Download Policies and Procedures

49th State Angel Fund Policies and Procedures
Policies and Procedures
Municipality of Anchorage
May 2012
DRAFT
49th State Angel Fund Policies and Procedures
DRAFT
Table of Contents
1.
Purpose ................................................................................................................................1
2.
49SAF Program ...................................................................................................................2
3.
2.1
Overview ......................................................................................................................2
2.2
Management .................................................................................................................4
2.3
Composition of the Advisory Committee ......................................................................5
2.4
Conflict of Interest/Use of Funds ..................................................................................6
2.5
Allocated Funding from the United States Department of Treasury...............................7
2.6
49SAF Program Income ...............................................................................................7
2.7
49SAF Program Eligible Expenses ...............................................................................8
Investment Management ......................................................................................................8
3.1
Business Model of Angel Investing and Venture Capital...............................................8
3.2
Risk Tolerance ..............................................................................................................9
3.3
49SAF Intended Lifespan, Return on Investment, and Averages ...................................9
3.4
Investment Strategy ......................................................................................................9
3.5 Invested Funds Policy .................................................................................................... 10
4.
5.
6.
Application and Investment Process ................................................................................... 10
4.1
Overview of Application and Investment Processes for Entrepreneurs ........................ 10
4.2
Applicant Eligibility Criteria....................................................................................... 12
4.3
Applicant Evaluation Criteria...................................................................................... 15
4.4
Applicant Funding Amounts and Timeframes ............................................................. 16
4.5
Required Documentation ............................................................................................ 17
Indirect Investments ........................................................................................................... 17
5.1
Limitations ................................................................................................................. 18
5.2
Process ....................................................................................................................... 18
5.3
Criteria ....................................................................................................................... 18
5.4
Eligibility ................................................................................................................... 18
SSBCI Reporting and Record Retention Requirements....................................................... 19
6.1
Quarterly Report Schedule .......................................................................................... 19
6.2
Quarterly Report Requirements................................................................................... 20
6.3
Annual Report Schedule ............................................................................................. 20
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6.4
Annual Report Requirements ...................................................................................... 20
6.5
Final Report ................................................................................................................ 22
6.6
Reporting of Certain Material Events .......................................................................... 22
6.7
Record Retention and Audit Rights ............................................................................. 23
7.
Performance Metrics .......................................................................................................... 24
8.
Risk Management .............................................................................................................. 24
9.
Glossary ............................................................................................................................. 25
Appendix A: 6.50.030 - Investment guidelines for Municipal Funds
Appendix B: Municipality of Anchorage Operating Policy/Procedure
Exhibit 1: Small Business Borrower/Investee Certification for Use of Proceeds
Exhibit 2: Sex Offender Certification Form
Exhibit 3: Lender/Investor Certification for Use of Proceeds
Exhibit 4: Quarterly Certification Form
Exhibit 5: Scorecard Guidance
49th State Angel Fund Policies and Procedures
1.
DRAFT
Purpose
The mission of the 49th State Angel Fund (49SAF) is to:

Provide a source of capital to high-growth businesses to promote entrepreneurship and
foster innovation, creating jobs and economic benefit for Anchorage.

Help strengthen the local angel investment network and attract additional venture capital
to the city.

Assist early-stage and disadvantaged businesses.
The 49SAF was created through a $13,168,350 allocation from the federal government called the
State Small Business Credit Initiative (SSBCI). The 49SAF is intended to help high-growth,
early-stage businesses with the potential to produce significant economic impact, including jobs,
find funding. Because banks usually loan based on assets, a startup business’s initial capital is
often produced through individual equity investment or angel networks. By building the 49SAF,
the Municipality of Anchorage (MOA) is helping to ensure the availability of critical capital for
qualified entrepreneurs to help them create value.
The 49SAF accomplishes its mission by making two kinds of investments:
1. Direct investments in companies early in their business lifecycle. Note: All direct
investments made by 49SAF must be matched by co-investors in a business at a
minimum ratio of 1 to 1. Direct investments are classified according to one of three
investment types:
–
PreSeed (49SAF invests $30,000 to $100,000): Targets entrepreneurs with a need for
funding to take preliminary steps to launch new Anchorage-based businesses. Often
involves technology or other high-growth industries, or leverages discoveries and
talent at Anchorage’s public and private universities and other research organizations.
See description of PreSeed Investment for details.
–
Seed (49SAF invests $100,000 to $500,000): Targets entrepreneurs with a higher
need for funding, often seeking to make initial hires, purchases, or commercialization
efforts. See description of Seed Investment for details.
–
Expansion (49SAF invests $500,000 to $3 million): Targets the following:
a. Early-stage entrepreneurs with a viable business that is ready to expand at scale.
b. Older-lifecycle businesses needing an injection of capital to operate more
efficiently (expansion). See description of Expansion Investment for details.
2. Indirect investments (49SAF invests $100,000 to $5 million) in third-party
angel/venture capital funds (also known as “fund to fund” investments), which in turn
make direct investments into companies that benefit Anchorage and comply with SSBCI
guidelines. Note: All indirect investments made by 49SAF into third-party funds must be
matched by other partners in the fund at a minimum ratio of 3 to 1; 49SAF targets
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indirect investments at a ratio of 10 to 1. Indirect investments are the preferred method of
deploying 49SAF capital, because they offer the added benefits of:
–
decreasing risk due to diversification.
–
adding the efficiencies of the private sector into investment decisions.
–
increasing available capital for early-stage companies through leverage.
–
helping build a long-term network of angel/venture capital investors in Anchorage.
Program policies and procedures contained in this document are established to ensure the MOA
manages and allocates the funds committed to it under the SSBCI Act of 2010 to establish the
49SAF. The policies and procedures conform to SSBCI guidelines (www.treasury.gov/ssbci); the
MOA’s agreement with the State Small Business Credit Initiative Allocated Agreement of
February 14, 2012; and the standards for financial management systems, including internal
control requirements as specified in the grants management common rule at § 85.20.
The 49SAF is managed by the MOA Finance Department as directed by the SSBCI Act of 2010
(title III of the Small Business Jobs Act of 2010, Public Law 111-240, 124 Stat. 2568, 2582).
2.
49SAF Program
2.1
Overview
1. Eligible applicants:
–
Direct investment: Small businesses based in Anchorage, or which provide the city
with significant economic benefit (i.e., job creation), that have an average business
size of 500 or less employees and will not exceed a maximum business size of 750
employees.
–
Indirect investment: Experienced accredited investors and third-party angel or venture
capital funds that agree to adhere to 49SAF policies, procedures, and SSBCI
guidelines.
2. Investment focus:
–
Early-stage, high-growth businesses that can manage the scale necessary to succeed
and create an exit strategy for the equity investors.
–
Disadvantaged, minority-owned, or business turn-around and/or consolidation
opportunities.
–
Applicants able to demonstrate the ability to achieve a leverage ratio of 10 to 1 over
the lifespan of 49SAF (concludes March 31, 2017).
3. Allowable project cost/uses: Any “business purpose” that accelerates the business's
achievement of key milestones and increases its value. Such business purposes include
start-up costs, working capital, franchise fees, equipment, inventory, research and product
development, sales and marketing infrastructure development, and hiring of key
executives. Limitations apply. See Exhibit 1, item 1.
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4. Available funding: From $30,000 to $5 million, depending on the type of investment
requested.
5. Terms: Negotiated between the business owner or third-party venture capital/angel fund
and the 49SAF.
6. Anchorage economic impact resulting from 49SAF investment: Requires a commitment
to make a substantial and positive economic impact to the city of Anchorage, such as
creating or retaining jobs in the city. While 49SAF has not specified a dollar per job ratio,
the economic impact, number of jobs committed, and the annual payroll amount are
considered in the investment criteria (see Exhibit 5: Scorecard Guidance).
7. Applicant contribution: 49SAF funding requires the applicant to match the 49SAF
funding at a minimum ratio of 1 to 1 in allowable project costs/uses. Higher levels of
funding may be required, depending on the individual investment opportunity. In-kind
contributions of labor, equipment, or similar items are not acceptable as the applicant’s
contribution.
8. Target and limitations: The 49SAF targets investments with an average invested amount
of $5 million or less.
9. Type of investment:
–
Direct investments will be in the form of any of the following:
a. a straight equity investment
b. convertible debt
c. a blend of equity investment and subordinated debt
–
Indirect investments: the 49SAF will take a membership or partnership interest in a
third-party entity (equity investment).
10. Security and collateral: Funding may require that 49SAF receives preferred position
and/or stock, or securitizes intellectual property or other assets. All such details will be
outlined in the term sheet provided by 49SAF and corresponding legal documents. Other
forms of collateral or credit enhancements, such as personal or corporate guarantees,
letters of credit, etc., will be considered during applicant evaluation.
11. Transparency: Receiving investment from the 49SAF will require the investee to open its
financial records to the MOA for as long as the 49SAF holds an investment in the firm.
For indirect investments, angel/venture capital funds are required to open their books to
the United States Department of Treasury (Treasury), if needed. The 49SAF will disclose
to the public that it has invested in a given business or fund. While the 49SAF will
continue to comply with disclosure laws (Municipal code 3.90), it recognizes that
investees prefer to keep much competitive information confidential and will endeavor to
do so within the confines of the law.
12. Modification: The 49SAF Advisory Committee or program manager may initiate changes
to the policies and procedures of the 49SAF, subject to final approval by the MOA’s
chief fiscal officer. After approval, the amended Policy and Procedure document will be
uploaded to the 49SAF website (www.49saf.com) within 1 week.
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49th State Angel Fund Policies and Procedures
2.2
DRAFT
Management
The Mayor has designated the MOA Finance Department as the agency responsible for
managing the 49SAF program and funding. The CFO oversees all management and
implementation of the 49SAF and its funds. The 49SAF responsibilities are designated as
follows:

MOA Program Manager:
–
Educate Anchorage entrepreneurs about the SSBCI program though seminars,
presentations, advertisements, websites, and via the Business Plan Competition.
–
Assist program applicants to understand program guidelines and SSBCI compliance
requirements, and answer questions related to application submission.
–
Supervise and manage preliminary review, analysis, and due diligence of all timely
applications to establish compliance with SSBCI requirements; evaluate the economic
viability of investment; and perform financial statement and market analyses.
–
Ensure that the 49SAF program remains within its stated budget.
–
Ensure compliance with all local, state, and federal guidelines.
–
Track investment performance through reports from 49SAF investments and provide
timely reports to the SSBCI as required (see SSBCI Reporting and Record Retention).
–
Assist the 49SAF Advisory Committee as needed.
–
Implement ongoing monitoring of companies receiving direct investment, which may
involve the use of third-party mentors and advisors.

Anchorage Economic Development Corporation (AEDC): Assist the MOA Finance
Department in the preliminary review and analysis of applications.

Consultant/Financial Analyst: Participate in final due diligence of all timely applications
to evaluate the economic viability of investment, ensure the investee has matching funds
as declared, assist in structuring the deal, and provide financial statement and market
analyses.

MOA Public Finance: Assist with establishing deal structures and loan schedules, and
advise on interest rates and exit strategies.

MOA Treasurer: Assist with monitoring and collecting loan payments and defaults.

Advisory Committee: Review and evaluate applicants; and recommend who receives
funding, the funding amount, and whether additional due diligence is needed prior to
funding. The Advisory Committee will assess applicants using scorecard guidelines that
focus on business strategy, team qualifications, anticipated economic impact to
Anchorage, intended market, product/services, project budget, and finance plan. The
Advisory Committee will rank successful applicants and provide award recommendations
to the Mayor and the CFO.
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49th State Angel Fund Policies and Procedures


2.3
DRAFT
Municipal Attorney’s Office:
–
Complete legal documentation and other actions necessary for each approved
investment. Determine whether liability issues exist within a potential investment that
offset potential returns.
–
Provide ongoing review of SSBCI for existing/new guidelines.
–
Oversee internal control reviews of the administering entity, MOA Finance.
Mayor and CFO: Review recommendations of the Advisory Committee and the potential
economic benefits to the community before authorizing 49SAF monies to an applicant.
The Mayor and CFO may
–
approve funding as proposed in the application.
–
modify the funding amount requested.
–
request additional due diligence be conducted.
–
reject the proposal.
Composition of the Advisory Committee
The committee, composed of a group of leaders from Alaska, includes individuals with track
records of success in their respective industries and functions. The committee may include
bankers, leaders within Anchorage business or the community at large, and entrepreneurs.
Committee guidelines follow:

Committee size: 11 members.

Committee member selection: The Mayor appoints members.

Term: 3 years.

Meetings: Various meetings will be conducted to prepare committee members for the
evaluation and award process.
–
Committee training: Members will be briefed about 49SAF policies, procedures,
evaluation process, and award.
–
Committee evaluation of applicants:
a. Members will be provided with applications in advance of the applicant’s oral
presentation. Preferred delivery method will be using an online database of
applications.
b. Members will be required to attend meetings to listen to applicant presentations.
c. Members will evaluate applicants, rank awards, and make recommendations to
the Mayor and the CFO.
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49th State Angel Fund Policies and Procedures
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d. Number of meetings:

2012 – As needed to distribute first tranche.

2013 – As needed to distribute second and third tranches.
e. Meeting structure: Meetings will follow Robert’s Rules of Order.
f. Quorum: Six members.

2.4
Committee officers: to include president/chairperson, vice president, secretary, and
treasurer. The Mayor will appoint the committee chairperson.
Conflict of Interest/Use of Funds

All individuals involved in administering 49SAF—whether participating in the initial
review, advisory committee, due diligence, or final approval—will adhere to the MOA’s
established conflict of interest guidelines. Members who are related to an applicant or
who could benefit from an investment decision will excuse themselves from the applicant
review and decision processes.

The MOA will not use any SSBCI funds to pay any person to influence or attempt to
influence any agency, elected official, officer, or employee of a state or local government
in connection with the making, award, extension, continuation, renewal, amendment, or
modification of any state or local government contract, grant, loan, or cooperative
agreement as such terms are defined in 31 U.S.C. § 1352.

No member of or delegate to the United States Congress or resident United States
Commissioner will be admitted to any share or part of funds allocated under the SSBCI
agreement with the MOA or to any benefit that may arise there from.

The MOA will not use any SSBCI funds to pay any costs incurred in connection with:
–
any defense against any claim or appeal of the United States Government, any agency
or instrumentality thereof (including Treasury), against the MOA.
–
any prosecution of any claim or appeal against the United States Government, any
agency or instrumentality thereof (including Treasury), which the MOA instituted or
in which the MOA has joined as a claimant.

The MOA will not use any SSBCI funds for loans used to finance, in whole or in part,
business activities prohibited by Treasury regulations, including Treasury regulations
promulgated after the date of the SSBCI agreement with the MOA (February 14, 2012)
and the SSBCI Policy Guidelines as published by Treasury on its website at
www.treasury.gov/ssbci.

The MOA will not use SSBCI funds outside the geographic borders of the MOA unless
the Mayor or CFO of the MOA warrants, in writing, that the loan or investment will
result in significant economic benefit to Anchorage. Before such investment is made, the
49SAF program manager will obtain confirmation from the Treasury to ensure the
investment complies with SSBCI guidelines.
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49th State Angel Fund Policies and Procedures
2.5
DRAFT
Allocated Funding from the United States Department of Treasury
Program funding is obtained from the Treasury and disbursed in thirds as follows:
Allocated
Required Paperwork
Maximum Amount Available
to Pay for Direct/Indirect
Administrative Costs
First One-third
(33%) or $4,345,556
Counsel for MOA must complete Five Percent (5%) or $217,277
certification per Annex 2, Exhibit
2-1 of the SSBCI Agreement with
the MOA.
Second One-third
(33%) or $4,345,555
MOA must certify it has expended,
transferred, or obligated 80 percent
of the last disbursement for 49SAF.
Three Percent (3%) or
$130,366
Third One-third
(34%) or $4,477,239
MOA must certify it has expended,
transferred, or obligated 80 percent
of the last disbursement for 49SAF.
Three Percent (3%) or
$134,317
Disbursements are subject to control objectives and controls as detailed in the 49SAF Risk
Matrix for the risk: Improper Use and Accounting of SSBCI Funds.
The 49SAF is required to provide performance reports to the Treasury on a quarterly and annual
basis (see SSBCI Reporting and Record Retention Requirements). The final annual report is due
on March 31, 2017. It will summarize the performance results of SSBCI funds, to include a
narrative of how or the extent to which the purpose of the funds, as described in Annex 1 of the
SSBCI agreement with the MOA, was accomplished using SSBCI funds.
2.6
49SAF Program Income
Program income is defined as gross income received by the MOA that is directly generated by an
activity supported by SSBCI funds or earned as a result of SSBCI funding during the program
time period. Program income includes, but is not limited to, income from:

Fees for services performed that were funded or supported with SSBCI funds.

Interest earned on loans made using SSBCI funds.
Program income does not include interest on SSBCI funds; the receipt of principal on loans
made using SSBCI funds; or rebates, credits, discounts, refunds, or interest earned on any of
them. Program income is to be added to the SSBCI funds and used for the same purposes.
Use and accounting of program income are subject to control objectives and controls detailed in
the 49SAF Risk Matrix.
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49th State Angel Fund Policies and Procedures
2.7
DRAFT
49SAF Program Eligible Expenses
The MOA will use the SSBCI funds only for the purposes and activities specified in the SSBCI
agreement with the MOA including, but not limited to, the schedule contained in Annex 3, and
for paying allowable costs of those purposes and activities in accordance with the cost principles
set forth in OMB Circular A-87 (Cost Principles for State, Local, and Indian Tribal
Governments) and codified in 2 C.F.R. Part 225.
Accounting of program expenses is subject to control objectives and controls detailed in the
49SAF Risk Matrix.
3.
Investment Management
3.1
Business Model of Angel Investing and Venture Capital
The 49SAF plans to invest 67 percent of its portfolio as indirect investments in third-party
venture capital or angel funds, and 33 percent in direct investments in entrepreneurial companies.
These percentages serve as a guide. Ultimately, the opportunities present and available in the
Anchorage market will determine the types of investments the 49SAF makes.
The 49SAF may directly and indirectly fund businesses that underperform, fail, or make drastic
changes from plan to remain competitive and operational. Taking a “patient capital” approach
and being able to withstand such failures is integral to the business model of angel investment.
Note on Expected Returns
In Expected Returns to Stock Investments by Angel Investors in Groups, the authors note that
angel investment as a business model is one characterized by returns that have “a large variance
and are heavily skewed, with many losses and occasional extraordinarily high returns.” 1 In
addition, they note the following from the study of 588 angel-funded projects in their Angel
Investor Performance Project (AIPP): that “complete failures (returning nothing) comprise 29.6
percent of the AIPP sample and 51.8 percent return less than the invested capital after adjusting
for the time value of money (50.4 percent without the adjustment).”2
Other studies of angel investing, such as Returns to Angel Investors in Groups, view the business
model as containing more volatility. 3 The authors note that:

Fifty-two percent of all of the exits returned less than the capital the angel had invested in
the venture.

Seven percent of the exits achieved returns of more than ten times the money invested,
accounting for 75 percent of the total investment dollar returns.
1
R. DeGennaro and G.Dwyer. 2010-2014. Working Paper, Federal Reserve Bank of Atlanta, p 34.
Ibid., p 34.
3
R. Wiltbank and W. Boeker. 2007. Kauffman and Angel Capital Education Foundations, p 1.
2
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49th State Angel Fund Policies and Procedures
3.2
DRAFT
Risk Tolerance
The 49SAF expects to maintain strong risk tolerance for underperforming, failed, and off-plan
businesses. Accordingly, these risks are expected to be offset by the correspondingly more rare,
high-performing direct investments; therefore, 49SAF fund risk tolerance will be built to
withstand up to a 50 percent failure rate during operation of the fund.
3.3
49SAF Intended Lifespan, Return on Investment, and Averages
Through its allocation from the SSBCI, the 49SAF will invest in businesses that make a positive
economic impact within Anchorage. The 49SAF’s anticipated primary period for investing is the
first 2 years of its existence, but not longer than 5 years, ending concurrently with the SSBCI
allocation period scheduled to expire on May 14, 2017, when the final report is due to the
Treasury. The principal of the 49SAF fund will be dispersed within 2 years (see Applicant
Funding Amounts and Timeframes). At that time or earlier, the 49SAF may be extended or have
its assets sold, per the decision of the MOA.
The return from 49SAF is projected to be between 10 and 20 percent, based on analysis
performed by the Center for Venture Research in The Angel Investor Market in 2011: The
Recovery Continues. 4 The 49SAF expects to realize gains on individual investments in 3 to 5
years (expected years to exit).
The true measures of performance of the 49SAF are less its return on investment and more its
total economic impact on Anchorage: jobs created, new companies founded or turned around,
and creation of a more permanent and visible network of angel investors in the city (see
Performance Metrics).
3.4
Investment Strategy
The 49SAF plans to keep 67 percent of its portfolio as indirect investments in third-party venture
capital or angel funds, and 33 percent in direct investments in entrepreneurial companies. These
percentages serve as a guide. Ultimately, the opportunities present and available in the
Anchorage market will determine the types of investments the 49SAF makes.
While indirect investments are the 49SAF’s preferred investment strategy—diversifying risk,
requiring less direct management, adding the benefit of increasing the skill of early-stage
investment within the private sector, and helping create more such permanent structures outside
government—at 49SAF program launch (May 14, 2012), third-party angel structures within
Anchorage are few. As such, most initial 49SAF investments are likely to be direct.
4
Jeffrey Sohl. 2012. Center for Venture Research. http://wsbe.unh.edu/sites/default/files/2011_analysis_report.pdf.
April 3. Sohl notes: “Returns from mergers and acquisitions represented 54% of the angel exits, and
bankruptcies accounted for 24% of the exits in 2011. Slightly more than half of the angel exits were at a profit
and annual returns for angel’s exits (mergers and acquisitions, notes and IPOs) were between 18% and 28%;
however, these returns were quite variable.”
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49th State Angel Fund Policies and Procedures
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The 49SAF guidelines have no preference for investing in a particular industry. However, angel
investment necessitates making returns in high-growth industries. In 2011 the most popular
sectors for angel investments were software, healthcare, industrial/energy, biotech, IT services,
and media.5. But the Alaska market is different, and diversion from these sectors is likely. Alaska
investments may require higher capital outlays due to the types of industry that flourish locally
and higher operating expenses.
3.5 Invested Funds Policy
The 49th State Angel Fund cash will be managed and accounted for in compliance with the
Anchorage, Alaska, Code of Ordinances, Chapter 6.50.030 - Investment guidelines for Municipal
Funds (see Appendix A); and Municipality of Anchorage Operating Policy/Procedure, P&P 2411 Dated September 1, 2007 (see Appendix B).
4.
Application and Investment Process
4.1
Overview of Application and Investment Processes for Entrepreneurs
1. Application:
–
Potential applicants access application and background information about 49SAF
through the MOA website.
–
Potential applicants may contact the 49SAF program manager for additional
information/clarification about 49SAF program guidelines and SSBCI compliance
requirements.
–
Applicants complete 49SAF application and provide all documentation and
certifications and submit the total application package online by established deadline.
–
Forms available to applicants online include: 49SAF policies and procedures,
program description and eligibility requirements, and application.
2. Initial review: The 49SAF program manager, along with one representative from the
AEDC, will perform a preliminary review of applications to include:
–
Review for application completeness and submission of all required certifications.
–
Due diligence for compliance to SSBCI requirements and economic viability of
applicant.
–
Short assessment of quality of application, business plan, and financial statements.
Applications that fail to pass these preliminary requirements or overcome a baseline
quality hurdle (which varies according to the number and quality of applications in a
given round) will be rejected and the applicants notified of such. Rejected applicants may
reapply in a future funding period.
5
Jeffrey Sohl. 2012. Center for Venture Research. http://wsbe.unh.edu/sites/default/files/2011_analysis_report.pdf.
April 3.
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3. Advisory Committee review:
–
Applications that pass the preliminary review are forwarded to the Advisory
Committee along with notes from the preliminary analysis team.
–
2nd screening (optional): Should too many applicants pass the preliminary review
during a given investment round, the Advisory Committee may elect to filter out a set
of applications online, prior to applicant presentation stage, using a ranking system
based on scorecard elements.
–
Presentation: Applicants will be scheduled to present to the Advisory Committee. The
Mayor and CFO may elect to attend such presentations. Applicants should expect to
be questioned about the specifics of their applications and proposals to enable the
committee to fully understand and evaluate the merits of the investment proposal. The
committee will also take this opportunity to assess the applicant’s character,
experience, business plan, and financial statements.
–
The committee will use a scorecard to help analyze applicants for 49SAF funds. The
scorecard has elements common to most business plan evaluations, specifically the
following: business strategy, management team, economic impact to Anchorage,
market, product/services, project budget, and finance plan. The scorecard is subject to
change per the Advisory Committee’s recommendations.
–
Each Advisory Committee member will use scorecard guidance to rank investment
opportunities. Use of the scorecard will enable determining an average rank per deal,
resulting in a summary of investment opportunities for the entire committee to
consider. From the summary, each opportunity will be discussed and funding
recommended within the investment budget for the round. Funds within a given
round may be completely or partially expended and carried over, or possibly
accelerated—depending on the investment opportunity—with approval from the
CFO.
–
The Advisory Committee may also
a. guide 49SAF program staff on steps to be taken during the due diligence process
to further assess the quality of an opportunity.
b. ask for assistance from the program manager or the Municipal Finance
Department for help in deal structuring and valuation, if needed.
–
The 49SAF program manager will notify all applicants of whether they passed this
stage in the review process.
4. Final due diligence:
–
Final due diligence is provided by the MOA or contracted third parties. Within 90
days or sooner of the Advisory Committee’s investment proposal, all of the following
will be documented for applicants receiving an investment proposal:
a. That no significant liability issues exist with the business or fund receiving
investment (legal).
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49th State Angel Fund Policies and Procedures
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b. That the deal structure/valuation presents no structural issues in recouping
investment (finance).
c. That the applicant demonstrates at least a 1 to 1 match of the 49SAF investment
(or greater, if required) from an external source (finance).
d. That any areas of concern identified during the Advisory Committee review stage
have been resolved (program manager/consultant).
e. That the applicant is in compliance with all SSBCI guidelines, including but not
limited to, all principals (program manager)

having no presence on any government registry of sex offenders.

not operating in businesses prohibited by guidelines or the Treasury.

having no delinquent property taxes owed to the MOA.

having the ability to pass a standard background check.
5. Offer and closing:
–
After passing final due diligence, the applicant will be made an offer. If the applicant
rejects the offer, the 49SAF program manager will have authority to negotiate a
counteroffer. Should the program manager and applicant agree to the counteroffer,
the 49SAF project manager will notify the Advisory Committee of the approved
counteroffer and pass it to the Mayor and CFO for final approval.
–
Final approval: the Mayor and CFO will use their best judgment to provide
recommended funding to an applicant. In addition to considering the
recommendations of the Advisory Committee, the Mayor and CFO will consider the
economic needs of and benefits to the community in making the final decision.
–
Closing documents: After final approval is granted, closing documents (see Exhibit 1
through Exhibit 3) are generated and provided to the applicant. In signing and closing
with the 49SAF program manager at the MOA, applicants
a. agree to the specified investment offer and structure.
b. receive notice of the requirements of their investment, which includes ongoing
compliance with the principles of the 49SAF and quarterly and annual reporting
related to business performance.
4.2
Applicant Eligibility Criteria
All 49SAF investments—direct or indirect—require applicants to demonstrate the following:

Positive, substantial economic impact to Anchorage via immediate or follow-on job
creation, or other economic benefit to the city. Successful applicants will show the sound
assumptions driving this assertion.

Commitment of matching funds of 1 to 1: An actual, conditional, or anticipated marketbased third-party investment commitment that equals at least 100 percent of the total
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49th State Angel Fund Policies and Procedures
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requested 49SAF funding, or the ability to secure such funding within 90 days of the
accepted application. Matching investor will close and transfer the proceeds of the
investment to the company in tandem with 49SAF funding.

Likelihood of the 49SAF investment to be leveraged by 10 to 1 with new debt or equity
financing within ten years. Applicants must demonstrate how they intend to achieve this
metric within their application. In addition, the firm or fund plan to secure follow-on
financing (as appropriate by business stage) should carry the business to selfsustainability.

Fewer than 750 employees.

Will not use 49SAF funding for any prohibited purpose, as set forth in the program
application or by Treasury.
Eligible applicants are those early stage companies that show potential economic benefit (as
described in Conflict of Interest/Use of Funds) and that generally meet the following guidelines
specific to each of the three 49SAF investment types, as detailed below.


PreSeed Investment:
–
Has at least one principal or a committed collaborator and/or mentor with unique
industry experience or knowledge related to the product, or with experience launching
a business, which may include a relationship with an innovation center,
entrepreneurial support organization, or advisor that can provide expertise appropriate
to the project.
–
Is committed to commercializing a discovery or product, or building a business that
has strong growth potential (at least 10 times leverage), but that may not be easily
financed through traditional commercial means.
–
Demonstrates a viable plan to secure follow-on seed capital financing needed to
successfully grow the startup company or to successfully sustain itself on completion
of pre-seed financing.
–
Has not exceeded total debt and equity financing of $500,000 (excluding the
requested PreSeed funding; required matching funding; sponsored research; and
related awards). Exceptions may occur.
Seed Investment:
–
Has a committed leadership team and committed collaborators/mentors with
significant industry experience related to the product to be commercialized.
–
Is committed to commercializing a discovery or building a product that has strong
growth potential (at least 10 times leverage), but which may not be easily financed
through traditional commercial means.
–
Demonstrates a viable plan to secure follow-on seed capital financing needed to
successfully grow the startup company or to successfully sustain itself on completion
of seed financing.
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49th State Angel Fund Policies and Procedures
–

DRAFT
The startup company has not exceeded total debt and equity financing of $3 million
(excluding the requested 49SAF pre-seed funding; required matching funding;
sponsored research; and related awards). Exceptions may occur.
Expansion Investment:
–
Has a management team of high-quality entrepreneurs with a track record of
leadership and performance—either in the company's specific industry or in prior
entrepreneurial ventures. 49SAF will also look at the team's passion for and
commitment to the new business idea, and the team’s ability to inspire confidence
among future stakeholders, including employees, potential customers, and investors.
The team must be open to and comfortable with receiving input provided by angel
investors.
–
Demonstrates an investment strategy that understands and capitalizes on its market.
Applicants demonstrate a clear understanding of their target consumers and potential
market size.
–
Is one of the following:
a. breakthrough product or solution, not product enhancement.
b. underperforming business that can grow aggressively given the injection of
requested capital.
c. significant research or capital investment in technology.
d. creator of a successful research or intellectual property licensing relationship with
an Anchorage-based university or similar research institution.
–
If a technology-centered business, the concept behind the technology must be proven
and verifiable, and demonstrate a clear path to commercialization via a strong
business plan.
–
Has an actionable plan to reach milestones. Funds must be used to accelerate the
company's achievement of key milestones that increase the company's value. The
49SAF will fund activities that include pursuing research and product development,
building a sales and marketing infrastructure, and hiring key executives; or that fund a
turn-around or mid-expansion in an existing business through the purchase of key
assets.
–
Demonstrates growth potential of 10 times the 49SAF investment and more in 5
years. Management of the 49SAF will look for companies that can grow quickly and
manage the scale necessary to succeed. The applicant must demonstrate a plan to
generate significant profits beyond the initial product idea. The 49SAF will also
require well-conceived financial projections that demonstrate consistent profits and
cash flow growth based on sound assumptions.
–
Demonstrates competitive advantage. The applicant company has proprietary features
that distinguish it from potential competitors or provide barriers to entry that prevent
other companies from competing with a similar offering that captures the applicant’s
target market. Attributes that convey competitive advantage include intellectual
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49th State Angel Fund Policies and Procedures
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property protection, exclusive licenses, exclusive marketing and distribution
relationships, strong brands, scarce human resources (i.e., specialized knowledge and
skills), and access to scarce raw material.
4.3
Applicant Evaluation Criteria
Submissions by eligible applicants will be evaluated based on the quality of the submission and a
demonstrated likelihood to achieve the following outcomes in Anchorage:
Best fit businesses for 49th State Angel Fund investment are those which:
• Can demonstrate 10x leverage within five years,
• Create significant economic impact within Anchorage (jobs being a key component)
• Scale quickly and communicate an investor exit strategy
The MOA has established formal investment criteria for the Advisory Committee and
CFO/Mayor to consider when selecting applicants for funding (see Exhibit 5: Scorecard
Guidance).Exhibit 5: Scorecard Guidance
While the merits of each investment will vary, the investment evaluation will include an analysis
of the following:

Management team with a business track record and balanced functional skills. 49SAF
funding will target teams of high-quality entrepreneurs with a track record of leadership
and performance, either in the company's specific industry or in prior entrepreneurial
ventures. 49SAF funding decisions will also consider the team's passion for and
commitment to the new business idea, and the team’s ability to inspire confidence among
future stakeholders, including employees, potential customers, and investors. The team's
credibility is essential. In addition, the team must be open to and comfortable with
receiving input provided by angel investors.

Market opportunity. The investment plan must demonstrate a strategy that understands
and capitalizes on its market. Clear understanding of the user and the customer is
required.

Disadvantaged business capitalization. There is an opportunity and need to provide equity
capital and expertise for the turn-around and/or consolidation of some small
disadvantaged businesses. In addition, the presence of minority owners and/or a physical
location in an Underutilized Business Zone (HUBZone) are factors that will be
considered.

Use of proceeds. Funds must be used for a “business purpose” that accelerates the
business's achievement of key milestones that increase its value. Examples include
research and product development, sales and marketing infrastructure development, and
hiring of key executives. Limitations apply. See Exhibit 1, item 1.

Growth potential: 10 times leverage. The 49SAF will look for companies that can grow
quickly and manage the scale necessary to succeed. The applicant must demonstrate a
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49th State Angel Fund Policies and Procedures
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plan to generate significant profits beyond the initial product idea. The 49SAF will also
require well-conceived financial projections that are based on sound assumptions and
demonstrate consistent profit and cash flow growth potential. Target companies are those
with the potential to generate 10 times the 49SAF investment and more in 5 years. In
addition, 49SAF applicant screening will evaluate the number of jobs created and the
benefit to our community.

4.4
Competitive advantage: patents, exclusive licenses, or channels. The company should
have proprietary features that distinguish it from potential competitors or provide barriers
to entry that prevent other companies from capturing its customers with a similar
offering. Attributes that convey competitive advantage include intellectual property
protection, exclusive licenses, exclusive marketing and distribution relationships, strong
brands, scarce human resources (i.e. knowledge and skills), and access to scarce raw
material.
Applicant Funding Amounts and Timeframes

PreSeed: Individual investments will not be less than $30,000 and will not generally
exceed $100,000. Awards will be in the form of equity or convertible debt.

Seed: Individual investments will not generally be less than $100,000 or exceed
$500,000. Awards will be in the form of equity or convertible debt.

Expansion: Individual investments will not generally be less than $500,000 or exceed $3
million. Awards will be in the form of equity or convertible debt.

Indirect: Individual investments will not be less than $100,000 or exceed $5 million.
Awards will be in the form of equity or partnership interest.
The 49SAF intends to invest its total allocated funds by May 14, 2014. The following schedule
will be used for 2012:
Period
Activity
May 14 – August 5
Application Period
August 6 – September 30,
Advisory Review
October 1 – December 31, 2012
Due Diligence, Final Approval
Investment
Round 1: $4,128,279
The following tentative schedule applies for 2013:
Period
Activity
January 7 – March 31
Application Period
April 1 – May 5
Advisory Review
May 6 – June 30
Due Diligence, Final Approval
July 1 – September 29
Application Period
16
Investment
Round 2: $4,215,189
Round 3: $4,342,922
49th State Angel Fund Policies and Procedures
September 30 – October 27
Advisory Review
October 28 – December 31
Due Diligence, Final Approval
DRAFT
Funds will be considered dispersed when at least 80 percent of the funds have been declared for
investment in a given round.
4.5
Required Documentation
Before providing any investment using 49SAF funds to any applicant, the following is required:
5.

Application: Timely and complete borrower application appropriate to type of investment
being applied for. No late or incomplete applications will be considered.

Term sheet and corresponding investment documents: A summary of the investment offer
will be signed by both the investee and 49SAF staff. In addition, other documents (e.g.,
note for convertible/subordinated debt, investor rights agreement) will be signed.

Investee certification: Small business investees must make a certification regarding the
use of investment proceeds for each SSBCI-supported transaction. See Exhibit 1: Small
Business Borrower/Investee Certification for Use of Proceeds.

Sex offender certification: Certification from the private entity, including any financial
institution, that the principals of such entity have not been convicted of a sex offense
against a minor (as such terms are defined in section 111 of the Sex Offender
Registration and Notification Act [42 U.S.C. 16911]). See Exhibit 2: Sex Offender
Certification Form.

Investor certifications:
–
Exhibit 3: Lender/Investor Certification for Use of Proceeds.
–
The binding written agreement of the investee to make available to the Treasury
Inspector General all books and records related to the use of 49SAF funds, subject to
the Right to Financial Privacy Act (12 U.S.C. § 3401 et seq.), including detailed loan
records, as applicable.
–
Certification from the financial institution that the financial institution is in
compliance with the requirements of 31 C.F.R. § 103.121.
Indirect Investments
The 49SAF has adopted an indirect investment strategy whereby it seeks to invest in venture
capital partnerships that in turn will make direct investments into Anchorage-based companies.
All fund-to-fund investments by 49SAF will comply with SSBCI and Treasury guidelines. The
general partners of the venture capital partnerships, or fund managers, are private sector
investors or other institutions that pool funds from a number of investors, identify and invest in
promising businesses, and manage the investments until an exit from the investment is achieved.
In this manner, the 49SAF is able to leverage public funds with additional capital and utilize the
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49th State Angel Fund Policies and Procedures
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investment acumen of the private sector in selecting suitable investments. The 49SAF has a
preference for indirect investments as the method of deploying early stage capital.
Investing in third-party angel and venture capital funds is intended to:

Enable existing angel investment networks in the Municipality to increase their capacity
to evaluate new investments.

Enable new angel investment entities to recruit new members, establish processes for
evaluating new investments, and provide significant training to their members.

Attract external sources of private, angel, and venture capital investment.

Recruit and develop more professionals working within this industry within Anchorage.

Provide more opportunities for entrepreneurs to find the funding they need to grow their
businesses in Anchorage.
5.1
Limitations
The 49SAF may not invest less than $100,000 or more than $5 million in any third-party angel
fund.
5.2
Process
The process is the same as for entrepreneur applications: initial review, advisory committee
review, due diligence, and final approval/funding.
5.3
Criteria
The initial review team and the advisory committee will evaluate indirect investment
opportunities using the same criteria as for direct investments—business strategy, management
team, economic impact to Anchorage, market, product/services, project budget, and finance
plan—where appropriate. In addition, they will consider the following factors:
5.4

Management team: The strength, expertise, results, and certifications of the co-investors
in the fund. The experience of the team should reflect the ability to carry out the focus of
the proposed fund.

Business strategy: Any fund competitive advantages (example: advantaged connections
to deal flow, research, talent, intellectual property).

Economic impact: The third-party fund’s likelihood of becoming a long-lasting,
sustainable source of early stage capital for Anchorage.
Eligibility
The 49SAF will make investments in third-party funds organized by individuals or entities with
experience in organizing angel and venture capital funds and investments, providing financial
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49th State Angel Fund Policies and Procedures
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services, and having valuable experience within the particular industry in which they intend to
invest.
To be eligible for indirect investment, on investment of funds a third-party fund must
6.

Be a partnership, limited partnership, corporation, limited liability company, limited
liability partnership, trust, or estate.

Be organized for the purpose of investing in a portfolio of non-publicly traded enterprises
with strong growth potential (10 times leverage) that meets the objectives of the overall
49SAF program.

Consist of at least three accredited or qualified investors as defined by Securities and
Exchange Commission Regulation D, Rule 501.

Be in compliance with the securities laws of this state.
SSBCI Reporting and Record Retention Requirements
The 49SAF is required to provide performance reports to the Treasury on a quarterly and annual
basis. The final annual report is due on March 31, 2017. It will summarize performance results of
the SSBCI funds, to include a narrative of how or the extent to which the purpose of the funds, as
described in Annex 1 of the SSBCI agreement with the MOA, was accomplished using the
funds.
6.1
Quarterly Report Schedule
Quarterly Report for Period Covering:
Due Date
January 1, 2012 through March 31, 2012
April 30, 2012
April 1, 2012 through June 30, 2012
July 30, 2012
July 1, 2012 through September 30, 2012
October 30, 2012
October 1, 2012 through December 31, 2012
January 30, 2013
January 1, 2013 through March 31, 2013
April 30, 2013
April 1, 2013 through June 30, 2013
July 30, 2013
July 1, 2013 through September 30, 2013
October 30, 2013
October 1, 2013 through December 31, 2013
January 30, 2014
January 1, 2014 through March 31, 2014
April 30, 2014
April 1, 2014 through June 30, 2014
July 30, 2014
July 1, 2014 through September 30, 2014
October 30, 2014
October 1, 2014 through December 31, 2014
January 30, 2015
January 1, 2015 through March 31, 2015
April 30, 2015
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49th State Angel Fund Policies and Procedures
Quarterly Report for Period Covering:
6.2
DRAFT
Due Date
April 1, 2015 through June 30, 2015
July 30, 2015
July 1, 2015 through September 30, 2015
October 30, 2015
October 1, 2015 through December 31, 2015
January 30, 2016
January 1, 2016 through March 31, 2016
April 30, 2016
April 1, 2016 through June 30, 2016
July 30, 2016
July 1, 2016 through September 30, 2016
October 30, 2016
October 1, 2016 through December 31, 2016
January 30, 2017
Quarterly Report Requirements
All reports will include:

Description of use of funds quarterly and cumulative for direct and indirect costs.

Program income generated.

Signature by authorized MOA official.
Certification per Annex 4 of the SSBCI agreement with the MOA
(attached as Exhibit 4: Quarterly Certification Form

6.3
6.4
Treasury may, from time to time, prescribe the form of the report.
Annual Report Schedule
Annual Reporting Period Ending:
Report Due Date
December 31, 2012
March 31, 2013
December 31, 2013
March 31, 2014
December 31, 2014
March 31, 2015
December 31, 2015
March 31, 2016
December 31, 2016
March 31, 2017
Annual Report Requirements
Generally, the MOA will include in each year’s annual report transaction-level data only for
loans and investments closed in the reporting period year. Data will include the following:
1. A unique investment identifier number, the census tract, and zip code of the investee’s
principal location.
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49th State Angel Fund Policies and Procedures
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2. The SSBCI-approved program in which the venture capital investment is enrolled.
3. The total amount of venture capital and other financing invested or loaned, and of that
amount, the portion that is from non-private support.
4. The amount of venture capital provided by the Approved Municipal venture capital fund
program.
5. Date of initial disbursement.
6. The business’s annual revenues in the last fiscal year.
7. The business’s full time equivalent (FTE) employees.
8. The 6-digit North American Industry Classification System (NAICS) code for each
business’s industry.
9. The year the business was incorporated.
10. The estimated number of jobs created and the estimated number of jobs retained as a
result of the investment.
11. The amount of additional private financing occurring after the investment closing, if
required under the provisions of Annex 7 in the SSBCI agreement with the MOA.
The MOA must also include in its annual report data on private financing that occurs after the
loan/investment closing. Reporting this data for subsequent years allows the SSBCI to determine
program effectiveness in achieving the MOA’s projected 10 to 1 private leveraging expectation
across all approved municipal programs. Subsequent financing may be considered to be caused
by, or resulting from, the initial SSBCI-supported other credit support program (OCSP)
financing when the initial SSBCI-supported OCSP financing increases the current and future
creditworthiness of a company. If the MOA is required to report subsequent private financing,
either for all OCSP programs or for a particular OCSP program, the MOA should record an
amount greater than $0 only when the subsequent private financing is caused by, or resulting
from, the initial SSBCI-supported OCSP financing, based on the guidance provided below.
For example, some loans or investments made under venture capital programs, or direct loan or
loan participation programs, satisfy this condition. By investing equity, convertible, or
subordinated debt, their financing can directly strengthen a company’s balance sheet and allow it
to (a) acquire assets that can collateralize a bank loan or (b) increase the cash available to service
bank debt. The direct nexus between the initial SSBCI–supported loan/investment and
subsequent private financing occurs only when the initial loan/investment is a form of
subordinate, mezzanine, or equity financing—in other words, a form of financing that actually
strengthens the company’s balance sheet or that can be used to secure or repay debt. Therefore,
the MOA should record subsequent private financing for venture capital investments, direct
loans, or loans enrolled in loan participation programs only when the initial loan/investment
involves subordinate, mezzanine, or equity financing.
The MOA has the option to report subsequent financing for previously closed OCSP loans or
investments if its total cumulative private financing generated by all approved municipal
programs has already exceeded 10 to 1. Under these circumstances, reporting is not mandatory.
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The MOA should record subsequent private financing for venture capital investments when the
initial loan/investment involves subordinate, mezzanine, or equity financing.
Cumulative Private Leverage Ratio for All Approved Municipal Programs
The cumulative private leverage ratio is the result of dividing the total cumulative private
financing generated by all approved municipal programs by the total SSBCI funds used by all
approved municipal programs. The resulting weighted average is outlined below and reflects the
MOA’s ability to meet its reasonable expectation of 10 to 1 leveraging to date.
Calculating 10 to 1 Expectation
The MOA should calculate its leveraging for purposes of demonstrating a 10 to 1 ratio across all
of its approved municipal programs according to the following formula:
Cumulative Private Leverage Ratio for all Approved Municipal Programs = [Total Cumulative Private
Financing Generated by all Approved Municipal Programs]/[Total Cumulative SSBCI Funds Used by all
Approved Municipal Programs]
6.5
Final Report
The final annual report is due on March 31, 2017. It will summarize performance results of the
SSBCI funds, to include a narrative of how or the extent to which the purpose of the funds, as
described in Annex 1 of the SSBCI agreement with the MOA, was accomplished using the
funds.
In addition, the authorized MOA official will attach to the annual report a completed and
executed Federal Financial Report, SF-425.
6.6
Reporting of Certain Material Events
The MOA will promptly notify the Treasury in writing in reasonable detail of any of the
following events:

Any proceeding instituted against the MOA in, by or before any court, governmental or
administrative body or agency, which proceeding or its outcome could have a material
adverse effect upon the operations, assets, or properties of the MOA.

Any material adverse change in the condition, financial or otherwise, or operations of the
MOA.

General events of default, to include:
–
Any representation, warranty, certification, assurance or any other statement of fact
contained in the SSBCI agreement with the MOA or the application of the MOA
including, but not limited to, the assurances (non-construction) contained as part of
the application, or any representation or warranty set forth in any document, report,
certificate, financial statement or instrument now or hereafter delivered to the
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49th State Angel Fund Policies and Procedures
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Treasury in connection with the agreement, is found to be inaccurate, false,
incomplete or misleading when made, in any material respect.
–
6.7
The MOA materially fails to observe, comply with, meet or perform any term,
covenant, agreement, or other provision contained in the agreement including, but not
limited to, the MOA’s failure to submit complete and timely quarterly reports or
annual reports, or the MOA ceases to use the SSBCI funds to undertake authorized
activities as detailed in Annex 1 of the SSBCI agreement with the MOA.
Record Retention and Audit Rights
The MOA will retain all financial records, supporting documents, statistical records, and all other
records pertinent to the SSBCI funds for a period of 3 years from the date of submission of the
final quarterly report.
Financial records and supporting documents include, but are not limited to:

All investment agreements.

Investment commitment letters.

All sex offender and use of proceeds certifications.

Any transaction enrollment forms.

All general ledger entries pertaining to SSBCI funds.

All statements for accounts containing SSBCI funds, including bank statements if
applicable.

Any contracts or memoranda of agreement with administering entities.

Any records of all transfers of funds to administering entities.

All invoices and receipts for administrative expenses.

Documentation of private leverage and subsequent private financing.
If lenders and investors, or an administering entity, are required to retain any records rather than
submitting these records to the MOA, the MOA must have a written agreement in place requiring
the maintenance of these records until at least January 30, 2020, and must exercise oversight to
verify compliance.
Treasury, the Treasury Inspector General, the Comptroller General of the United States, or any
of their duly authorized representatives have the right of timely and unrestricted access to any
books, documents, papers, or other records of the MOA that are pertinent to the SSBCI funds
and to make audits, investigations, examinations, excerpts, transcripts, and copies of such
documents. This right also includes timely and reasonable access to the MOA’s personnel for the
purpose of interview and discussion related to such documents. This right of access will last as
long as records are retained, except that Treasury’s right of access expires on September 27,
2017.
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49th State Angel Fund Policies and Procedures
7.
DRAFT
Performance Metrics
The 49SAF’s performance will be measured by the following:
8.

49SAF investments awarded

49SAF funds expended

Leveraged dollars

Leverage ratio (goal 10 to 1)

Direct jobs created

Businesses created, attracted, capitalized
Risk Management
Risks associated with management of the 49SAF have been identified along with associated
controls and control objectives. All 49SAF activity will comply with the 49SAF Risk Matrix.
The program manager is the central administrative control for all 49SAF activities.
Administrative controls will be tested once annually, internally, at the offices of the 49SAF by
the Municipal attorney. The program manager will review test results.
The MOA’s CFO is responsible for the oversight of 49SAF, control of funding, investment
management, and application of risk controls and remedies.
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49th State Angel Fund Policies and Procedures
9.
DRAFT
Glossary
Term
Definition
10 times leverage
The overall aim of the 49SAF and the allocation from the federal
government is that investments in small businesses made with the
funds will result in a multiplier of 10 times (new debt or equity) on
the balance sheet.
EIN
Employer identification number.
Investor
Private venture capital, seed stage, mezzanine, or angel fund
participating in 49SAF program. This term does not refer to
individual investors in a fund.
Principal
If a sole proprietorship, the proprietor; if a partnership, each
managing partner and each partner who is a natural person and holds
a 20 percent or more ownership interest in the partnership; and if a
corporation, limited liability company, association or a development
company, each director, each of the five most highly compensated
executives or officers of the entity, and each natural person who is a
direct or indirect holder of 20 percent or more of the ownership stock
or stock equivalent of the entity.
Program income
Gross income received by the MOA that is directly generated by an
SSBCI fund-supported activity or earned as a result of the SSBCI
funds during the allocation time period. Program income includes,
but is not limited to, income from: fees for services performed that
were funded or supported with SSBCI funds; and interest earned on
loans made using SSBCI funds. Program income does not include
interest on SSBCI funds, the receipt of principal on loans made using
SSBCI funds, rebates, credits, discounts, refunds, or interest earned
on any of them.
SSBCI
State Small Business Credit Initiative .
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49th State Angel Fund Policies and Procedures
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Appendix A: 6.50.030 - Investment guidelines for Municipal Funds
A. Definitions. For the purposes of this section, the following definitions shall apply:
Asset Backed Commercial Paper (ABCP) means a short-term investment vehicle with a maturity
that is typically between 30 and 270 days. The security itself is typically issued by a bank or
other financial institution. Unlike commercial paper, the notes are backed by physical assets such
as trade receivables, and are generally used for short-term financing needs.
Bank means a state or federally chartered commercial or mutual bank, savings and loan
association or credit union located in the United States and having insurance of accounts through
the appropriate federal insuring agency of the United States.
Broker/Dealer means a qualified institution including depository banks, any Federal Reserve
Bank, government securities dealers, or broker dealer registered in compliance with the
Securities Exchange Act of 1934.
Certificate of deposit means a nonnegotiable certificate of deposit or other depository agreement
issued or to be issued to the Municipality by a Bank.
Collateralized Debt Obligation (CDO) means an investment-grade security backed by a pool of
bonds, loans and other assets. CDOs do not specialize in one type of debt but are often nonmortgage loans or bonds. Similar in structure to a collateralized mortgage obligation (CMO) or
collateralized bond obligation (CBO), CDOs are unique in that they represent different types of
debt and credit risk. In the case of CDOs, these different types of debt are often referred to as
'tranches' or "slices." Each slice has a different maturity and risk associated with it. The higher
the risk, the more the CDO pays.
Commodities means bulk goods such as grains, metals, and foods traded on a commodities
exchange or on the spot market.
Contingency Reserve Portfolio means that portion of the Portfolio used as a defensive fixed
income portfolio, with an average duration within half a year of its benchmark. The Contingency
Reserve Portfiolio is intended as a buffer between the Working Capital Portfolio and the
Strategic Reserve Portfolio. The objective of this fixed income portfolio is to provide a high level
of current income consistent with low volatility of principal. The Contingency Reserve Portfolio
is not designed to provide daily liquidity yet seeks higher returns with some preservation of
principal by employing a broader range of sectors and tactically managing duration.
Derivatives means a security whose price is dependent upon or derived from one or more
underlying assets. The derivative itself is a contract between two or more parties. Its value is
determined by fluctuations in the underlying asset. The most common underlying assets include
stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are
characterized by high leverage. Futures contracts, forward contracts, options and swaps are the
most common types of derivatives. Derivatives are contracts and can be used as an underlying
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asset. Derivatives are generally used as an instrument to hedge risk, but can also be used for
speculative purposes.
Equity Investments means investments in foreign or domestic stocks or mutual funds that have
investments in foreign or domestic stocks.
FDIC means the Federal Deposit Insurance Corporation.
FHLMC or Freddie Mac means Federal Home Loan Mortgage Corporation.
FNMA or Fannie Mae means Federal National Mortgage Association.
Forward Contract means a cash market transaction in which delivery of the commodity is
deferred until after the contract has been made. Although the delivery is made in the future, the
price is determined on the initial trade date. (Most forward contracts don't have standards and
aren't traded on exchanges. A farmer would use a forward contract to "lock-in" a price for his
grain for the upcoming fall harvest.)
Futures Contract or Futures means a contractual agreement, generally made on the trading floor
of a futures exchange, to buy or sell a particular commodity or financial instrument at a predetermined price in the future. Futures contracts detail the quality and quality of the underlying
asset; they are standardized to facilitate trading on a futures exchange. Some futures contracts
may call for physical delivery of the asset, while others are settled in cash.
GNMA or Ginnie Mae means Government National Mortgage Association.
IBRD means the International Bank for Reconstruction and Development.
Index Fund means a type of mutual fund with a portfolio constructed to match or track the
components of a market index, such as the Standard & Poor's 500 Index (S&P 500). An index
mutual fund is said to provide broad market exposure, low operating expenses and low portfolio
turnover.
Interfund loan means a loan from a MCP to a Municipal Fund extending outside a fiscal year.
Municipal Cash Pool means that portion of the Portfolio that is invested by external managers
and represents the Duration/Risk Portfolio investment objective of this part of the Code.
Mutual Fund means a diversified mutual fund, including index funds, registered under the
Securities Act of 1933 and Investment Company Act of 1940.
Non-Dollar Denominated Securities means a financial instrument that has its face value
denominated in a currency other than the U.S. dollar.
Operating Policy & Procedures means the Municipality's Policy & Procedures established and
related to investments.
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Options means a contract between a buyer and a seller that gives the buyer the right—but not the
obligation—to buy or to sell a particular asset (the underlying asset) at a later day at an agreed
price. In return for granting the option, the seller collects a payment (the premium) from the
buyer.
Portfolio means aggregate balance of all Municipal funds currently under investment. It excludes
real estate owned by the Municipality, including real estate owned by the Heritage Land Bank
and any component unit of the Municipality. Portfolio excludes debt proceeds in escrow for
defeased debt. Portfolio excludes assets invested within the MOA Trust Fund, the Police and Fire
Pension, the Municipal Prefunding Trust, and the Police and Fire Medical Trust.
Portfolio Benchmark means a blended benchmark consisting of the individual portfolios
respective benchmarks, weighted at their beginning-of-period market values throughout
budgetary and economic cycles, taking into account the Municipality's investment risk
constraints and the cash flow characteristics of the Portfolio.
Rated Bank means:
1. A bank whose short term debt issues are rated at least A-1 or P-1 or F-1, or whose long
term debt issues are rated at least A by Standard and Poor's (S&P), Moody's Investors
Service (Moody's), or Fitch Ratings (Fitch) or the equivalent by a nationally recognized
rating service; or
2. A bank whose letters of credit secure third-party debt issues rated at least A by S&P or its
equivalent by a nationally recognized rating service; or
3. A bank which is a subsidiary of a one-bank holding company, all of whose commercial
paper is rated at least "A-1" by S&P or "P-1" by Moody's or "F-1" by Fitch or the
equivalent by a nationally recognized rating service.
Real Estate Investments means land and all physical property associated with it. This includes all
investments that have an interest in land ownership including real estate investment trusts.
Securities means any authorized investment listed in subsection D.
Securities Lending means an investment strategy in which investors make short-term loans of
their securities to generate incremental revenues from their portfolios. Loans are typically
collateralized by at least 102 percent with cash or government backed securities.
Short Sales or Selling Short means the sale of a security or contract related to a security not
owned by the seller. Selling Short is a technique used to take advantage of an anticipated price
decline in the security.
Split Rated or Split Rating means when a debt security or a debt issuer has ratings from two or
more nationally recognized rating agencies that are different. In this situation, the lowest rating
applies for the purposes of this section of the Anchorage Municipal Code when determining if an
investment is an Authorized Investment.
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Strategic Reserve Portfolio means that portion of the Portfolio that is analogous to an
intermediate fixed income portfolio, managed with a maximum duration no greater than one-year
in excess of its benchmark. The Strategic Reserve Portfolio is intended for residual cash balances
for which the Municipality does not foresee utilizing over a rolling three-year forecast period.
The objective of the Strategic Reserve Portfolio is to generate excess return through effective
sector selection, issue selection, and duration management.
Structured Investment Vehicles (SIVs) means a special kind of conduit or a special purpose
vehicle or entity that is bankruptcy remote, which means that it is a separate business entity and
is not rolled up into the sponsoring company's balance sheet. It is a type of structured vehicle that
issues ABCP. Many SIVs are administered by large commercial banks or other asset managers
such as investment banks or hedge funds. They issue ABCP as a way to fund purchases of
investment grade securities and also to earn the spread based on the term to maturity differential.
They usually invest the majority of their portfolios in "AAA" and "AA" assets, which include an
allocation to residential mortgage backed securities. In contrast to a multi-seller or securities
arbitrage conduit, a SIV does not employ credit enhancement, and the underlying SIV assets are
marked to market at least weekly.
Swap means a derivative in which two counterparties agree to exchange one stream of cash flow
against another stream. These streams are called the legs of the swap. The cash flows are
calculated over a notional principal amount, which is usually not exchanged between
counterparties. Consequently, swaps can be used to create unfunded exposures to an underlying
asset, since counterparties can earn the profit or loss from movements in price without having to
post the notional amount in cash or collateral. Swaps can be used to hedge certain risks such as
interest rate risk, or to speculate on changes in the expected direction of underlying prices.
TBA means a term used to describe a forward mortgage-backed securities trade. Pass-through
securities issued by Freddie Mac, Fannie Mae and Ginnie Mae trade in the TBA market. The
term TBA is derived from the fact that the actual mortgage-backed security that will be delivered
to fulfill a TBA trade is not designated at the time the trade is made. The securities are "to be
announced" 48 hours prior to the established trade settlement date. The settlement procedures of
mortgage-backed securities TBA trades are established by the Bond Market Association.
Variable Rate Demand Obligation (VRDO) means a debt security which bears interest at a
floating (variable) rate adjusted at specified intervals (such as daily, weekly, or monthly) and can
be redeemed at its holder's option when the rate changes. Also known as a low floater, variable
rate demand note, or variable rate demand bond.
Working Capital Portfolio means that portion of the Portfolio managed for very short-term
liquidity, typically with a duration band of zero to 270 days. The Working Capital Portfolio is
intended to provide for same-day liquidity for working capital management. In addition to
providing liquidity, the objective of the Working Capital Portfolio is to preserve principal and
generate current income by investing in a portfolio of high-quality, short-term instruments.
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B. Management of Municipal Funds.
1. It is the policy of the Municipality to invest public funds in a manner that provides the
highest investment return consistent with preservation of capital while meeting the daily
cash flow demands of the Municipality.
2. Investment decisions shall be guided by this section, and the Operating Policy &
Procedures for investment of Municipal funds, as modified from time to time by the
Chief Fiscal Officer.
3. The Chief Fiscal Officer shall obtain the services of such investment managers, advisors,
custodians and other professionals as are reasonably prudent and necessary to manage
and invest all Municipal Funds.
4. The Chief Fiscal Officer shall solicit input from the Investment Advisory Commission
members prior to the final selection of any service providers.
a. For an investment manager, advisor, custodian or other professionals contracted
under the provisions of this section, assembly approval is not required;
b. The Chief Fiscal Officer shall report within 90 days to the Assembly, by
Assembly Informational Memorandum, on contracts entered into pursuant to the
provisions of this section including, but not limited to, the duties of be performed
by the contractor and the compensation paid.
C. Investment Objective.
The primary objectives, in priority order, of the Municipality's investment activities shall be:
1. Safety. Safety of principal is the foremost objective of the investment program.
Investments of the Municipality shall be undertaken in a manner seeking to ensure the
preservation of capital in the overall Portfolio. To attain this objective, diversification is
required to reduce overall Portfolio risk while attaining market rates of return.
2. Liquidity. The Municipality's investment Portfolio shall remain sufficiently liquid to
enable the Municipality to meet all reasonably anticipated operating requirements.
3. Return on Investment. The Municipality's investment Portfolio shall be designed with the
objective of outperforming the total Portfolio Benchmark.
4. Duration/Risk Portfolio. The Municipality's investment Portfolio shall be structured into
three duration portfolios, each designed to fulfill a specific liquidity requirement.
Allocations into each portfolio shall consist of an absolute value derived from a rolling
three-year forecast, re-evaluated on an annual basis.
D. Authorized Investments.
In order to provide maximum security for the investment of public funds and to provide the
greatest interest revenue consistent with safety, only the following investments of the
Municipality's funds are authorized (where the issue or issuer is Split Rated, the lower of the
ratings shall apply):
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1. Obligations issued or guaranteed by the U.S. government, U.S. agencies or U.S.
government-sponsored corporations and agencies.
2. Corporate Debt Securities that are guaranteed by the U.S. government or the FDIC as to
principal and interest.
3. Taxable and tax-exempt municipal securities having a long term rating of at least A- by a
nationally recognized rating agency or a taxable or tax-exempt municipal security having
a short term rating of at least "A-1" by S&P or "P-1" by Moody's or "F-1" by Fitch.
4. IBRD Debt Securities issued and guaranteed by the IBRD and rated AAA by a nationally
recognized rating agency.
5. Commercial paper rated at least "A-1" by S&P or "P-1" by Moody's or "F-1" by Fitch.
6. Bank debt obligations, including unsecured certificates of deposit, notes, time deposits,
and bankers' acceptances (with maturities of not more than 365 days), and deposits with
any Bank, the short-term obligations of which are rated at least "A-1" by S&P or "P-1" by
Moody's or "F-1" by Fitch and is either:
a. Incorporated under the laws of the United States of America, or any state thereof,
and subject to supervision and examination by federal or state banking authorities;
or
b. Issued through a foreign bank with a branch or agency licensed under the laws of
the United States of America, or any state thereof, or under the laws of a country
with a Moody's sovereign rating for bank deposits of "Aaa", or an S&P sovereign
rating of "AAA", or a Fitch national rating of "AAA", and subject to supervision
and examination by federal or state banking authorities.
7. Repurchase agreements secured by obligations of the U.S. government, U.S. agencies, or
U.S. government-sponsored corporations and agencies.
8. Dollar denominated corporate debt instruments rated BBB- or better by S&P's Rating
Service (investment grade) or the equivalent by another nationally recognized rating
agency.
9. Dollar denominated corporate debt instruments, rated below BBB- by S&P's Rating
Service or the equivalent by another nationally recognized rating agency, including
emerging markets.
10. Dollar denominated debt instruments of foreign governments rated BBB- or better by
S&P's Rating Service or the equivalent by another nationally recognized rating agency.
11. Asset Backed Securities (ABS), other than commercial paper, collateralized by: credit
cards, automobile loans, leases and other receivables which must have a credit rating of
AA- or above by S&P's Rating Service or the equivalent by another nationally recognized
rating agency.
12. Mortgage Backed Securities, including generic mortgage-backed pass-through securities
issued by GNMA, FHLMC, FNMA, Non-agency mortgage-backed securities,
Collateralized Mortgage Obligations (CMOs), or Commercial mortgage-backed securities
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(CMBS), which must have a credit rating of AA- or better by S&P's Rating Service or the
equivalent by another nationally recognized rating agency.
13. Debt issued by the Tennessee Valley Authority.
14. Money Market Mutual Funds rated "Am" or better by Standard & Poor's Rating Service,
or the equivalent by another nationally recognized rating agency, and consisting of any or
all of the securities authorized for investment in this section of the Code.
15. Alaska Municipal League Investment Pool (AMLIP), consistent with all other provisions
of this section of the Code.
16. Mutual Fund Investments so long as the overall nature of the fund is generally consistent
with this section of the Code.
17. Interfund Loans from a Municipal Cash Pool to a Municipal Fund.
E. Prohibited Investments.
Prohibited Investments for the Portfolio are those not listed under Authorized Investments and
specifically include Equity Investments. Prohibited Investments also include the sale or purchase
of futures or option contracts for any security.
Other Prohibited Investments include:
1. SIVs;
2. ABCP;
3. The selling short of any security;
4. Non dollar denominated securities;
5. Commodities; and
6. Real estate investments.
F. Use of Derivatives.
Derivatives shall not be used as an investment in the Portfolio with the exception of:
1. TBAs; and
2. Derivative securities of which the ultimate payment of principal and or interest on the
security is guaranteed by the U.S. government or an agency of the U.S. government.
G. Securities Lending.
This type of program is permissible only if recommended by the Chief Fiscal Officer and
approved by the Municipal Assembly.
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H. Reporting.
The Chief Fiscal Officer shall submit to the Assembly on an annual basis reports addressing
Portfolio performance and compliance. The annual report shall address the use of investment
consultants and external money managers, the use of derivatives, securities lending activities and
bank lines of credit. The report shall also include compliance with the requirements regarding
Portfolio diversification, maximum holdings by type of authorized investment, and Portfolio
performance compared with Portfolio benchmarks.
(AO No. 82-200(S); AO No. 97-60, § 1, 7-22-97; AO No. 2006-145, § 1, 10-31-06; AO No.
2009-80, §§ 1, 2, 7-21-09)
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Appendix B: Municipality of Anchorage Operating Policy/Procedure
P&P 24-11 Dated September 1, 2007
1. PURPOSE
To establish the policy for investment of Municipal Funds pursuant to Anchorage
Municipal Code 6.50.030.
2. POLICY
It is the policy of the Municipality of Anchorage (the “Municipality”) to invest
public funds in a manner that will provide the highest investment return
consistent with preservation of capital while meeting the daily cash flow demands
of the Municipality and conforming to Anchorage Municipal Code (AMC) Title 6.
a. The primary objectives, as outlined in AMC 6.50.030, in priority order, of the
Municipality’s investment activities shall be:
(1) Safety. Safety of principal is the foremost objective of the investment
program. Investments of the Municipality shall be undertaken in a
manner seeking to ensure the preservation of capital in the overall
Portfolio. To attain this objective, diversification is required to
reduce overall Portfolio risk while attaining market rates of return.
(2) Liquidity. The Municipality’s investment Portfolio shall remain
sufficiently liquid to enable the municipality to meet all reasonably
anticipated operating requirements.
(3) Return on investment. The Municipality’s investment Portfolio shall
be designed with the objective of outperforming the total Portfolio
benchmark.
(4) Duration/Risk Bucketing. The Municipality’s investment Portfolio
shall be structured into three duration buckets, each designed to
fulfill a specific liquidity requirement. Allocations into each bucket
shall consist of an absolute value derived from a rolling three-year
forecast, re-evaluated on an annual basis.
3. ORGANIZATIONS AFFECTED
This investment policy applies to the following financial assets of the
Municipality. These funds are accounted for in the Municipality’s Comprehensive
Annual Financial Report and include:
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a.
b.
c.
d.
e.
f.
g.
h.
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General Funds
Construction Funds
All Enterprise Funds of the Municipality
All Funds of Authorities Created by the Municipality
Bond Debt Service Account Funds
Bond Debt Service Reserve Account Funds
Anchorage School District Funds
Other Restricted and Unrestricted Funds
This investment policy does not apply to the following Funds:
a. MOA Trust Fund
b. Police and Fire Retirement Fund
c. Retiree Medical Prefunding Investment Fund
4. REFERENCES
Anchorage Municipal Code Title 6, subsection 6.50.030
5. DEFINITIONS
a. Approved Broker List is the List of qualified institutions further described in
Section 7 d of this Policy.
b. Bank is defined as a state or federally chartered commercial or mutual savings
bank or credit union located in the United States and having insurance of
accounts through the appropriate federal insuring agency of the United
States.
c. Broker/Dealer is defined as a qualified institution, including depository
banks, any Federal Reserve Bank, primary government securities dealers, or a
broker dealer registered in compliance with the Securities Exchange Act of
1934.
d. Certificate of Deposit is defined as a nonnegotiable certificate of deposit, time
certificate of deposit or other depository agreement issued or to be issued to
the Municipality by a Bank.
e. Duration Bucket or Duration Portfolio is defined as a portfolio of the
Municipal Cash Pool, which has been invested, based on liability duration or
cash need. Individual Duration Portfolios will generally target: Working
Capital Portfolio (less than six months), Contingency Reserve Portfolio (plus
or minus one-half year of the benchmark duration), or Strategic Reserve
Portfolio (plus or minus 1-year of the benchmark duration).
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f. Interfund Loan is defined as a loan from the Municipal Cash Pool to a
Municipal Organization that may extend outside of the fiscal year during
which the loan was made. The Assembly will individually approve all such
loans.
g. Municipal Cash Pool (MCP) is defined as the Municipality’s investment
portfolio that is structured into three Duration Portfolios, further described in
Section 7 of this policy, and managed by external money managers on behalf
of the Municipality and is a part of the Total Portfolio.
h. Municipal Cash Pool Benchmark is defined as a blended benchmark consisting
of the individual Duration Portfolio’s respective benchmarks, weighted at
their beginning-of-period market values throughout budgetary and economic
cycles, taking into account the Municipality’s investment risk constraints and
the cash flow characteristics of the MCP.
i.
Total Portfolio is defined as the aggregate balance of all Municipal funds
currently under investment by external money managers and internal staff
members.
j.
Securities are defined as any Authorized Investment referred to in Section 7 of
this policy.
6. RESPONSIBILITIES
a. The Chief Fiscal Officer is responsible for this Operating Policy/Procedure and
the investment of all Municipal Funds.
b. In addition to the authority to manage the Municipality’s investment program
derived from AMC Title 6 and various bond ordinances, management
responsibility for the investment program is assigned to the Chief Fiscal
Officer, who shall establish written procedures for the operation of the
investment program consistent with this investment policy. Such procedures
shall include explicit delegation of authority to persons responsible for
investment transactions. No person may engage in an investment transaction
except as provided under the terms of this policy and the procedures
established by the Chief Fiscal Officer. The Chief Fiscal Officer shall be
responsible for all transactions undertaken and shall establish a system of
controls to regulate the activities of subordinate officials.
7. PROCEDURES
The Municipality may attempt to take advantage of conditions in the market
by trading securities to further improve the overall rate of return on the Total
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Portfolio and the MCP. Losses may be realized on the sale of an individual
security and shall be considered within the context of the overall Duration
Portfolio return provided that adequate diversification is maintained and the
sale of a security is in the best interest of the Municipality at the time of the
transaction.
Duration/Risk Bucketing: The Municipality’s MCP shall be structured into
three Duration Buckets, each of which is designed to fulfill a specific liquidity
requirement. The Chief Fiscal Officer shall determine the amount of the funds
to be allocated to each Duration Bucket, based on aggregated forward-looking
cash flow forecasts.
Descriptions of the three Duration Buckets or Duration Portfolios are
contained below:
1. “Working Capital Portfolio” is used for cash flows that occur
throughout the year, and should be managed for very short-term
liquidity, typically with a duration band of 0 – 180 days. The
Working Capital Portfolio is intended to provide for same-day
liquidity for working capital management. In addition to providing
liquidity, the objective of the Working Capital Portfolio is to
preserve principal and generate current income by investing in a
portfolio of high-quality, short-term instruments. The benchmark
for the Working Capital Portfolio shall be the Merrill Lynch 90 day
U.S. T-Bill Index.
2. The “Contingency Reserve Portfolio” is a Defensive Fixed Income
Portfolio, with an average duration within half a year on the Lehman
1-3 Year Government Bond Index. The Contingency Reserve
Portfolio is intended as a buffer between the Working Capital
Portfolio and the Strategic Reserve Portfolio. The overall duration
of this Portfolio is sufficiently short enough that if it is required to
support short-term liquidity needs it can likely do so with limited
impact to the Portfolio return. The objective of this fixed income
Portfolio is to provide a high level of current income consistent with
low volatility of principal. The Contingency Reserve Portfolio is not
designed to provide daily liquidity yet seeks higher returns with
some preservation of principal by employing a broader range of
sectors and tactically managing duration. The benchmark for the
Contingency Reserve Portfolio shall be the Lehman 1-3 year
Government Index.
3. The “Strategic Reserve Portfolio” is analogous to an Intermediate
Fixed Income Portfolio, managed with a maximum duration no
greater than 1-year in excess of the benchmark. The Strategic
Reserve Portfolio is intended for residual cash balances for which
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the Municipality does not foresee utilizing over a rolling three-year
forecast period. The objective of the Strategic Reserve Portfolio is to
generate excess return through effective sector selection, issue
selection, and duration management. Principal fluctuations can
occur. The benchmark for the Strategic Reserve Portfolio shall be
the Lehman Intermediate Government Credit Index.
1. Prudence
All participants in the investment process shall act responsibly. The standard
of prudence to be applied by the Chief Fiscal Officer, staff, and external service
providers shall be the “prudent investor” rule, which states: “Investments
shall be made with judgment and care, under circumstances then prevailing,
which persons of prudence, discretion and intelligence exercise in the
management of their own affairs, not for speculation, but for investment,
considering the probable safety of their capital as well as the probable income
to be derived.”
2. Investment Management
The Chief Fiscal Officer may engage investment managers, both internal and
external, to execute the investment strategy. Funds of the Municipality will be
primarily invested by external investment managers.
(1)
External Managers Only:
1. Provide the Municipality with a written agreement to invest within
the guidelines established in these policies and corresponding
sub-policies or particular Investment Guidelines;
2. Provide the Municipality with proof of liability and fiduciary
insurance coverage (minimum $5,000,000 each type);
3. Must be recognized as providing demonstrated expertise over a
number of years in the management of institutional assets;
4. Maintain frequent and open communication with the Municipality,
Municipality’s staff, on all significant matters pertaining to its firm’s
ownership, investment style and philosophy, changes in personnel,
significant client departures and periods of under performance;
5. Must be a registered investment advisor under the Investment
Advisor’s Act of 1940 as amended.
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(2)
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External and Internal Managers:
1. Adhere to the investment management style, concepts and
principles for which they were hired by the Municipality;
2. Execute all transactions for the benefit of the Municipality with
brokers and dealers qualified to execute institutional orders on an
ongoing basis seeking the best cost of execution for the
Municipality and where appropriate, facilitate the recapture of
commissions on behalf of the Municipality;
3. Reconcile monthly accounting, transaction and asset summary data
with custodian valuations and communicate and resolve any
significant discrepancies.
3. Authorized Financial Dealers and Institutions
Investment transactions shall only be conducted with qualified institutions
including depository banks, any Federal Reserve Bank, primary government
securities dealers, or broker-dealers registered in compliance with the
Securities Exchange Act of 1934. External managers shall be responsible for
the selection of qualified entities to implement security transactions. Internal
staff may only utilize institutions that are on an Approved Broker List that
shall be maintained by the Chief Fiscal Officer. Only firms believed to have
requisite experience, capabilities and credit worthiness shall be included on
this List. The List shall be reviewed at least annually by the Chief Fiscal Officer
or designee.
4. Authorized Investments
Authorized Investments identified in AMC 6.50.030 are the only permitted
investments of the Municipality.
5. Use of Derivatives
Derivative instruments shall not be used to increase Total Portfolio or
Duration Portfolio risk above the level that could be achieved in a particular
Duration Portfolio using only traditional investment securities. Moreover,
derivatives will not be used to acquire exposure to changes in the value of
assets or indices that, by themselves, are not allowable investments. Under
no circumstances will an investment in derivatives be made that is noncovered or leveraged to the extent that it would cause portfolio duration or
maturity to exceed limits specified in this policy. Derivative instruments may
only be used by external managers with the express written authority of the
Municipality.
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6. Safekeeping and Custody
All Security transactions, including collateral for repurchase agreements
(other than Certificates of Deposit and any overnight repurchase agreements),
entered into by the Municipality shall be conducted on a delivery-versuspayment (DVP) basis. Certificates of Deposit, if delivered, shall be held at the
Chief Fiscal Officer’s Offices or the Municipality’s custodian bank and all other
Securities except shares of Money Market Mutual Funds and Mutual Fund
Investments, including collateral for overnight repurchase agreements, will be
held by a third-party custodian under a written agreement and evidenced by
safekeeping receipts.
7. Securities Lending
As part of this investment strategy, the Municipality may retain the services of
a custodial bank or an independent securities lending agent to supervise a
program of securities lending in exchange for a fee or other consideration.
Supervision of the program shall include:
(1)
Procedures to review the creditworthiness of all borrowers.
(2)
Requirement for full collateralization of all loans.
8. Bank Line of Credit
Short term lines of credit, as permitted under the Anchorage Municipal Code,
may be utilized to temporarily meet short term operating cash demands. The
Chief Fiscal Officer shall have the authority to arrange the terms and
conditions of such lines of credit.
9. Diversification
It is the policy of the Municipality to diversify Municipal investments and to
ensure the safety and liquidity of the investments by observing the following
sound investment practices. Diversification will be accomplished by adhering
to the following schedule: Each Duration Portfolio and internally managed
portfolio will have its own Investment Guidelines and limitations. Externally
managed portfolios shall have greater flexibility with respect to issuer quality,
maximum maturity and sector concentration than any funds managed
internally.
10. Reporting
The Chief Fiscal Officer shall submit to the Assembly on an annual basis reports
addressing Total Portfolio and MCP performance and compliance. The annual
report will address the use of investment consultants and external money
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managers, the use of derivatives, securities lending activities and bank lines of
credit. The report shall also include compliance with the requirements
regarding Duration Portfolio and internally managed funds diversification,
maximum holdings by type of Authorized Investment, and Duration Portfolio
performance compared with respective Duration Portfolio Benchmarks.
8. ANNUAL REVIEW DATE/LEAD REVIEW AGENCY
The Public Finance & Investments Division will review this document in August
each year for any needed revisions.
9.
INVESTMENT GUIDELINES
Internally Managed Funds
(Limitations based on asset values at time of investment)
1. At least 50% of the portfolio shall be invested in U.S. Government
securities.
2. In addition, the following shall limit concentration by security type to
the indicated levels based on portfolio values at the time of purchase.
Type of Securities
Holdings
Maximum
U.S. Government Securities
100%
Repurchase Agreements
50%
Certificates of Deposit
50%
Banker’s Acceptances
25%
5%
issuer
per
Certificates of Deposit secured by other
than U.S. Government Securities
20%
Commercial Paper
15%
5%
per
15%
5%
per
issuer
Corporate Bonds, Rated Investment Grade
issuer
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Alaska Municipal League Investment Pool (AMLIP)
25%
Money Market Mutual Funds
25%
Mutual Fund Investments
25%
3. Maximum Maturity to the extent possible, the Municipality will
attempt to match its internally managed funds with anticipated cash
flow requirements.
4. Bond Debt Service Reserve funds may be invested in Securities not
exceeding the final maturity date of the bond issue for which they are
invested. Investment of any funds that are subject to restrictive
covenants contained in an Ordinance or Resolution must be invested
in accordance with those covenants.
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49th State Angel Fund Policies and Procedures
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Externally Managed Working Capital Portfolio
Exhibit A
MUNICIPALITY OF ANCHORAGE WORKING CAPITAL PORTFOLIO
Investment Guidelines
The Portfolio ............................................... The Municipality of Anchorage Working Capital Portfolio is a
separate account managed by Alaska Permanent Capital
Management Inc. (APCM) for the benefit of the Municipality of
Anchorage’s (the Company’s) Municipal Cash Pool.
Investment Objective .............................. The Portfolio's investment objective is to provide stability of
principal, ready liquidity and a competitive money market
instrument return that exceeds the total return of the Merrill Lynch
90-day Treasury Bill Index (the Index).
Duration Guidelines................................. The Portfolio will be managed to have a targeted duration within a
band of ± .25 years of the duration of the Index.
Asset Guidelines ........................................ Following are the eligible investments:
At least 50% of the portfolio shall be invested in U.S. Government
securities.
In addition, the following shall limit concentration by security type
to the indicated levels based on portfolio values at the time of
purchase.
Type of Securities
Maximum Holdings
U.S. Government Securities
100%
Repurchase Agreements
50%
Time Certificates of Deposit
50%
Banker’s Acceptances
25%
5%
Time Certificates of Deposit secured
by other than U.S. Government
Securities
Commercial Paper
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per issuer
20%
15%
5%
per issuer
49th State Angel Fund Policies and Procedures
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Corporate and other Investment
Grade instruments that reset interest
payments to a short-term interest rate
at least semi-annually or have a final
maturity within one year of purchase.
Money Market Mutual Funds
(excluding the Alaska Municipal
League Investment Pool)
15%
5%
per issuer
25%
Asset Allocation ......................................... Except for obligations issued or guaranteed by the U.S. government,
U.S. agencies, U.S. government-sponsored corporations or agencies,
or collective investment vehicles with diversified portfolios used for
short-term deposits of cash, no more than 5% of the Portfolio's assets
may be invested in securities of a single issuer.
Credit Criteria............................................. Securities must be rated investment grade or better by at least two
nationally recognized credit rating agencies at the time of purchase.
Split rated credits will be considered to have the lower credit rating.
Money market instruments must also have at least two ratings by
nationally recognized credit rating agencies and be rated A-1, F-1 or
P-1 or better at the time of purchase.
Other Investment Practices ................. Temporary cash balances may be invested in a money market
instrument (A1/P1 or better, less than 365 days), in a client and
NAIC approved commingled 2A-7 Money Market Fund, or in a
commingled Stable Dollar NAV Fund.
The Portfolio may purchase securities on a when-issued basis or for
forward delivery.
The Portfolio may enter into repurchase agreements collateralized
102% with U.S. Government securities or mortgage securities as
defined above. The maximum term of these agreements will be 90
days, and the collateral must be marked-to-market daily.
Reinvestment of Income........................ All investment income of the Portfolio and capital gains, if any, will
be added to the assets of the Portfolio, unless otherwise directed by
the Company.
Derivative Instruments……………
Notwithstanding the language in section 3 of the Investment
Manager Agreement, the Manager is precluded from using
derivative instruments unless the Company and the Manager
mutually agree in writing to a modification of the Account’s
Investment Guidelines (this Exhibit A).
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49th State Angel Fund Policies and Procedures
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Custodian…………………………
As selected by the Company.
Prohibited investments…………
Dollar denominated obligations of foreign governments are
prohibited until the Assembly agrees to modify the Code section that
details allowable investments. Similarly, municipal securities are not
presently permitted. The Anchorage Municipal Code (chapter 6.50)
details currently permitted investments.
APCMC Exhibit A 07-23-2007.doc
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Externally Managed Contingency Reserve Portfolio
Exhibit A
MUNICIPALITY OF ANCHORAGE CORE SHORT DURATION FIXED INCOME PORTFOLIO
Investment Guidelines
The Portfolio ............................................... The Municipality of Anchorage Core Short Duration (the
Contingency Reserve) Portfolio is a separate account managed by
Aberdeen Asset Management Inc. (AAM) for the benefit of the
Municipality of Anchorage’s (the Company’s) Municipal Cash Pool.
Investment Objective .............................. The Portfolio's investment objective is to provide a total return that
exceeds the total return of the Lehman 1-3 Year Government Index
(the Index).
Duration Guidelines................................. The Portfolio will be managed to have a targeted duration within a
band of ± .25 years of the duration of the Index.
Asset Guidelines ........................................ Following are the eligible investments:
(i) U.S. Treasury and agency securities;
(ii) Agency and non-agency mortgage-backed securities backed by
loans secured by residential, multifamily and commercial
properties including, but not limited to pass-throughs, CMOs,
REMICs, CMBS, project loans, construction loans, and
adjustable rate mortgages;
(iii) Dollar denominated obligations of domestic and foreign
corporations;
(iv) asset-backed securities;
(v) cash equivalent investments defined as any security that has
an average duration under one year, a weighted average life of
less than one year, and spread duration less than one year;
The Portfolio may purchase private placement or Rule 144A debt
securities including issues in the corporate, mortgage and assetbacked sectors.
Asset Allocation……………..…….
Except for Treasury or Agency debentures, pass-throughs, REMICs,
or collective investment vehicles with diversified portfolios used for
short-term deposits of cash, no more than 5% of the Portfolio's assets
may be invested in securities of a single issuer.
Credit Criteria............................................. Securities must be rated investment grade or better by a nationally
recognized credit rating agency at the time of purchase. Structured
product, including mortgage-backed and asset-backed securities as
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49th State Angel Fund Policies and Procedures
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defined in sections ii and iv above, must be rated AA- or better by a
nationally recognized credit rating agency at the time of purchase.
Split rated credits will be considered to have the lower credit rating.
In the event that a Portfolio investment is downgraded below these
credit quality guidelines, the Investment Manager shall notify the
Company and provide an evaluation and a plan of action for their
orderly liquidation. If bonds are downgraded below investment
grade, the Manager is allowed to hold up to 2% in aggregate
market value of these securities for a period of six months. At such
time, the manager shall provide the Municipality with an updated
plan of action.
Money market instruments must be rated A-1 or P-1 or better at the
time of purchase.
Other Investment Practices ................. Temporary cash balances may be invested by AAM in a money
market instrument (A1/P1 or better, less than 365 days), in a
client and NAIC approved commingled 2A-7 Money Market Fund
or in a commingled Stable Dollar NAV Fund.
The Portfolio may purchase securities on a when-issued basis or for
forward delivery.
The Portfolio may enter into repurchase agreements collateralized
102% with U.S. Government securities or mortgage securities as
defined above. The maximum term of these agreements will be 90
days, and the collateral must be marked-to-market daily.
The Portfolio may enter into covered dollar roll on mortgage
securities. Covered agreements will be defined as a sale and
simultaneous purchase (for forward settlement) whereby the trade
date cash balance must remain positive for the life of the roll (until
the forward purchase settles).
Cross trades are permitted at prevailing market levels, in
accordance with “PTE 95-66”.
Reinvestment of Income........................ All investment income of the Portfolio and capital gains, if any, will
be added to the assets of the Portfolio, unless otherwise directed by
the Company.
Derivative Instruments…………….
Notwithstanding the language in section 3 of the Investment
Manager Agreement, the Manager is precluded from using
derivative instruments unless the Company and the Manager
mutually agree in writing to a modification of the Account’s
Investment Guidelines (this Exhibit A).
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49th State Angel Fund Policies and Procedures
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Custodian…………………………
As selected by the Company.
Prohibited investments…………… ..........
Dollar denominated obligations of foreign governments are
prohibited until the Assembly agrees to modify the Code section that
details allowable investments. Similarly, municipal securities are not
presently permitted. The Anchorage Municipal Code (chapter 6.50)
details currently permitted investments.
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49th State Angel Fund Policies and Procedures
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Externally Managed Strategic Reserve Portfolio
Exhibit A
MUNICIPALITY OF ANCHORAGE INTERMEDIATE DURATION PORTFOLIO
Investment Guidelines
The Portfolio ............................................... The Municipality of Anchorage Intermediate
Duration Portfolio (the Portfolio) is a separate
account managed by BlackRock Financial
Management, Inc. for the benefit of the Municipality
of Anchorage’s (the Company’s) Municipal Cash
Pool.
Investment Objective .............................. The Portfolio's investment objective is to provide a
total return that exceeds the total return of the
Lehman Intermediate Government/Corporate Index
(the Index).
Duration Guidelines................................. The Portfolio will be managed to have a targeted
duration within a band of ± 20% around the
duration of the Index.
Asset Guidelines ........................................ Following are the eligible investments:
(i) U.S. Treasury and agency securities;
(ii) Agency and non-agency mortgage-backed
securities backed by loans secured by
residential, multifamily and commercial
properties including, but not limited to passthroughs, CMOs, REMICs, CMBS, project loans,
construction loans, and adjustable rate
mortgages;
(iii) Dollar denominated obligations of domestic
and foreign corporations;
(iv) asset-backed securities;
(v) cash equivalent investments defined as any
security that has an average duration under
one year, a weighted average life of less than
one year, and spread duration less than one
year;
The Portfolio may purchase private placement or
Rule 144A debt securities including issues in the
corporate, mortgage and asset-backed sectors.
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49th State Angel Fund Policies and Procedures
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Asset Allocation ......................................... Except for Treasury or Agency debentures, passthroughs, REMICs, or collective investment vehicles
with diversified portfolios used for short-term
deposits of cash, no more than 5% of the Portfolio's
assets may be invested in securities of a single
issuer.
Credit Criteria............................................. Securities must be rated investment grade or better
by a nationally recognized credit rating agency at
the time of purchase. Structured product, including
mortgage-backed and asset-backed securities as
defined in sections ii and iv above, must be rated
AA- or better by a nationally recognized credit
rating agency at the time of purchase. Except for
dollar denominated corporate debt instruments,
split rated credits will be considered to have the
lower credit rating.
In the event that a Portfolio investment is
downgraded below these credit quality guidelines,
the Investment Manager shall notify the Company
and provide an evaluation and a plan of action for
their orderly liquidation. If bonds are downgraded
below investment grade, the Manager is allowed to
hold up to 2% in aggregate market value of these
securities for a period of six months. At such time,
the manager shall provide the Municipality with an
updated plan of action.
Money market instruments must be rated A-1 or P1 or better at the time of purchase.
Other Investment Practices ................. Temporary Cash balances may be invested by
BlackRock in a money market instrument (A1/P1
or better, less than 365 days), in a client and NAIC
approved commingled 2A-7 Money Market Fund or
in a commingled Stable Dollar NAV Fund.
The Portfolio may purchase securities on a when
issued basis or for forward delivery.
The Portfolio may enter into repurchase
agreements collateralized 102% with U.S.
Government securities or mortgage securities as
defined above. The maximum term of these
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49th State Angel Fund Policies and Procedures
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agreements will be 90 days, and the collateral must
be marked-to-market daily.
The Portfolio may enter into covered dollar roll on
mortgage securities. Covered agreements will be
defined as a sale and simultaneous purchase (for
forward settlement) whereby the trade date cash
balance must remain positive for the life of the roll
(until the forward purchase settles).
Cross trades are permitted at prevailing market
levels, in accordance with “PTE 95-66”.
Reinvestment of Income........................ All investment income of the Portfolio and capital
gains, if any, will be added to the assets of the
Portfolio, unless otherwise directed by the
Company.
Derivative Instruments……………. ...... Notwithstanding the language in section 3 of the
Investment Manager Agreement, the Manager is
precluded from using derivative instruments unless
the Company and the Manager mutually agree in
writing to a modification of the Account’s
Investment Guidelines (this Exhibit A).
Custodian ..................................................... As selected by the Company.
Prohibited investments……………
Dollar denominated obligations of foreign
governments are prohibited until the Assembly
agrees to modify the Code section that details
allowable investments.
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49th State Angel Fund Policies and Procedures
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Exhibit 1: Small Business Borrower/Investee Certification for Use of
Proceeds
These assurances reference Section 3005(e)(7) and Section 3011(c)(2) of the Small Business
Jobs Act of 2010.
Legal name of borrower or investee:
________________________________________________________
The borrower or investee hereby certifies the following to the lender or investor:
1. The investment proceeds will be used for a “business purpose.” Business purpose
includes, but is limited to, start up costs, working capital, business procurement, franchise
fees, equipment, inventory, as well as the purchase, construction renovation or tenant
improvements of an eligible place of business that is not for passive real estate
investment purposes. The definition of business purpose excludes: activities that relate to
acquiring or holding passive investments, such as commercial real estate ownership and
the purchase of securities; and lobbying activities, as defined in Section 3(7) of the
Lobbying Disclosure Act of 1995, P.L. 104-65, as amended.
2. The loan or investment proceeds will not be used to:
–
repay a delinquent federal or state income taxes unless the Borrower has a payment
plan in place with the relevant taxing authority; or
–
repay taxes held in trust or escrow, e.g. payroll or sales taxes; or
–
reimburse funds owed to any owner, including any equity injection or injection of
capital for the business’ continuance; or
–
to purchase any portion of the ownership interest of any owner of the business.
3. The borrower or investee is not:
–
an executive officer, director, or principal shareholder of the lender; or
–
a member of the immediate family of an executive officer, director, or principal
shareholder of the lenders; or
–
a related interest of an such executive officer, director, principal shareholder, or
member of the immediate family.
For the purposes of these three restrictions, the terms “executive officer”, “director”,
“principal shareholder”, “immediate family”, and “related interest” refer to the same
relationship to a lender as the relationship described in part 215 of title 12 of the Code of
Federal Regulations, or any successor to such part.
4. The borrower or investee is not:
–
a business engaged in speculative activities that develop profits from fluctuations in
price rather than through normal course of trade, such as wildcatting for oil and
dealing in commodities futures, unless those activities are incidental to the regular
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49th State Angel Fund Policies and Procedures
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activities of the business and part of a legitimate risk management strategy to guard
against price fluctuations related to the regular activities of the business; or
–
a business that earns more than half of its annual net revenue from lending activities;
unless the business is a non-bank or non-bank holding company Community
Development Financial Institutions; or
–
a business engaged in pyramid sales, where a participant's primary incentive is based
on the sales made by an ever-increasing number of participants; or
–
a business engaged in activities that are prohibited by federal law or applicable law in
the jurisdiction where the business is located or conducted. (Included in these
activities is the production, servicing, or distribution of otherwise legal products that
are to be used in connection with an illegal activity, such as selling drug
paraphernalia or operating a motel that knowingly permits illegal prostitution); or
–
a business engaged in gambling enterprises, unless the business earns less than 33%
of its annual net revenue from lottery sales.
Legal Name: ______________________________________________________
By: _____________________________________________________________
Authorized Signatory
Name: ___________________________________________________________
Title: ___________________________________________________________
Date: ___________________________________________________________
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Exhibit 2: Sex Offender Certification Form
(May be Used for Both Borrowers/Investees and Lenders/Investors)
This certification is required by Section 3011(c)(2) of the Small Business Jobs Act of 2010 from
any private entity that receives a loan, a loan guarantee, or other financial assistance using funds
received by a participating State under the State Small Business Credit Initiative.
Legal name of entity:
___________________________________________________________________
As required by Section 3011(c)(2) of the Small Business Jobs Act of 2010, the private entity
hereby certifies to the participating State that the Principals of the private entity have not been
convicted of a sex offense against a minor (as such terms are defined in section 111 of the Sex
Offender Registration and Notification Act (42 U.S.C. 16911)). For the purposes of this
Certification, Principal means the following: if a sole proprietorship, the proprietor; if a
partnership, each managing partner and each partner who is a natural person and holds a 20% or
more ownership interest in the partnership; and if a corporation, limited liability company,
association or a development company, each director, each of the five most highly compensated
executives or officers of the entity, and each natural person who is a dire indirect holder of 20%
or more of the ownership stock or stock equivalent of the entity. The undersigned acknowledges
its ongoing responsibility to provide notice to the Municipality of Anchorage should this
certification lapse, for example in the case of a)a current principal being convicted of such a
crime, or b)a new principal of the firm be so convicted.
Legal Name: ______________________________________________________
By: _____________________________________________________________
Authorized Signatory
Name: ___________________________________________________________
Title: ___________________________________________________________
49th State Angel Fund Policies and Procedures
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Exhibit 3: Lender/Investor Certification for Use of Proceeds
This Assurance is referenced by Section 3005(e)(7) of the Small Business Jobs Act of 2010.
Legal name of lender or investor:
___________________________________________________________________
The Lender/Investor hereby certifies to the Participating State the following:
1. The loan or investment has not been made in order to place under the protection of the
approved state program prior debt that is not covered under the approved state program and that
is or was owed by the borrower to the lender or to an affiliate of the lender.
2. The loan or investment is not a refinancing of a loan or investment previously made to that
borrower by the lender or an affiliate of the lender.
3. The lender is not attempting to enroll the unguaranteed portions of SBA-guaranteed loans.
Legal Name: _______________________________________________________
By: _______________________________________________________________
Authorized Signatory
Name: ___________________________________________________________
Title: ___________________________________________________________
49th State Angel Fund Policies and Procedures
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Exhibit 4: Quarterly Certification Form
CERTIFICATION ON USE-OF-ALLOCATED FUNDS
United States Department of the Treasury
Main Treasury Building, Room 1310
1500 Pennsylvania Avenue
Washington, D.C. 20220
Reference is made to:
The Allocated Agreement dated as of February 14, 2012 (the “Allocated Agreement”), between
the United States Department of the Treasury (“Treasury”) and the Municipality of
Anchorage (the “Participating Municipality”). Capitalized terms used herein and not defined
herein will have the respective meanings ascribed to them in the Allocated Agreement.
This certification is delivered to Treasury pursuant to Section 4.7 (“Quarterly Reports”) of the
Allocated Agreement. The undersigned, on behalf of the Participating Municipality, hereby
makes the following certifications as of the date of this certification:
1. The information provided by the MOA under Section 4.7 (“Quarterly Reports”) of the
Allocated Agreement on the use of Allocated Funds is accurate.
2. Funds continue to be available and legally committed to contributions by the MOA to, or
for the account of, Approved Municipal Programs, less any amount that has been
contributed by the MOA to, or for the account of, Approved Municipal Programs
subsequent to the MOA being approved for participation in the State Small Business
Credit Initiative.
3. The MOA is implementing its Approved Municipal Program or Programs in accordance
with the Act and the regulations or other guidance issued by Treasury under the Act.
4. The authority of the undersigned to execute and deliver this certification on behalf of the
MOA is valid and in full force and effect.
By: ___________________________________
Name:
Title:
Date: ____________________________
49th State Angel Fund Policies and Procedures
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Exhibit 5: Scorecard Guidance
BUSINESS STRATEGY
 Clarity of purpose
 Business plan
 Marketing/Sales approach
 Commercialization, expansion, or scalability goals/potential
 Identification of critical milestones (as well as solutions to overcome)
Assess the feasibility and clarity of the business strategy, including the underlying logical
and factual support.
TEAM
 Co-founders and Management
 Board of Directors
 Scientific and business advisors, collaborators, and mentors committed to the
business

Track records, education and functional expertise of team, and
experience in a) managing growth and b) within targeted industry
Assess the team’s overall strength: its commitment level, ability and likelihood of
executing the business as envisioned, and ability to pivot when market forces act in
unforeseen ways.
ECONOMIC IMPACT to ANCHORAGE
 Quality/Quantity of Jobs Provided (now/in future)
 Possibility of related investment, or ability to strengthen a city key industry or
diversify economy
 Disadvantaged Business (minority-owned/in a low income zone)
 Underperforming Business (turnaround or expansion opportunity)
Assess the likelihood of achieving the projected economic impact within the context of the
submitted proposal, and the clarity of and logical and factual support underlying the
methodology used to project the economic impact.
MARKET
 Opportunity size and scope
 Strength/quantity of competition
 Firm competitive advantage (including intellectual property)
 Current and future trends
Consider the market dynamics of the industry in which it seeks to enter or expand and the
logical and factual support presented for how the applicant has identified the market
opportunity.
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49th State Angel Fund Policies and Procedures
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PRODUCT/SERVICES
 Value proposition
 Problem/solution dynamic—and is the firm product a true “painkiller?”
 Extra value in technology being developed
 Is the firm product found better, faster, or cheaper elsewhere?
Consider whether crystal-clear value is offered to the customer and fills a need within the
marketplace.
PROJECT BUDGET
 Firm-provided internal financials—Profit & Loss Statement, Balance Sheet, Cash
Flow Analysis
 Other factors: Burn rate, break even point, customer acquisition costs/lifetime
value
 Assumptions surrounding inbound cash flows
 Consider past and current performance (if provided), and future forecasts
The score should reflect the attractiveness of the total budget, planned use of funds, and
forecast inbound cash flows/monetization—as well as assessing whether those
assumptions are realistic. If the business is in operation, the firm’s internal historical
financials should also be assessed.
FINANCE PLAN (current needs, matching and follow-on)
 Return on investment
 Matching funds status
 Follow on financing
 Probability of payback
 Safety of principal versus income potential (Indirect Investments only)
The score should reflect the attractiveness of the funding offer overall: An aggregate of
the likelihood/current status of the items above.
5-2