§88-119  Investments.  Investments may
be made in:



(1)  Real estate loans and mortgages.  Obligations (as
defined in section 431:6-101) of any of the following classes:



(A)  Obligations secured by mortgages of
nonprofit corporations desiring to build multirental units (ten units or more)
subject to control of the government for occupancy by families displaced as a
result of government action;



(B)  Obligations secured by mortgages insured
by the Federal Housing Administration;



(C)  Obligations for the repayment of home
loans made under the Servicemen's Readjustment Act of 1944 or under Title II of
the National Housing Act;



(D)  Other obligations secured by first
mortgages on unencumbered improved real estate owned in fee simple; provided
that the amount of the obligation at the time investment is made therein shall
not exceed eighty per cent of the value of the real estate and improvements
mortgaged to secure it, and except that the amount of the obligation at the
time investment is made therein may exceed eighty per cent but no more than
ninety per cent of the value of the real estate and improvements mortgaged to
secure it; provided further that the obligation is insured or guaranteed
against default or loss under a mortgage insurance policy issued by a casualty
insurance company licensed to do business in the State.  The coverage provided
by the insurer shall be sufficient to reduce the system's exposure to not more
than eighty per cent of the value of the real estate and improvements mortgaged
to secure it.  The insurance coverage shall remain in force until the principal
amount of the obligation is reduced to eighty per cent of the market value of
the real estate and improvements mortgaged to secure it, at which time the
coverage shall be subject to cancellation solely at the option of the board. 
Real estate shall not be deemed to be encumbered within the meaning of this
subparagraph by reason of the existence of any of the restrictions, charges, or
claims described in section 431:6-308;



(E)  Other obligations secured by first
mortgages of leasehold interests in improved real estate; provided that:



(i)  Each leasehold interest at the time shall
have a current term extending at least two years beyond the stated maturity of
the obligation it secures; and



(ii)  The amount of the obligation at the time
investment is made therein shall not exceed eighty per cent of the value of the
respective leasehold interest and improvements, and except that the amount of
the obligation at the time investment is made therein may exceed eighty per
cent but no more than ninety per cent of the value of the leasehold interest
and improvements mortgaged to secure it;



provided further that the obligation is
insured or guaranteed against default or loss under a mortgage insurance policy
issued by a casualty insurance company licensed to do business in the State. 
The coverage provided by the insurer shall be sufficient to reduce the system's
exposure to not more than eighty per cent of the value of the leasehold
interest and improvements mortgaged to secure it.  The insurance coverage shall
remain in force until the principal amount of the obligation is reduced to
eighty per cent of the market value of the leasehold interest and improvements
mortgaged to secure it, at which time the coverage shall be subject to
cancellation solely at the option of the board;



(F)  Obligations for the repayment of home
loans guaranteed by the department of Hawaiian home lands pursuant to section
214(b) of the Hawaiian Homes Commission Act, 1920; and



(G)  Obligations secured by second mortgages on
improved real estate for which the mortgagor procures a second mortgage on the
improved real estate for the purpose of acquiring the leaseholder's fee simple
interest in the improved real estate; provided that any prior mortgage shall
not contain provisions that might jeopardize the security position of the
retirement system or the borrower's ability to repay the mortgage loan.



The board may retain the real estate, including
leasehold interests therein, as it may acquire by foreclosure of mortgages or
in enforcement of security, or as may be conveyed to it in satisfaction of
debts previously contracted; provided that all the real estate, other than
leasehold interests, shall be sold within five years after acquiring the same,
subject to extension by the governor for additional periods not exceeding five
years each, and that all the leasehold interests shall be sold within one year
after acquiring the same, subject to extension by the governor for additional
periods not exceeding one year each;



(2)  Government obligations, etc.  Obligations of any
of the following classes:



(A)  Obligations issued or guaranteed as to
principal and interest by the United States or by any state thereof or by any
municipal or political subdivision or school district of any of the foregoing;
provided that principal of and interest on the obligations are payable in
currency of the United States; or sovereign debt instruments issued by agencies
of, or guaranteed by foreign governments;



(B)  Revenue bonds, whether or not permitted by
any other provision hereof, of the State or any municipal or political
subdivision thereof, including the board of water supply of the city and county
of Honolulu, and street or improvement district bonds of any district or
project in the State; and



(C)  Obligations issued or guaranteed by any
federal home loan bank, including consolidated federal home loan bank
obligations, the Home Owner's Loan Corporation, the Federal National Mortgage
Association, or the Small Business Administration;



(3)  Corporate obligations.  Below investment grade or
nonrated debt instruments, foreign or domestic, in accordance with investment
guidelines adopted by the board;



(4)  Preferred and common stocks.  Shares of preferred
or common stock of any corporation created or existing under the laws of the United States or of any state or district thereof or of any country;



(5)  Obligations eligible by law for purchase in the
open market by federal reserve banks;



(6)  Obligations issued or guaranteed by the
International Bank for Reconstruction and Development, the Inter-American
Development Bank, the Asian Development Bank, or the African Development Bank;



(7)  Obligations secured by collateral consisting of
any of the securities or stock listed above and worth at the time the
investment is made at least fifteen per cent more than the amount of the
respective obligations;



(8)  Insurance company obligations.  Contracts and
agreements supplemental thereto providing for participation in one or more
accounts of a life insurance company authorized to do business in Hawaii,
including its separate accounts, and whether the investments allocated thereto
are comprised of stocks or other securities or of real or personal property or
interests therein;



(9)  Interests in real property.  Interests in
improved or productive real property in which, in the informed opinion of the
board, it is prudent to invest funds of the system.  For purposes of this
paragraph, "real property" includes any property treated as real
property either by local law or for federal income tax purposes.  Investments
in improved or productive real property may be made directly or through pooled
funds, including common or collective trust funds of banks and trust companies,
group or unit trusts, limited partnerships, limited liability companies,
investment trusts, title-holding corporations recognized under section 501(c)
of the Internal Revenue Code of 1986, as amended, similar entities that would
protect the system's interest, and other pooled funds invested on behalf of the
system by investment managers retained by the system;



(10)  Other securities and futures contracts. 
Securities and futures contracts in which in the informed opinion of the board,
it is prudent to invest funds of the system, including currency, interest rate,
bond, and stock index futures contracts and options on the contracts to hedge
against anticipated changes in currencies, interest rates, and bond and stock
prices that might otherwise have an adverse effect upon the value of the
system's securities portfolios; covered put and call options on securities; and
stock; whether or not the securities, stock, futures contracts, or options on
futures are expressly authorized by or qualify under the foregoing paragraphs,
and notwithstanding any limitation of any of the foregoing paragraphs
(including paragraph (4)); and



(11)  Private placements.  Investments in institutional
blind pool limited partnerships, limited liability companies, or direct
investments that make private debt and equity investments in privately held
companies, including but not limited to investments in Hawaii high technology
businesses or venture capital investments that, in the informed opinion of the
board, are appropriate to invest funds of the system.  In evaluating venture
capital investments, the board shall consider, among other things, the impact
an investment may have on job creation in Hawaii and on the state economy.  The
board shall report annually to the legislature on any Hawaii venture capital
investments it has made; provided that if the board determines it is not
prudent to invest in any Hawaii venture capital investments the board shall
report the rationale for the decision.  The board, by January 1, 2008, shall
develop criteria to determine the amount of funds that may be prudently
invested in Hawaii private placement investments. [L 1925, c 55, pt of §7; RL
1935, pt of §7926; am L 1935, c 156, §1; am L 1939, c 5, pt of §1; am L 1941, c
50, §1 and c 61, §1; RL 1945, §710, subs 2; am L 1947, c 233, §1; am L 1949, c
297, §1; am L Sp 1949, c 27, §1; am L 1951, c 56, §1; am L 1955, c 270, §§1, 2;
RL 1955, §6-75; am L 1959, c 81, §1, c 144, §1, and c 175, §1; am L 1961, c
111, §1; am L 1965, c 222, §11; am L 1967, c 166, §§1, 2; HRS §88-110; am L
1969, c 107, §1, c 110, pt of §1, and c 159, §1; am L 1970, c 89, §§1 to 3; am
L 1974, c 177, §1; am L 1977, c 83, §1; am L 1978, c 11, §2; am L 1981, c 129,
§1; am L 1983, c 105, §1; am L 1986, c 71, §1 and c 77, §2; am L 1987, c 114, §1;
am L 1990, c 34, §8; am L 1991, c 17, §1; am L 1998, c 151, §21; am L 1999, c
168, §1; am L 2000, c 297, §12; am L 2006, c 169, §21; am L 2007, c 260, §2]