Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committee on Labor, to which was referred S.B. No. 2983 entitled:

begs leave to report as follows:

The purpose of this measure is to enable the Employees' Retirement System to invest in Economically Targeted Investments (ETI's) and to require that a certain percentage of its investment portfolio be dedicated to this purpose.

Testimony in support of the measure was received from the High Technology Development Corporation and four private citizens. The Employees' Retirement System was unable to comment on the measure and stated that it was researching the issue.

The measure also requires the Employees' Retirement System's Board of Trustees to execute all shareholder proxies and voting instructions in a manner that supports corporate governance, social justice, and environmental protection issues unless such a vote would result in the long term harm of the company.

Your Committee finds that ETI's are investments that are selected for economic benefits to a specific region in addition to its investment return value.

Your Committee also finds that the measure encourages investments in intellectual property, which in turn will support the State's efforts to diversify Hawaii's economy. By building a technology-based economy and improving opportunities in research and development, the State's economy will be in a better position to implement the commercialization of the intellectual property through licensing or other means, resulting in wealth creation and increased job opportunities.

Your Committee believes that having the Employees' Retirement System's Board of Trustees execute all shareholder proxies and voting instructions in a reasonably socially conscious manner is prudent and will ensure that the Board will be more aware of the governing of its assets.

As affirmed by the record of votes of the members of your Committee on Labor that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2983 and recommends that it pass Second Reading and be referred to the Committee on Ways and Means.