Columbus, Georgia

MINUTES OF THE

BOARD OF TRUSTEES MEETING OF THE

COLUMBUS GEORGIA EMPLOYEES' PENSION PLAN



September 10, 2003



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

Plan was held September 10, 2003 at 2:00 P.M. in the Mayor=s Conference Room.





PRESIDING: Mayor Robert Poydasheff, Chairman



PRESENT: Daniel Gray, Kay G. Love, Harvey Milner, Jack Nowell, Mary

Strozier-Weaver



ABSENT: Carmen Cavezza, Morton Harris, Alan Rothschild, Joe Smith,

Captain John Starkey



GUESTS: Henry Swift, Vice President (Salomon Smith Barney), Denise

Baxter, Investment Officer (CCG), Lisa Lane (CCG)







Mayor Robert Poydasheff, Chairman called the meeting to order. Kay Love on

behalf of Julia Rasch, Recording Secretary, gave the attendance. Mayor

Poydasheff stated that he wanted the record to reflect that Kay Love is

leaving, and in his opinion, there will never be a person as knowledgeable,

capable, and as dedicated. Mayor Poydasheff wished her God speed and Ms. Love

stated that it had been an honor to serve in her capacity.



MINUTES OF THE PREVIOUS MEETING:



The motion was made by Mr. Dan Gray and seconded by Mary Strozier-Weaver that

the minutes from the August 6, 2003 meeting be accepted as submitted. The vote

was unanimous.



INVESTMENT UPDATE:



Mr. Henry Swift stated that the report this month is very good and he would be

brief. He handed out information that included charts on the stock and bond

markets a well as the portfolio valuation as of September 9, 2003.



The first chart is the 30 year treasury bond. The yield on the 30 year

Treasury Bond has been dropping for a long time, over the last two years, and

it finally got down below 4% at the end of June. All of the sudden in late

June, prices started down and yields started going up. As you recall, that

hurt us a little bit in the June quarter ending. It will also hurt us a little

bit more in the quarter ending September 30, 2003. What has happened since the

last meeting on August 5? You can see the 30 year Treasury Bond was priced at

a 5.38% and on September 9 it was priced at 5.22%. Basically, the yield on the

Treasury Bond has come down since our last meeting, which means that bond

prices have gone up a little. You will see this in the report that follows

this chart, that in fact the fixed income managers have increased their value

slightly, about 0.75% over this 30 day period.



The S&P index is the next chart which we use as a barometer for the stock

market. As you can see, we have had a powerful move up in prices since the

10th or 11th day of March. It went sideways from end of May until mid

August. Since the middle of August we have had another strong move up in stock

prices and you can see at our last meeting this index was priced at 965 and on

September 9 (last night) it closed at 1023. We have had a nice 5% to 5.5% move

in the stock market over this one month period. You would expect that we would

have some sort of commensurate return from our equity managers over that same

period of time.



The next page is the valuation report. Mr. Swift noted that the fixed income

managers posted a little better return over this period. The combination of

the three fixed income managers were up about 70 basis points. The fixed

income total went from $69.7-m to $70.22-m. This is in keeping with what has

been happening in the bond market and this is encouraging because we have ?the

wind at our backs both in terms of fixed income, for the moment, and in terms

of equities.? Equities is where things have been happening. If you refer to

the growth managers on the first page, you will see that the combined growth

managers went from $24.2-m to 25.4-m or an increase of 5%. That is a huge

one-month move and you will see that is the story throughout all these

managers. That is unsustainable and can?t continue, but it is a very good

showing. The value managers were up about $1.5-m for a total of 4.9%, almost

5% , return for the 30 days. Of the core managers, those that manage for both

growth and value, National Asset Management who will be presenting today,

actually had the best return of any mangers, being up 6.6%. The combination of

the core managers was up 5.9%. Once again these are absolutely wonderful

returns over a very short period of time. The international manager was up

almost 5%, going from $8.2-m to $8.6-m. Where did it all happen in the last 30

days? It happened in equities. The total bottom line is up $5-m. If we could

do that every month, we would be doing very well. The total portfolio

increased 3.2% over the 30 day period, probably just about in line with the

market place. This is just great and for the moment, the most important thing

is that as the stock market has been going up, our money managers have been

participating in that rise and bringing value to the portfolio.



A copy of the evaluation report and the other reports are maintained by the

Board Secretary in the Finance Director=s Office and is available for review

upon request.



PRESENTATION BY INVESCO-NAM



Henry introduced the presenters and stated that 3 years ago we conducted a

search to add a core manager to the current core manager, Trusco Capital. We

did an extensive search to find the manager and at the end of the day we ended

up with 2 finalists to come in and interview to be our core manager. It was

Invesco Capital out of Atlanta and National Asset Management out of Louisville,

Kentucky. We had reached the point where we felt like either one of these

could do an excellent job for us. We hired Invesco, probably due to proximity,

and a year later Invesco and National Asset Management merged. As a result of

that merger, National took over this portion of our account and has been

managing it ever since.



David Chick, Portfolio Manager and George Rue, Product Manager, Invesco made a

report to the Board. George Rue stated that it had been a year since they had

come down to make a report to the Board and since that time the market has

better news for us, and they have better news for us.

The report followed in the format listed below:



INVESCO-NAM



Stable organization in business since 1979

Currently manage $19-billion and there have been no departures from the

investment team since 1995 when someone retired. Resources have been added to

the team, but it is the same basic group of people.

Team approach ? the average investment experience of their professionals is

appr. 18 years. Experience is combined with a disciplined investment

philosophy and process which no individual overrides.





CORE MULTIPLE ATTRIBUTE PHILOSOPHY

Charged with blending both value stocks and growth stocks into the

portfolio

It is done by multiple attribute diversification by buying three different

types of stocks: low P/E, yield, and growth

Results in great diversification in the portfolio and over long time periods

these 3 characteristics have on balance out performed the market

Change the weightings depending on the economic environment to keep the

portfolio in sync with what is going on in the economy

This is done in a risk controlled environment by seeking to add value to the

portfolio but in a low risk way



CORE MULTIPLE ATTRIBUTE PROCESS

The base begins by diversifying the portfolio by the 3 different types of stock

attributes. Move up the pyramid by using a computer to narrow the universe and

then do some financial rankings. The security analysis is where the majority

of the time is spent. It is a common sense approach that is used and the

result of that is a portfolio of 50-70 high quality stocks that make up the

core portfolio. When selling a stock, they focus on the same things as when

buying a stock. If one of those breaks down, they take a serious look at it.

If two or more break down, they sell the stock.



PERFORMANCE OVERVIEW

The portfolio is up 7.4% since June 30 vs. 3.7% for the index. Now bringing

the calendar year-to-date number up to 16.2% vs. 16% for the S&P. The first

part of the good news is that the market is up after a long doldrums of several

years of down markets. Now we have a fairly consistent up moving market so

those numbers are positive for the portfolio. Their performance relative to

the market has also improved. A lot of that has to do with the positioning

that they have in the portfolio. A year ago, the portfolio was positioned to

benefit from an improving economy. It has been improving since then, but the

market did not really reflect that because the improvement in the economy was

so small. It was not as robust as often happens coming out of a recession.

Since then the economic numbers are improving and people are more optimistic

that it will continue to improve and at a higher rate and therefore, the types

of stocks that they have been buying in the portfolio to benefit from that

improvement have really started going up in price more so than the market has.

Financial stocks have performed better. Technology stocks have performed

better. Industrials and materials stocks have also performed better. The

current attribute weightings are: low P/E stocks are 37% of the portfolio and

those generally do benefit from an improving economy. Yield stocks are down to

23%, which generally do better when the economy is sour and growth stocks do

better when the economy is moving along in a regular growth rate. Growth

stocks are up to 39% so the emphasis is really on stocks that will do well when

the economy does well.



CORE MULTIPLE ATTRIBUTE EQUITY PERFORMANCE

They have a long standing record by using the three stock attributes of working

well not only on a consistent basis against the S&P, but in different types of

market conditions. The left hand graph on page 5 shows the market broken up to

times when value stocks have done well and when growth stocks have done well.

It rotates back and forth. Six out these 7 time periods the blue bar (this

model) have done better than the red bar (S&P). The right hand graph depicts

the last fifteen years of when the market has been up or when the market has

been down. The blue bar (this model) has been ahead of the market when the

market has been up and it has not been as far down when the market is down in

all of those cases. While not perfect, it is designed to work in all sorts of

market conditions and this is why it works well as a core portfolio.



EQUITY CHARACTERISTICS

Graph shows the sector weightings in the portfolio vs. those in the S&P 500.

The S&P defining the broad market place is divided into different economic

sectors for different types of stocks. The emphasis here is in the middle in

the more economically sensitive sector: financials, materials, industrials and

information technology. On the top and bottom are the more defensive sectors:

consumer, energies and telecom and they are underweighted here. The

economically sensitive stocks are working now and can run anywhere from six

months to a year to a couple of years. Depending on what the valuation does of

those stocks and how the earnings come through. A year from now we could be

close to where we are now depending on what happens in the overall economy and

to some of these companies if the rate of growth of the economy starts slowing

back down again then we would probably shift to some more growth oriented

stocks away from the industrials and materials stocks.



EQUITY MARKET OUTLOOK

They were underperforming in June as depicted on the chart for the first six

months and one of the reasons was the economically sensitive stocks had not

really kicked in yet. Another reason is that low quality stocks had

outperformed. They on balance are underweighted in low quality stocks. The

return of the S&P is also depicted on the chart and you can see the first six

months of the year at 11.8% and then using S&P Quality Ratings you can see that

the highest rating, A, had the lowest return of 9.4%. It is almost linear as

you move down through the lower quality. Our portfolio was over weighted in

the higher quality by 11%. The chart on the right shows where high quality

stocks vs. the S&P. We are getting to a point where high quality stocks are

fairly inexpensive. This is going in our favor. They measure high quality as

A rated stocks relative to the S&P.

The next chart attempts to answer the question ?Is what we have experienced

since the lows in March just a rally within an overall bear market or the start

of something better?? The down trend has been defined by a channel and we have

broken out of the channel and that is encouraging. There has been a change in

trend and the trend going forward will probably be up. Another fundamental

that they look at is what has happened to the stock market after two

consecutive down years in the market. The chart on the right depicts this.

What happens to the stock market in a major military engagement and what

happens after that. Finally, after a cut in the capital gains rates. All

three of which we have had. You can see that no matter what time period you

use, those events tend to precede a better market and that gives us further

encouragement. Another thing that has been in the headlines lately that causes

investors to become concerned is deflation. The next page shows back from 1926

and broken the inflation rate down into three categories: the center category

is the most stable which is modest deflation minus 1% to modest inflation 3%

and we are in that zone now and have been for a number of years. Generally,

that is good for common stocks. Common stocks have averaged almost 12% a year

during those inflation environments. Whereas, if you raise inflation above 3%

that generally has been bad for stocks and you can see the returns a little

over 1%. What has happened less in modern history, is deflation (falling

prices at a greater than 1% rate). That is also bad for stocks. Right now

inflation is a favorable backdrop for equity returns.



APPENDIX

List of the stocks ordered by attribute as well as new stocks that went into

the portfolio or positions that were closed.





Mr. Chick and Mr. Rue were thanked for the presentation and with no further

questions, they were dismissed from the meeting.



OLD BUSINESS:



Investment Policy Statement Update was discussed and approved ? copies were

distributed to those who did not have theirs with them. Motion was made by Dan

Gray and seconded by Jack Nowell to adopt the changes to the Investment Policy

Statement to reflect changes in the state law.



Mayor Poydasheff requested that copies of the updated Investment Policy

Statement be distributed to the Columbus Council. Mayor Poydasheff requested

that in December, a year-end portfolio valuation report be given by Mr. Swift

to Columbus Council.



NEW BUSINESS:



None



Henry Swift expressed appreciation to Kay Love for her years of service,

thanked her for working well with him and his staff, and closed by wishing her

well.



With no further business for discussion, the motion was made that the meeting

be adjourned.



The next meeting is scheduled for October 1, 2003 at 2:00 p.m. in the Mayor=s

Conference Room. The guest speaker will be from Victory Asset Management

(Value).











_____________________________

Kay Love for Julia A. Rasch

Recording Secretary