Title:74 Part:719

PART 719 TECHNOLOGY DEVELOPMENT ACCOUNT (TDA) PROGRAM : Sections Listing

TITLE 74: PUBLIC FINANCE
CHAPTER V: TREASURER
PART 719 TECHNOLOGY DEVELOPMENT ACCOUNT (TDA) PROGRAM

SUBPART A: INTRODUCTION AND PURPOSE

Section 719.100 Purpose of Program

SUBPART B: DEFINITIONS

Section 719.200 Definitions

SUBPART C: ADMINISTRATION

Section 719.300 Responsibilities of the Treasurer
Section 719.310 Responsibilities of the Investment Advisor
Section 719.320 Investment Policy and Objectives
Section 719.330 Investment Parameters
Section 719.340 Program Documents

AUTHORITY: Authorized by and implementing the Technology Development Act [30 ILCS 265].

SOURCE: Adopted at 43 Ill. Reg. 7003, effective May 28, 2019.

SUBPART A: INTRODUCTION AND PURPOSE

Section 719.100 Purpose of Program

The purpose of the Technology Development Act is to attract, assist, and retain quality technology businesses and promote the growth of jobs and entrepreneurial and venture capital environments in Illinois. The creation of the Technology Development Account will allow the State to bring together, and add to, Illinois' rich science, technology, agricultural, financial, and business communities. [30 ILCS 265/5]

SUBPART B: DEFINITIONS

Section 719.200 Definitions

The following definitions shall apply to this Part:

"Act" means the Technology Development Act [30 ILCS 265].

"Fund Manager" means an entity that provides equity financing for starting up or expanding a company, or related purposes such as financing for seed capital, research and development, introduction of a product or process into the marketplace, or similar needs requiring risk capital.

"Green Technology" means technology that:

promotes clean energy, renewable energy, or energy efficiency;

reduces greenhouse gases or carbon emissions; or

involves the invention, design, and application of chemical products and processes to eliminate the use and generation of hazardous substances.

"Illinois Companies" means companies that are headquartered or that otherwise have a significant presence in the State at the time of initial or follow-on investment. [30 ILCS 265/11(d)]

"Illinois Venture Capital Firm" means an entity that:

has a majority of its employees in Illinois or that has at least one general managing partner or principal domiciled in Illinois; and

either:

provides equity financing for starting up or expanding a company, or related purposes such as financing for seed capital, research and development, introduction of a product or process into the marketplace, or similar needs requiring risk capital; or

has a track record of identifying, evaluating, and investing in Illinois companies and that provides equity financing for starting up or expanding a company, or related purposes such as financing for seed capital, research and development, introduction of a product or process into the marketplace, or similar needs requiring risk capital. [30 ILCS 265/11(c)]

"Investment Advisor" means one or more entities lawfully doing business in the State of Illinois selected by the Treasurer to oversee the investment, administration, and reporting for the Technology Development Account.

"Portfolio Company" means an entity in which a Fund Manager invests.

"Significant Presence" means at least one physical office and one full-time employee within the geographic borders of Illinois. A "physical office" may mean a professional workplace, a co-working location, or a home office.

"TDA II-Recipient Fund" means any fund in which the State Treasurer places money under Section 11 of the Act.

"TDA IIa Account Balance" means 5% of the State's investment portfolio, which shall be calculated as:

the balance at the inception of the State's fiscal year; or

the average balance in the immediately preceding 5 fiscal years, whichever number is greater.

"Technology Business" means a company that has as its principal function the providing of services including computer, information transfer, communication, distribution, processing, administrative, laboratory, experimental, developmental, technical, or testing services; manufacture of goods or materials; the processing of goods or materials by physical or chemical change; computer related activities; robotics, biological or pharmaceutical industrial activities; or technology-oriented or emerging industrial activity. [30 ILCS 265/11(c)]

"Technology Development Accounts" means the Technology Development Accounts established pursuant to Sections 10 and 11 of the Act ("TDA IIa").

"Track Record" means having made, on average:

at least one investment in an Illinois company in each of its funds if the Illinois venture capital firm has multiple funds; or

at least two investments in Illinois companies if the Illinois venture capital firm has only one fund. [30 ILCS 265/11(c)]

"Treasurer" means the duly elected Treasurer of the State of Illinois or his or her designees.

"Venture Capital" means equity financing that is provided for starting up, expanding, or relocating a company, or related purposes such as financing for seed capital, research and development, introduction of a product or process into the marketplace, or similar needs requiring risk capital. [30 ILCS 265/11(c)] This includes, but is not limited to, financing classified as venture capital, mezzanine, buyout, or growth.

SUBPART C: ADMINISTRATION

Section 719.300 Responsibilities of the Treasurer

The Treasurer exercises authority and control over the management of the Technology Development Accounts by setting applicable policies and procedures that are followed by the Treasurer and Investment Advisor. As such, key roles and responsibilities include, but are not limited to:

a) Investment Policy − The Treasurer is responsible for drafting this policy and reviewing it at least annually to ensure accuracy and continued relevance.

b) Oversight − The Treasurer is responsible for the direction of investments and administration of the assets of the Technology Development Accounts.

c) Investment Advisor − In order to properly carry out its responsibilities, the Treasurer may use one or more Investment Advisors to assist in the administration of the Technology Development Accounts.

d) Performance and Fee Monitoring − The Treasurer will review the investment performance of the TDA II-Recipient Fund, as well as the fees, on a quarterly or annual basis, as determined by the Treasurer.

e) Due Diligence − The Treasurer will monitor investments and participate in operational due diligence activities in coordination with the contractors retained to assist in the administration of the Technology Development Accounts.

f) Accounting − Technology Development Accounts assets must be accounted for separately from other Treasurer monies. The Treasurer will execute investment valuation procedures in compliance with Statement No. 72, Fair Value Measurement and Application, February 2015 of the Governmental Accounting Standards Board of the Financial Accounting Foundation, evaluating available inputs for investments to determine the input level most applicable.

Section 719.310 Responsibilities of the Investment Advisor

In order to properly carry out its responsibilities, the Treasurer may use one or more Investment Advisors to assist in the administration of the Technology Development Accounts. The Treasurer may engage the Investment Advisor to provide services needed for the effective operation of the Technology Development Account in accordance with all applicable federal and State laws and regulations. These services may include, but are not limited to:

a) Evaluation of TDA II-Recipient Funds − The Investment Advisor may advise and provide fund evaluations to the Treasurer, taking into consideration the investment policy and objectives set forth in this Part. This may include investment analysis, portfolio construction, and due diligence. The Investment Advisor will have the responsibility to seek, recruit, screen, and evaluate fund managers for investment through TDA IIa.

b) Due Diligence − The Investment Advisor is responsible for fund manager due diligence, which includes, but is not limited to, research, financial analysis, and legal, accounting, and background investigations of fund managers. The Investment Advisor will undergo due diligence activities in coordination with the Treasurer.

c) Fund Monitoring − The Investment Advisor is responsible for monitoring the performance of TDA II-Recipient Funds, tracking the diversification of the investments and the amounts invested by TDA II-Recipient Funds, and reconciling all reporting and accounting requirements of portfolio companies and TDA II-Recipient Funds.

d) Benchmarking − The Investment Advisor is responsible for establishing applicable investment benchmarks (including public market equivalents), measuring the performance of TDA II-Recipient Funds against set benchmarks, and reviewing benchmarks.

e) Reporting − The Investment Advisor is responsible for administering all reporting and recordkeeping duties set forth in the investment policy and the Act. The Investment Advisor shall ensure standardization of reporting across TDA II-Recipient Funds. The Investment Advisor shall ensure that the following information is reported for TDA IIa to the Treasurer on a quarterly or annual basis, as determined by the Treasurer, for all investments:

1) the names of portfolio companies invested in during the applicable investment period;

2) the addresses of reported portfolio companies;

3) the date of the initial (and follow-on) investment;

4) the cost of the investment;

5) the current fair market value of the investment;

6) for Illinois companies, the number of Illinois employees on the investment date; and

7) for Illinois companies, the current number of Illinois employees. [30 ILCS 265/11(d)]

f) General Resource − The Investment Advisor shall serve as a general resource to the Treasurer for information, advice and training regarding investment, reporting, fund vetting and management, portfolio company valuation, and marketing strategies.

Section 719.320 Investment Policy and Objectives

a) The Treasurer shall develop, publish, and implement an investment policy covering the investment of monies in TDA IIa. The policy may be amended at any time, and shall be published on the Treasurer's website. The Treasurer shall review the policy at least once every year to ensure that it remains relevant to the Act, this Part, and prudent investment standards.

b) The investment policy is a written statement describing the risk management and oversight of the program and should be designed to describe the following:

1) the Treasurer's investment objectives;

2) the Treasurer's investment parameters;

3) the roles of the Treasurer and Investment Advisor; and

4) the reporting requirements for TDA II-Recipient Funds.

c) The Treasurer shall consider the following investment factors when selecting fund managers to invest in TDA IIa:

1) Diversification – The Treasurer shall aim to diversify its investments in areas including, but not limited to, the following:

A) strategy;

B) industry sector;

C) size of investment;

D) investment stage;

E) vintage year;

F) fund managers;

G) underlying portfolio companies;

H) geographic location; and

I) business model.

2) Small Business Investment Companies − The Treasurer shall endeavor to invest in qualified fund managers that participate in the U.S. Small Business Administration's Small Business Investment Companies Program (15 USC 14B).

3) Cost Efficiency − The Treasurer shall seek to minimize any fees or costs that diminish from the total assets or value of the Technology Development Account.

4) Investment in Illinois Technology Businesses − The Treasurer shall encourage the investment community to explore investment opportunities in Illinois technology businesses.

5) Fund Manager Diversity − The Treasurer shall seek to identify, recruit, and select fund managers that are more than 50% owned and/or managed by qualified minorities, women, military veterans, and persons with a disability.

6) Portfolio Company Diversity − The Treasurer shall seek to identify, recruit, and select fund managers that have demonstrated experience and/or express an intent to invest in:

A) portfolio companies that are more than 50% owned and/or managed by qualified minorities, women, military veterans, or persons with a disability; and/or

B) portfolio companies geographically located in diverse communities or low-to-moderate income areas.

7) Green Technology − The Treasurer shall seek to identify, recruit, and select fund managers that have demonstrated experience and/or an express ability to invest in green technology businesses located in Illinois.

8) Sustainability Factors − The Treasurer shall seek to integrate sustainability factors such as environmental, social capital, human capital, business model and innovation, and leadership and governance factors into its investment analysis, investment due diligence, and portfolio construction.

Section 719.330 Investment Parameters

a) TDA IIa Investment − The Treasurer, in accordance with the Act, shall segregate a portion of the Treasurer's State investment portfolio that at no time shall be greater than 5% of the portfolio, in the TDA IIa, an account that shall be maintained separately and apart from other moneys invested by the Treasurer. 5% of the State's investment portfolio shall be calculated as the greater of:

1) the balance at the inception of the State's fiscal year; or

2) the average balance in the immediately preceding 5 fiscal years. [30 ILCS 265/11(a)]

b) Reinvestment of Distributions − Distributions from the investments in TDA IIa may be reinvested into TDA IIa, not to exceed the original cost basis of the initial investments.

c) TDA IIa Excess Investments − In the event TDA IIa investments exceed 5% of the portfolio, as described in subsection (a), the Treasurer will, to the extent practicable, take reasonable steps to reduce the excess TDA IIa investments below the applicable threshold in a manner that will result in minimal negative financial impact.

d) TDA IIa Investment in Illinois Venture Capital Firms − In no case shall more than 15% of the TDA IIa account balance be invested in firms based outside of Illinois.

e) Cap on Investment in Individual Funds − The investment of the State Treasurer in any fund in which the State Treasurer places money under TDA IIa shall not exceed 15% of the total TDA IIa account balance.

Section 719.340 Program Documents

In order to establish and administer the Technology Development Accounts, the Treasurer may enter into all necessary agreements, documents and instruments with terms and provisions that shall not be inconsistent with the Act and this Part.