariat according to the contribution rates of the Undersecretariat. While exiting
from investments made by the co-investment funds, if profit is incurred the performance fee
paid to portfolio manager by the Undersecretariat shall not exceed 10% of the share of profit
deserved by the Undersecretariat according to the contribution rates of the Undersecretariat.
The performance fee paid to co-investing angel investor, shall not exceed 25% of the share of
profit deserved by the Undersecretariat according to the contribution rates of the
Undersecretariat. The performance fee paid by the fund of funds to the director or counselor
of a venture capital fund, shall not exceed 25% of the share of profit deserved by the fund by
funds according to its contribution rates.
(2) Payment of performance fees is tied to the condition of obtaining profit above
certain threshold rate of returns. The Minister is authorized to determine the threshold rate of
returns regarding the payment of performance fees to the fund of funds. The issues regarding
the payment of performance fees shall be determined by the protocol signed between the
Undersecretariat and fund of funds.
PART FIVE
Supervision, Auditing and Sanctions
Supervision, Auditing and Sanctions
Article 16- (1) The activities of funds of funds, funded by the Undersecretariat, are
audited annually by an independent auditing firm. The scope of supervision and auditing is
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The original of this document is in Turkish. In case of discrepancies
between the Turkish and the English text, the Turkish text shall prevail.
specified in the protocol. When considered necessary, the Undersecretariat may audit the
funds of funds, funded by the Undersecretariat.
(2) The sanctions to be applied in case of detection of acts, contrary to this Decree, of
the funds of funds, venture capital funds, target companies, angel investors or other real or
legal persons directly and / or indirectly funded by the Undersecretariat, is regulated in the
protocol.
PART SIX
Miscellaneous Provisions
Other Issues
Article 17- (1) The rules that the fund of funds will be subject to, and the
implementation issues are regulated in the protocol signed between the Undersecretariat and
the fund of funds. The Minister is authorized to determine the terms of the Protocol and make
commitments within the framework of these terms. All preparation, communication and
negotiation activities related to the protocol and relevant documents are executed and
concluded by the Undersecretariat.
(2) Unless otherwise specified in the protocol, the protocol shall come into force on
the date of signing.
(3) In case of reconciliation of the parties, Minister is authorized to make changes in
the terms and conditions of the protocol.
(4) The Minister is authorized dispelling the doubts that may arise regarding the
implementation of this Decree.
Effect
Article 18- (1) The Decree shall come into force on the date of publication.
Execution
Article 19- (1) The Decree shall be executed by the Minister in charge of the
Undersecretariat.
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The original of this document is in Turkish. In case of discrepancies
between the Turkish and the English text, the Turkish text shall prevail.
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The original of this document is in Turkish. In case of discrepancies
between the Turkish and the English text, the Turkish text shall prevail.
STATEMENT OF REASONS
Venture capital is an important financial instrument for early and growth stage
companies having the potential for rapid growth by generating business ideas. To increase the
capacity and efficiency of emerging venture capital funds which are developing especially
from the 2000s in our country, and to direct this potential to dynamic, technology driven,
high value added businesses; the fund of funds model which is also applied in countries such
as Germany and South Korea is designed as a top fund and instead of investing directly to
these businesses creating a portfolio of venture capital funds and managing this portfolio is
adopted as an investment strategy. The co-investment fund is a sub-fund under the fund of
funds, providing peer capital support not exceeding the amount of the capital transferred by
the angel investors for each investment. Under the umbrella of funds of funds, there is the
opportunity of making co- investments with angel investors besides the venture capital
funds.
With this regulation, the selection criterias for funds of funds, the upper limits of the
resources to be transferred to the funds of funds by the Undersecretariat of Treasury, the
business areas to be invested in with transferred amounts, auditing, the upper limits of any
type of fixed fees and expenses resulting from the committed amount, and other issues
relating to implementation are determined. Thus, the funds of funds that meet financing
requirements of the early and growth stage companies have the opportunity of resource
transfers provided by the Undersecretariat of Treasury in a financial system in which
different financial structures such as; angel investors, venture capital funds and banks can be
offered to entrepreneurs.
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