GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1997

H	3 

HOUSE BILL 1027
Committee Substitute Favorable 5/15/97
Third Edition Engrossed 6/30/97

Short Title:  State Treasurer Venture Capital.	(Public)

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Sponsors:

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Referred to:  

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April 21, 1997

A BILL TO BE ENTITLED
AN ACT TO STIMULATE SUBSTANTIAL GROWTH OF VENTURE CAPITAL INVESTMENTS IN NORTH CAROLINA THROUGH INVESTMENTS BY THE STATE TREASURER.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 147-69.1(c) is amended by adding a new subdivision to read:
"(7)	Any of the investments authorized by G.S. 147-69.2(b)(2) through (6) and (b)(9) and (10)."
Section 2.  G.S. 147-69.2(b) reads as rewritten:
"(b)	It shall be the duty of the State Treasurer to invest the cash of the funds enumerated in subsection (a) of this section in excess of the amount required to meet the current needs and demands on such funds, selecting from among the following in the State Treasurer's discretion:
(1)	Any of the investments authorized by G.S. 147-69.1(c), except that assets of retirement and pension systems may not be invested in the investments authorized by subdivision (9) or (10) of this subsection pursuant to G.S. 147-69.1(c)(7).
(2)	General obligations of other states of the United States.
(3)	General obligations of cities, counties and special districts in North Carolina.
(4)	Obligations of any company, other organization or legal entity incorporated or otherwise created or located within or outside of the United States if the obligations bear one of the three highest ratings of at least one nationally recognized rating service and do not bear a rating below the three highest by any nationally recognized rating service which rates the particular security.
(5)	Notes secured by mortgages insured by the Federal Housing Administration or guaranteed by the Veterans Administration on real estate located within the State of North Carolina.
(6)	Asset-backed securities (whether considered debt or equity) provided they bear ratings by nationally recognized rating services as provided in G.S. 147-69.2(b)(4) and that they do not bear a rating below the three highest by any nationally recognized rating service that rates the particular securities.
(7)	With respect to Retirement Systems' assets referred to in G.S. 147-69.2(b)(8), (i) insurance contracts that provide for participation in individual or pooled separate accounts of insurance companies, (ii) group trusts, (iii) individual, common, or collective trust funds of banks and trust companies and (iv) real estate investment trusts; provided the investment manager has assets under management of at least one hundred million dollars ($100,000,000); provided such investment assets are managed primarily for the purpose of investing in or owning real estate or related debt financing located in the United States; and provided that the investment authorized by this subsection shall not exceed ten percent (10%) of the book value of all invested assets of the Retirement Systems.
(8)	With respect to assets of the Teachers' and State Employees' Retirement System, the Consolidated Judicial Retirement System, the Firemen's and Rescue Workers' Pension Fund, the Local Governmental Employees' Retirement System, and the Legislative Retirement System (hereinafter referred to collectively as the Retirement Systems), preferred or common stocks issued by any company incorporated or otherwise created or located within or outside of the United States, if all of the following conditions are met:
a.	The common stock or preferred stock of the corporation is registered on a national securities exchange as provided in the Federal Securities Exchange Act or quoted through the National Association of Securities Dealers' Automated Quotations (NASDAQ) system.
b.	The corporation has paid a cash dividend on its common stock in each year of the 5-year period next preceding the date of investment and the aggregate net earnings available for dividends on the common stock of the corporation for the whole of that period have been at least equal to the amount of the dividends paid.
c.	In applying the dividend and earnings test under this section to any issuing, assuming, or guaranteeing corporation, if the corporation acquired its property or any substantial part thereof within a five-year period immediately preceding the date of investment by consolidation, merger, or by the purchase of all or a substantial portion of the property of any other corporation or corporations, or acquired the assets of any unincorporated business enterprise by purchase or otherwise, the dividends and net earnings of the several predecessor or constituent corporations or enterprises shall be consolidated and adjusted so as to ascertain whether or not the applicable requirements of this subdivision have been complied with.
d.	The book value of common and preferred stocks including securities convertible into common stocks shall not exceed fifty percent (50%) of the book value of all invested assets of the Retirement Systems and the following conditions must also be met:
1.	Not more than one and one-half percent (1 1/2%) of the book value of the assets shall be invested in the stock of a single corporation.
2.	The total number of shares in a single corporation shall not exceed eight percent (8%) of the issued and outstanding stock of the corporation.
	e.	Up to five percent (5%) of the limits authorized in subdivision d. may be invested in the stocks or shares of a diversified investment company registered under the ‘Investment Company Act of 1940' that has total assets of at least fifty million dollars ($50,000,000).
			As used in this subsection, the term ‘book value' means adjusted cost basis as shown on the records of the State Treasurer.
		Notwithstanding the provisions of sub-subdivisions a. through e., the investments authorized in this subdivision (8) may be made in individual, common, or collective trust funds of banks or trust companies if the investment manager has assets under management of at least one hundred million dollars ($100,000,000).
			Notwithstanding the provisions of sub-subdivisions a. through e., the investments authorized in this subdivision (8) may be made in securities convertible into common stocks issued by such a company, if the securities bear one of the four highest ratings of at least one nationally recognized rating service and do not bear a rating below the four highest by any nationally recognized rating service which may then rate the particular security.
(9)	With respect to assets other than assets of retirement or pension systems, obligations, and securities of the North Carolina Enterprise Corporation, or of a limited partnership in which the North Carolina Enterprise Corporation is the only general partner, not to exceed twenty million dollars ($20,000,000) from all funds.
(10)	With respect to assets other than assets of retirement or pension systems, a limited partnership interest in a partnership whose primary purpose is to invest in venture capital or corporate buyout transactions within or outside of the United States, not to exceed one hundred thirty million dollars ($130,000,000) from all funds.  This maximum dollar amount does not apply to or restrict the reinvestment in accordance with this subdivision of any income from these investments.
(11)	With respect to assets of the Escheat Fund, obligations of the North Carolina Global TransPark Authority authorized by G.S. 63A-4(a)(22), not to exceed twenty-five million dollars ($25,000,000), that have a final maturity not later than September 1, 1999. The obligations shall bear interest at the rate set by the State Treasurer. No commitment to purchase obligations may be made pursuant to this subdivision after September 1, 1993, and no obligations may be purchased after September 1, 1994. In the event of a loss to the Escheat Fund by reason of an investment made pursuant to this subdivision, it is the intention of the General Assembly to hold the Escheat Fund harmless from any such loss by appropriating to such Escheat Fund funds equivalent to such loss."
Section 3.  As soon as practicable, the State Treasurer shall assure that all assets of retirement and pension systems described in G.S. 147-69.2(a) are no longer invested in investments authorized by G.S. 147-69.2(b)(9) or (10).
Section 4.  This act is effective when it becomes law.