The meeting was called to order at - Delaware



Delaware College Investment Plan

Delaware Higher Education Commission Conference Room

Board of Trustees Meeting

October 21, 2010

Trustees Attending: Others Present:

José Echeverri, Chair Peter Mahoney, Fidelity Investments

Santosh Viswanathan Maureen Laffey, DHEC Director

Glenn Barlow Joe Ciccariello, Fidelity Investments

David Gregor for Tom Cook Andrew Dierdorf, Fidelity Investments

Elio Battista, Deputy Attorney General

José Echeverri called the meeting to order at 10:05 a.m.

Minutes from the board meeting held on May 12, 2010 were reviewed and unanimously approved.

Maureen Laffey discussed adjustments to the agenda.

Peter Mahoney reviewed the DCIP marketing plan, and noted that the results were solid in every aspect of the plan.

Strategy 2010 – Mr. Mahoney noted some statistics of account owners and age of beneficiaries. The goal is to drive a higher click thru rate and open more accounts. The Delaware College Investment Plan (DCIP) is looking to maintain 100% share of voice in online search and has been very successful in the past with that effort.

On page 3 – Online display – The key metrics are:

PCPA - Promo cost per account

PCPC - Cost per click

PCCR – Account conversion rate

Overall, the first half of 2010 proved to be both efficient and effective. Costs were lower for each click but overall volume of clicks was higher. Mr. Mahoney also stated there were adjustments to be made. The number of new accounts generated, and directly attributed to online display were up 400% from last year. Mr. Echeverri asked what the difference was between an impression and a click. Peter responded that an impression is passively viewing an online ad while a click demonstrates that the prospect has actively engaged with the display ad and essentially “asked for more information”. The viewing of ads results in greater brand awareness. The sites to focus on are:

Yahoo – This is the primary site for details of the 529 plan.

Bing – Relatively new, too early for results

Saving for strong click through rate but new account results are low.

Nick Jr. – Sticking with it – solid results

No more advertising on Disney since there are more kids than adults who look at this site. There is constant monitoring by Fidelity to determine who is viewing the sites to ensure that not just parents, but, parents are viewing the sites with their children.

All ads are geographically targeted. Mr. Battista stated he is amazed this can be done. Mr. Viswanathan asked who is paying for this and Mr. Mahoney stated they are covered in the Fidelity marketing budget.

National exposure came out in Money Magazine for DCIP. They noted three 529 plans with ultra low fees and DCIP was one of them.

Mr. Mahoney discussed the terms of the second half marketing strategy – where, what ad size, where on the web page the ads will appear. The budget is split between Nick Jr., and Yahoo. We will spend what’s necessary to maintain 100% share of voice with online search and Fidelity will be constantly monitoring. Ms. Laffey asked if this marketing was for Fidelity in general, which Mr. Mahoney responded it is just for Delaware for a half year.

Mr. Viswanathan spoke of the Children’s Museum, DCM information. The goal is to try increasing attendance for the museum. On page 4, mid page, parents are trying to build a brand recognition. Membership was at 180% of target as of September 2010. Money spent there will yield excellent dividends. Ms. Laffey stated the first payment of the sponsorship was made. There is a DCIP wheel logo in the art room that identifies DCIP as the sponsor of that room. Mr. Viswanathan stated an aggressive attitude towards funding is needed.

Ms. Laffey said that the UD soccer attendance was up and the soccer ball giveaways that were tossed into the audience by the players were a hit. She also stated:

University of Delaware – sponsorship includes name recognition at the Fan Zone at football games for two hours before the game, and a “Welcome Kit” for new members of the Future Blue Hens Club.

Delaware Sports Commission Packet – Maureen met with the DSC Executive Director and the Director of Tourism for Delaware. Maureen told them they DCIP may be able to support a sponsorship of about $10,000 if the board would agree with that amount. She asked them how much they planned on asking the DCIP board to approve, and they replied $100,000.00. Maureen explained that due to the fact that the board just approved a large sponsorship for the Delaware Children’s Museum, she didn’t think it was the appropriate time to ask for such a large amount.

Peter Mahoney and Ms. Laffey spoke of the kids who would participate in the events held by the DSC, and they would not necessarily about Delaware kids. Most parents at these events have talented kids, and many of the parents believe their kids will get sports scholarships for college. Mr. Echeverri added that events are held throughout the State.

Mr. Battista stated Linda Parkowski was approached (DE Tourism Director) and they are looking for dollars to support the DSC. The Commission is located in the Delaware Economic Development Office because their goal is to promote sports, fill hotel rooms, etc., so visitor dollars are put into our economy. They want to hold high end tournaments, and expect college scouts there. Ms. Laffey stated they have 31 board members. Mr. Echeverri commented more homework needs to be done. He would like to see the numbers and have more information so we have a better idea of dollars to give them as a sponsor. Mr. Ciccariello said that in Massachusetts soccer is robust. Mr. Battista commented that DCIP might want to consider awareness with other soccer clubs throughout the state. Mr. Echeverri stated the participant ages go from Kinder Kickers on up. He suggested checking into Hispanic and CDSA – Kent County, Kirkwood Soccer Club, and Hockessin Soccer Club.

Ms. Laffey said she spoke with the marketing individual at Delaware State University, however, a proposal was never submitted by him. She will follow up with him regarding sponsorship opportunities.

Andrew Dierdorf discussed the investment performance for the portfolios. – As of September 30, 2010, financial markets produced positive returns over the 1 year period. For example, the U.S. equity market provided a return of over 11% during this 1 year period, as measured by the Dow Jones U.S. Total Stock Market Index. All five of the major asset classes in which the 529 portfolios invest produced positive returns during this period.

On page 3, Mr. Dierdorf discussed the results by asset class, as well as the philosophy for constructing the age-based portfolios. In general, the age-based portfolios are designed to reduce risk as the target date or college date approaches, by reducing the allocation to equities and increasing the allocation to fixed income and short term investments.

On page 4, Mr. Dierdorf summarized the performance for the active portfolios. Over the 1-year period ending September 30, 2010, the portfolios that have a longer time horizon until target date, which includes higher allocations to equities, produced positive returns, but, underperformed their benchmarks. By comparison, the portfolios with a shorter time horizon until target date produced lower positive absolute returns, while out-performing their benchmarks.

On page 5, Mr. Dierdorf summarized the performance for the index portfolios. These portfolios invest in underlying index funds, and are expected to produce performance that is similar to the benchmark over long-term periods. Returns for these portfolios have also been positive over the 1-year period ending September 30, 2010, and are close to benchmark returns as expected.

Mr. Echeverri asked if there was any one particular fund that was driving the relative performance for active portfolios. Mr. Dierdorf responded that on pages 13, 14, 15, and 16, the underlying funds and their performance are shown. Funds that have produced outperformance relative to benchmarks are shown in green, while funds that have underperformed their benchmarks are shown in red, over various time periods. Mr. Dierdorf explained that in general, he expects that there will be times when certain funds outperform while others underperform, as the portfolio is designed to be diversified across a variety of strategies and areas of the market.

Mr. Mahoney discussed the overall business results and stated that new accounts are up by 10%, gross sales are up by 15%, and the net sales are down by 10%, and the plan is doing what it’s supposed to do. He says that it is logical that people will take money out for college.

On page 3, accounts and assets, Mr. Mahoney said the year over year results September 09-10 were up slightly. There was a significant move upward in December 2009 in both accounts and assets and that that is a result of the press reports surrounding the fee cuts that we announced at that time. There is consistent progress on a monthly basis. The money market yields are still low, 5 basis points, waiving 15 of the 20 basis point program management fee in order to provide a positive yield.

Mr. Mahoney said that in March 2010, an e-mail was sent out to all individuals informing the investors to review their accounts and portfolios. Last week there was a follow up with households that either deposited for the first time into a money market portfolio or increased amounts to those portfolios. The goal of the communication was to make customers aware of the lower return available in the money market portfolio and ensure that participants knew of other conservative products that are available via the DCIP.

On page 6 Mr. Mahoney reviewed the DE College Savings Indicator research survey results released in September. He stated that Delaware did better than the overall in national results. Delaware families were on track to cover 15% of college costs in 2010 and 12% in 2009. 21% of households experienced job losses in the prior 12 months and that clearly impacted the results. Mr. Ciccariello says that more parents are saving in Delaware. Mr. Mahoney said that overall, more individuals are aware of 529 plans than ever before. The beneficiary age of accounts has gone down and the DCIP marketing efforts are targeting younger children. Parents are being extremely responsive to the message of saving early and consistently.

On page 8, Mr. Mahoney said that Fidelity has adjusted their College Savings Indicator Survey process in order to capture more press over the course of the year. In 2010, for the first time we launched both high school senior survey as well as the traditional household survey that is in its 4th year. This enhancement has captured more press. Outreach to local press organizations is vigorous but it is difficult to get them to cover the story. However, the national media stories flow to Delaware residents through the associated press and national publications available in DE.

Ms. Laffey discussed the weekly report that she and Mr. Echeverri receive from Peter, and asked if anyone else is interested in receiving the report. Mr. Viswanathan expressed interest in receiving it, so Peter will include him on the weekly distribution list.

Mr. Echeverri asked where dollars are best spent, soccer leagues, getting the word out to elementary school principals, guidance counselors (very important). Mr. Battista says a banner can be placed on school district websites and on the individual school websites. Mr. Echeverri also suggested that a luncheon can be planned for the guidance counselors at the district level. How can we educate parents and grandparents, K-5 students, and sports representation. Mr. Battista stated that we can also add packets to the state employees as they retire, as they are a captive audience. Check with Kim Vincent at the pension office. What’s the process? Ms. Laffey will check into this.

Mr. Dierdorf then spoke of the equity markets. Referenced politics, Jan 1 – sunset divisions on the tax codes. If the economy gets worse, the feds step in. If the economy is good, we stay on our own. The asset price will be stable, however, the mortgage rates will be low. It all depends on the market and we’ll see what happens within the next 6-12 months. Mr. Echeverri said he’s an external optimist in that he asks of the market is going up because are stepping in? We can make the market go up by 15% through ramped up technology and longer asset allocation (key). We will also continue to educate.

Ms. Laffey stated we are authorized to add a board member following the sunset committee review and revised legislation, and asked for suggestions from the board members.

Mr. Mahoney said that they will need to encumber the $10,000 for the Delaware Children’s Museum by December, 2010. Mr. Mahoney said he and Jen Trainor can introduce DCIP to the museum staff who they will be working with for the event. Mr. Mahoney noted that the $10,000 for the event is in addition to the $250,000.00 sponsorship. These funds will be used to work with the museum, and they will advertise the event on twitter, and on Facebook. It will also cover some of the costs of admissions. Mr. Viswanathan asked if Fidelity would be available to educate on that day and the response was “sure”. As long as dollars are spent.

The meeting was adjourned at 11:50 am.

Respectfully submitted,

Karin Gotcher

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