INVESTMENT SUBCOMMITTEE MEETING MINUTES

Date: June 2, 2009 Time: 10:30 a.m.

Regularly Scheduled _X_ Special

Attendees: Was a quorum present? Yes

Commission Other Attendees
Peter Blum Tony Camp (ING) by telephone
Charlie Casella Kevin Brown (ING)
Mary Marcial Kay Carey-Reid (ING)
Sandra Fae Brown-Brewton Bud Hancock (ING) by telephone

Comptroller's Office
Mark Ojakian
Thomas Woodruff
Margaret Haering
Scott Anderson

Matters Discussed:

Tony Camp and Bud Hancock explained ING's proposal on investing the $306 million in general account assets that will be deposited into the Stable Value Fund on July 6, 2009. ING recommends that most of the new money be invested in a separate account so that 25% of the overall portfolio is based on the Barclays Intermediate Aggregate Index.

The 25% portion would be used to provide liquidity to the fund and could be used for all distributions/withdrawals expected because of the RIP and for all incoming contributions. We will be able to reallocate the amount assigned between the two strategies if the distribution/withdrawal requests are less than anticipated or the amount of new cash flows causes the balance to shift beyond the desired 75/25%.

The Intermediate Agg portfolio will produce a slightly lower return because it will have a lower duration and more conservative investments. Asset quality will be slightly higher than the existing Core+ strategy, which is based on the Barclays Aggregate Index. The intent is to provide some protection against loss of market value.

The main difference between the two indices, is that the Intermediate Agg index is based on securities with maturities of 10 years or less. It also does not include investments in emerging market, high yield or non-US securities, which are allowed in Core +. No securities less than BBB- can be included. Its average credit quality is AA to AAA; the Core + has average credit quality of AA.

The current market/book ratio of the Stable Value fund is 95.3% as of the end of May 2009. This is an improvement. Bud Hancock noted that the market/book ratio is a good measure of the strength of the fund. ING believes that interest rates will stay low for the near-term. If inflation increases the market value of securities in the portfolio can be expected to decline.

ING presented two scenarios for the crediting rate for the Stable Value fund for the next year, using the formula set forth in the Stabilizer contract. If we stay with the Core+ strategy for all fund assets, the recommended rate will be 3.6% as of July 1, 2009. If we apply the Intermediate Agg strategy for the roughly $300 million coming over on July 6, 2009, the crediting rate will be 3.4%.

In the Core + strategy, ING is continuing to prune non-agency MBS from the portfolio, which have had a negative effect on performance. Bud Hancock indicated that there were no GM securities in the portfolio. According to Hancock, the prices of corporate securities have held up decently in the past several months.

The investment subcommittee will reconvene on June 9, 2009 at 1:30 to discuss ING's recommendation with all members. The subcommittee will then make a recommendation to be forwarded to the full Commission on June 18, 2000.

Materials Reviewed:

Internal investment review
Stable Value Proposal Update
Stable Value Portfolio Review

Decisions voted upon: N/A

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