Columbus, Georgia

AGENDA

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COLUMBUS, GEORGIA EMPLOYEES? PENSION PLAN

MAYOR?S CONFERENCE ROOM

SIXTH FLOOR, GOVERNMENT CENTER TOWER



February 5, 2003 AT 2:00 P.M.





1. Call to order





2. Roll Call





3. Approval of January 8, 2003 minutes





4. Investment Update (Salomon Smith Barney)





5. Presentation By Scudder (Value Manager)





6. Old Business



a. Actuarial Assumptions ? Sub-Committee Report





7. New Business



a. None





8. Adjourn - the next scheduled meeting will be on April 2, 2003.

William M. Mercer (Actuaries) will be here to make their annual presentation.















MINUTES

BOARD OF TRUSTEES

EMPLOYEES' PENSION PLAN

January 8, 2003





A meeting of the Board of Trustees for the Columbus Georgia Employees= Pension

Plan was held January 8, 2003 at 2:00 P.M. in the Finance Conference Room.



PRESIDING: Dan Gray, Vice Chairperson



PRESENT: Kay Love, Morton Harris, Jack Nowell, Alan Rothschild, Jr., and Capt.

John Starkey



ABSENT: Mayor Bob Poydasheff, Carmen Cavezza, Mary Strozier-Weaver, Saundra

Hunter, and Michael Majure



GUESTS: Henry Swift (Robinson-Humphrey), Denise Baxter, Investment Manager and

Angela Cole, Ass?t Finance Director







Dan Gray, Vice-Chairperson, called the meeting to order. Kay Love,

Secretary/Treasurer, gave the attendance.





MINUTES OF THE PREVIOUS MEETING:



The motion was made by Alan Rothschild and seconded by Jack Nowell that the

minutes from the November 6, 2002 meeting be accepted as submitted. The vote

was unanimous.





INVESTMENT UPDATE:



Mr. Swift opened the investment update by stating that his report would cover

most of the past year and what has happened since the first part of December.

He then began with the chart on the 30 year bond indicating that going back to

March 20th the treasury bond in terms if its? yield has dropped from 5.80 to

4.64 the middle of September. This drop helps to explain why the fixed income

managers had such a great year in 2002. In December the treasury bonds did not

change much; beginning at 5.04 at the start of December and now standing at

4.96 which reflects a little bit of an increase in the fixed income managers

for this 30 day period.



The next chart is the S&P 500 and gives a graphic picture of what happened in

the stock market in the year 2002. Beginning in March 2002 the S&P topped out

at about 1164 and then dropped down to 803 in October, reflecting a 31% top to

bottom decrease over that period of time. There was a rebound in the market

beginning the middle of October and lasted through to about the last two or

three weeks in December when the market slid off again. From the first of

December, the S&P 500 went from 934 down to 922 as of January 7, 2003, which is

not much change within that time period but does reflect a fall from the

increase beginning in the middle of October.



The chart for the NASDAQ is even worse. This shows that from early March 2002

the NASDAQ which had topped at 1929 dropped down to 1114 in October 2002. This

represented just for the year a top to bottom decrease of 42%. A part of that

is that it helps to explain why some of the growth managers did worse during

the year than some of the value managers. For the period since December, not

really much change, the NASDAQ dropped from 1484 down to 1431.



The next report is the valuation summary, which covers the period 12/02/02 to

01/07/03.



The bond portfolio is up about 30 basis points going from $74.8 million to

$75.1 million. The growth managers were down 1.8% combined. The value

managers were down less than 50 basis points during the same period of time.

Core managers down about the same as the growth managers, 1.7%. Lazard, the

international manager was up 9 basis points, therefore, they faired the best of

any of the equity managers during this 30 day period. The total equities were

down about 1.1% and the total city account was down just slightly at minus 40

basis points to $148.9 million dollars.



At the February meeting there will be a complete report along with the

performance valuation which will cover the fourth calendar quarter and the

second quarter of the fiscal year.



A copy of the evaluation report is maintained by the Board Secretary in the

Finance Director=s Office and is available for review upon request.



There was a very brief discussion where Mr. Swift explained to Mr. Gray that

the fund, at one time, had been as high as $175 million and that the fund has

taken a real hit from the stock market. He stated that the board should also

remember that the withdrawals over the last three to four years totals right at

$6 to $8 million, which has added to the reduction in the fund total balance.

At this time Capt. Starkey stated that several people had indicated to him that

when they had attended the benefits presentation by William Mercer, that the

statement had been made that the pension fund had lost $41 million dollars and

that they were very concerned about it.



This was followed by Mr. Swift?s response to the question of what Salomon Smith

Barney thinks will happen if there is another double dip in the market. The

company thinks that this next year will not be a great year, but it clearly

will not be as bad as 2001 or 2002. If the market is down this year it will be

the first time since the depression that it?s been down four years in a row.

The chances are good that the market will have a decent year where it will be

up 8% to 10%. The problem is, that if the bond interest rates start back up,

it could wipe all that out in the losses received in the bond portfolio if the

managers are too long. Remember in the last quarter Synovus and Madison were

down versus the index because they had both started shortening their maturities

in anticipation that rates were going up. So far the rates really haven?t gone

up, but rather, they have sort of stabilized. The hope of Salomon Smith Barney

is that the market does well for a year, maybe a 7% return on equities.



PRESENTATION:



Mr. Vincent P. McNichol, V.P. for Rittenhouse (Growth) with the following

outline, presented today?s report:



? Statement Of Purpose

? the primary goal is to increase and protect the portfolio value over time by

focusing on a time-tested philosophy of concentrating on high-quality,

large-capitalization growth stocks.



? Investment Gains

? Performance Report



? Equity Analysis

? Equities By Sector

? Portfolio Characteristics

? Summary Of Companies

? Sector Performance

? Top Performers

? explaining the ?Unexplainable?

How can we explain the recent poor performance of large-cap growth

stocks?

- Economic recession began in March 2001

- Lack of earnings growth

- Valuation peaked in 2000

- Negative market sentiment

--Terrorism

--Corporate Governance



? Portfolio Review

? Asset Allocation

? Portfolio Holdings



Mr. McNichol closed stating that they expect to see the economy growing

moderately in the early part of the year. Picking up gradually and a little

stronger in the last couple of quarters of the year. Although there have been

some signs of a slow movement upward with inflation, if the interest rates

level that inflation should not become a real problem.







OLD BUSINESS:



Actuarial Assumptions - Ms. Love stated that the sub-committee has met a couple

of times; most recently was the first of the week to discuss what the actuarial

assumptions for the upcoming valuation. Eric Freden has provided some

preliminary numbers and after the sub-committee met and discussed the

information that Mercer submitted the basic conclusion is that the assumption

needs to be changed.



Basically what their analysis showed is:

The assumption percentages for how the pay plan, or the raises, given

the employees is too high;

The turnover is higher, experience wise, than is the actuarial

assumption, so they felt that needed to be updated as well as using the latest

life expectancy tables that were put out which is 1994;



The life expectancy table would wind up costing more money because

people are living longer and therefore increasing the amount of the

contribution that is needed to fund the plan whereby decreasing the percentage

for how the pay plan is maintained as well as increasing the turnover

assumption percentage will cause less of a contribution. They pretty much

offset each other within about $100,000 based on the report Mercer is working

on now, moving from 8% to 7.5%, but these are preliminary numbers.



There are two questions regarding the reduction of the interest rate

assumption: One, how much is it going to cost the city to decrease that

interest rate and what is a normal range, what is considered to be normal or

appropriate. Also how many of their clients actually have moved that interest

rate down, at this point only one client has actually made the jump to move the

interest rate down, there are sixteen of which we are one who are analyzing it

at this point.



Following several minutes of discussion around the board, the motion was made

by Mr. Harris that a recommendation be submitted to Council that the assumption

rate of 8.0% be reduced to 7.5% in the FY?04 budget; the vote was unanimous.

It was also recommended by Mr. Harris that the board be represented at the May

budget meeting of Council to present this recommendation and/or to answer any

questions that Council may have regarding these changes.



Asset Allocation ? Ms. Love stated that the next issue up for discussion was

the allocation of the assets. A handout from Mr. Swift was passed out to the

attendees regarding the withdrawals that the City needs to make to pay benefits

as well as moving that allocation up towards 55%. In order to bring the equity

managers back in line with the Investment Policy Statement the board needs to

move approximately 7.9 million dollars from fixed to equity.



In addition, the Finance Department is going to require $1.7 million between

now and June 30, 2003 to pay retiree benefits. Consequently, as the above

changes are made, the withdrawal of the funds required by the Finance

Department will also be necessary. The recommendation by Mr. Swift is as

follows:



The shift from fixed income to equity take place over the next four months

beginning in January and that each shift would take place on or about the 15th

of each month. In the months of January, February and March $500,000 split

equally among all managers would be moved to the Finance Department. Then in

April the balance of $200,000 would be moved to complete the $1,700,000 needed

by the Finance Department to pay benefits. Each month 25% of the total needed

to bring the equity up to 55% would then be moved from the fixed income

managers to the equity managers. This amount would vary depending on the

market value at the time of the transactions.



Mr. Harris made the motion to accept the proposal as described by Mr. Swift for

readjustment to 55/45% equity/fixed income. Mr. Gray seconded the motion. The

vote was unanimous





NEW BUSINESS: None



Mr. Harris asked Ms. Love if she would give just a two-minute summary of status

of the actuary?s proposals regarding possible substitute benefits plans.



Ms. Love stated that Mercer has been asked to run the actuarial numbers just as

they normally do with the report and incorporated into those numbers all the

options that were presented back at the meetings where many of the employees

attended. That would be moving from a 2% accrual to 1.5%, 30 years and out

plan, increasing the deferred compensation to include a match and doing

financial models on all of this based on the actual demographics of the

population, and that is in the works.



With no further business for discussion, the meeting was adjourned. The next

meeting will be February 5, 2003 at 2:00 p.m. and will be held in the Mayor=s

Conference Room.







_______________________

Julia A. Rasch,

Recording Secretary