INVESTMENT SUBCOMMITTEE
MEETING MINUTES

Date: February 16, 2011 Time: 3:00 p.m.
X Regularly Scheduled __ Special
Attendees: Was a quorum present? Yes
Commission Other Attendees
Charlie Casella Anthony Camp, ING
Steven Greatorex Jeff LaFave
Sandra Fae Brown
Robert Baus
Michael Carey

Comptroller's Office
Thomas Woodruff, Director, HPBSD
Margaret Haering, Assistant Director, HPBSD

Matters Discussed:
Tony Camp of ING said that the diversification of 25% of the Stable Value Fund's assets to two additional managers, PIMCO and Prudential, was accomplished on 11/30/2010. Each of the new managers has 12.5% of the fund's assets to invest pursuant to investment management guidelines that were reviewed by the State's Stable Value consultant, Milliman, Inc. The fund's current crediting rate gross of administrative fees is 3.71 per cent. The committee discussed the potential impact of an increase in interest rates on the fund's market to book ratio and future crediting rates. Tony indicted that crediting rates are due to be recalculated for the 2nd quarter by March 1.

Jeff LaFave discussed the 2 new funds that ING is recommending that we add to the plans' investment line-up. The first is the Vanguard Mid Cap Index fund, which is being proposed to replace the TIAA-CREF Mid Cap Index fund that was merged into another fund in 2010. The committee questioned the need for the fund; Tom Woodruff explained that the plan was to offer passive and active investment options in all of the major asset classes and that due to the loss of the TIAA Mid Cap fund we currently did not have an index fund or midcap blend. The committee voted to add that fund.

The second proposed fund is the American Funds American Mutual Fund, which is a Large Cap value fund. Jeff said that a number of participants had requested the addition of a value fund. The recommended fund has low investment fees and is actively managed. After discussing the issue the committee voted to add that fund as well.

The committee members asked for more information about target date funds and in order to be certain that the family of funds in our plan is performing as anticipated and that we are not overlooking other fund families that might be better. Bob Baus suggested that future comparisons of similar funds be shown in graph form.

Materials Reviewed:
Stable Value presentation from ING
ING fund ratings for all funds in the plans
Fact sheets for the Vanguard Mid Cap Index Fund and the American Mutual Fund.

Decisions voted upon:
The committee decided to add the Vanguard Mid Cap Index Fund and the American Mutual Fund to the investment line-up effective 3/1/2011.

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