Opinion No. ( 1987 )

Winfred S. Clardy, Executive Director Arkansas Teacher Retirement System Education Bldg. West, Capitol Mall Little Rock, Arkansas 72201

Dear Mr. Clardy:

This is in response to your request for an official opinion from this Office regarding whether or not a particular proposal would qualify as an "Arkansas related investment" under Ark. Stat. Ann. 12-3307.14 (Supp. 1985).

Ark. Stat. Ann. 12-3307.14 (Supp. 1985) provides as follows:

ARKANSAS RELATED INVESTMENTS. In acquiring, investing, reinvesting, exchanging, retaining, selling and managing funds held by each of the Arkansas public employee retirement systems fiduciaries administering said systems shall, when appropriate investment alternatives are available, manage such funds so as to favorably impact the economic condition of, and maximize capital investment in, the State of Arkansas. It is the intention of the General Assembly that as assets become available for investment the systems shall seek to invest not less than five percent (5%) nor more than ten percent (10%) of their portfolio in Arkansas related investments. In calculating percentage of Arkansas related investments the systems shall not include Federal National Mortgage Association investments nor Government National Mortgage Association investments. Nothing in this section shall in any way limit or impair responsibility of a fiduciary to invest in accordance with the prudent investor rule set forth in Subsection 7.11 of this Section.

In an attempt to comply with this law, the Teacher Retirement System is considering a proposal from an Arkansas corporation which has various properties located both inside and outside Arkansas. In the particular investment proposal in question only one of the corporation's seven developments is in the State of Arkansas. Your question is whether or not the entire package would qualify as an Arkansas related investment.

The Arkansas related investments statute appears to be a goal rather than a requirement. The law provides that the retirement systems shall "when appropriate investment alternatives are available" maximize investment in Arkansas. (An investment range of five to ten percent shall be pursued. However, the prudent investor rule supercedes [supersedes] the Arkansas related investment goal.)

It is the conclusion of this Office that the investment proposal currently before the Teacher Retirement System should be considered an Arkansas related investment. The Teacher Retirement System should consider developing rules and regulations against which all proposals of this type can be measured. I strongly recommend such action.

The foregoing opinion, which I hereby approve, was prepared by Assistant Attorney General C. Randy McNair III.