Columbus, Georgia

MINUTES OF THE

BOARD OF TRUSTEES MEETING OF THE

COLUMBUS GEORGIA EMPLOYEES' PENSION PLAN



May 5, 2004





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

Plan was held May 5, 2004 at 2:00 P.M. in the Mayor?s Conference Room.





PRESIDING: Mayor Robert Poydasheff, Chairman



PRESENT: Angela Cole, Dan Gray, Alan Rothschild, Jr., Harvey Milner, and Joe

Smith



ABSENT: Carmen Cavezza, Morton Harris, Jack Nowell, Mary Strozier-Weaver and

Capt John Starkey



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

(Salomon Smith Barney), Rick Ford (Columbus Water Works)









Mayor Bob Poydasheff, called the meeting to order. Julia Rasch, Recording

Secretary, gave the attendance.



MINUTES OF THE PREVIOUS MEETING:



The motion to accept the minutes from the April 14, 2004 meeting was made by

Mayor Poydasheff . Mr. Gray seconded the motion. The vote to accept was

unanimous.



INVESTMENT UPDATE:



Mr. Henry Swift opened the investment update by confirming that the board

members had received the official performance evaluation for the period ending

March 31, 2004. He continued by stating that Synovus was still under

performing and that they should continue to be on the watch list. He feels that

Synovus is where they are because they went short a lot earlier than the other

managers and in addition to that, going back and looking at their history, they

held an enormous amount of cash instead of investing it. If they had put that

cash to work earlier, then their numbers from inception would look a lot better

but they held the cash too long and it hurt them.



Secondly, Mr. Swift is very concerned about Eagle Asset Management. For the

past twelve months ending in March 2004, Eagle had a return of 23%, which is

good but the index was up 32%. Going back to inception, 11/5/02, they were up

10.7% versus almost 17% for the index. Therefore, he recommended to the Mayor

that a sub-committee be appointed to look at Eagle. A meeting should be

arranged to have them come in and explain why they?re behind so much and let

them know that they are on notice. They will have had the funds for three

years in November of this year, which is the minimum amount of time before

evaluating a manager.



The Mayor appointed Joe Smith, Morton Harris, Alan Rothschild, Dan Gray and

Harvey Milner as the committee to take a look at Synovus and Eagle.



On the brighter side of things, there were a number of really good performances

for the year. Scudder had a very good performance, they were up 43% for the

year and Lazard was up almost 46% for the year.



Lazard has requested by letter that they would like to move the large cap

portion of the mutual fund that they have from a mutual fund status to a

managed status, where they?re actually managing the money the same as the other

managers. In the beginning Lazard couldn?t do that because they only had 7

million dollars and now it?s up to almost 11 million. Mr. Swift would like to

schedule a meeting with the committee and Lazard the day before the June

meeting to discuss with them the pros and cons of meeting their request.



Another issue that Mr. Swift wants this committee to study is the policy that

states that the sector allocation will be 25% maximum or the maximum set to

allocation that exists in the benchmark for that particular manager. An

example of that would be, suppose that in the technology sector, the Russell

1000 growth index has 30% in technology and our policy says 25% or the higher,

which is 30%, they can go to 30%. There are some managers that don?t like

that, they want to be able to go to 35% but are handicapped because of the

policy. He wants to discuss it with the committee, validate the policy and

then discuss it with some managers to ensure that the board is not putting on

blinders in terms of allowing managers to go to a higher percentage.



Overall the market was up slightly, less than 2% for the S&P. The Bond Index

was also up slightly, the bonds have turned since the end of the quarter and

have been going in the wrong direction since then. With that Mr. Swift

concluded the performance evaluation.



There was a brief discussion regarding the status of the economy and Mr. Swift

pointed out that the

economy is doing very well but the market is not.



Mr. Henry Swift presented to the board members a detailed summary of the

quarterly report as of 03/31/04. This summary recapped the entire performance

for the end of the last quarter. A copy of the report summary is attached.



Following the quarterly report, Mr. Richard Swift summarized the portfolio

valuation report as of 05/04/04. A copy of this report is also attached.



Using the charts presented to the board members he stated that this covers the

period from 4/13/04 ? 05/04/04. The first one is the S&P 500, which was at

1129 04/13/04 and closed at 1119 on 05/04/04. So slightly down in the stock

market. The second chart was the 30-year Treasury bond yield, which went from

5.14% to 5.33%, a pretty good spike in rates for the last 60 days and again in

the short period that was covered in this report.



Following was a summary of the managers and their performances during this

period. The combined fixed income account went from 71, 511,000 million to

71,094,000 million (-0.58%).

Next were the equity managers, Eagle and Rittenhouse; the combined growth went

from 27 million to 26,444 million, (-2.06%). And, as is obvious, just in this

short period of time Eagle continues to struggle, (-4.0%).



The Value managers, Scudder and Victory, the combined value went from 35,641

million to 35,627 million, basically flat for the period.



Mr. Henry Swift pointed out that one of the reasons that the fund is doing so

well because Scudder has been doing so well. Up 44% last year, but the

important point there is that they?ve got a good portion of the money, 22.5

million of the money is with Scudder and they?ve been doing very, very, well

for the fund.



Then the Core Managers, Trusco and National went from 24 million down to 23.5

million, (-2.19%).



Mr. Swift asked to make a comment on Trusco. He stated that they were down for

the year and that the gentleman here to do the presentation is going to address

that issue, and to ask any questions the board may have about it. They are not

down for the year, but down compared to the index for the year, which is kind

of unusual for them.



On the last page, the International Manager, Lazard, they went from 10,162

million to 10,091 million (-70%).



Giving a combined equity of being down -1.20% and that mixed with the fixed

being down -.58%, the total city account was down -.94%.



The asset allocation is exactly where it should be and does not need any

adjustment at this time; the equity balance is at 65% and the fixed income

balance is at 45%.



A copy of the evaluation reports and the other information presented to the

board is retained by the Board Secretary in the Finance Director=s Office and

is available for review upon request.



PRESENTATION:



Mr. Swift introduced Mr. Jim Foster, of Trusco to present their annual report.

Mr. Swift informed that board Jim Dillon was the representative of Trusco who

always came in to make the report for Trusco retired in February was replace by

Mr. Crisman Boggan. Unfortunately Mr. Boggan?s father-in-law passed away and

he is attending the funeral and was unable to attend today?s board meeting.



The report followed the Agenda listed below:



Market Snapshot/Economic Overview



Investment Overview



n The S&P 500 rose 1.7% on a total return basis in the first quarter

following a 12.2% increase in the fourth quarter 2003.

n The economy continued along an expansionary path during the quarter,

but the lack of significant job growth in the early months dampened investor

optimism and helped keep monetary policy neutral.

n The sluggish pace of job growth and steady Fed policy helped Treasury

yields fall to the lowest levels since July ?03 and caused the yield curve to

flatten, prompting an increase in mortgage refinance activity.

n Cyclically sensitive stocks tended to lag in the first quarter after

a strong performance in 2003.

n Near-tem risks to major economic drivers are down substantially in

2004, particularly given the recent improvement in job growth.

n We continue to recommend an overweight position in stocks.



Economic Summary



n The economy is in a ?sweet spot? but there is nervousness about

future strength. Orders are up, profits are higher, jobs are increasing albeit

slowly, inflation is low, and policies remain friendly



Performance & Portfolio Composition



Performance Comparisons



Portfolio Composition



Portfolio Characteristics & Holdings



Core Equity Portfolio Characteristics



Core Equity Portfolio Holdings



Mr. Foster was thanked for his presentation and with no further questions, was

dismissed from the meeting.



Mr. Rothschild addressed the board at this time to express his deep concern

over the actuarial report that had been presented by William M. Mercer at the

April 14, 2004 meeting. He expressed to the board that according to the

charter the board is responsible for two things; to monitor the investments as

well as to make recommendations to the City Council regarding actuarial

assumptions. He then summarized to the board some of the disturbing

information he found in the report last month and stated that he was

dissatisfied with some of the answers given by Mercer.



1. He feels that the assumed rate of return of 7.5% is too high and

that the board needs to make a recommendation to City Council to lower it to

possibly 6.5%. The annual return through the last four years was 2.38%. Even

with the returns being better this year, somewhere in the range of the high 8%,

the problem is that with the three year smoothing to get the average the

current year plus the two prior years have to be added together to the average

plug into the actuarial reports.





2. The minimum contribution is another troubling issue. The city has to

continuously add funds to the minimum contributions when the assumed rate of

return is not met for the current year.



3. Another part of the report that really concerns him is on page 18 of the

report. They provided a chart that shows that 65% of the people who invest the

way the city does, 55% equities, only achieve a 7.36% rate of return. If the

fund were right in the middle, 55% in equities, then the expected rate of

return would be 6.41%.



4. On page 12 of the report, are the funding ratios and what the representative

from Mercer said was that if the funded ratios get into the 70?s or 80?s, the

city is in trouble. The funding ratio was 82% and estimated down from 104% the

prior year, with the realities of these returns and with the Mercer

representative telling us that he?s comfortable using 7.5%, he has about whose

interest Mercer is trying to serve. He is comfortable with the investments,

but not with getting a higher equity mix or riskier bonds to try to increase

the yield. His recommendation would be that the city considers changing this to

6.5%, to immediately recognize how serious the issues are here and to try to

avoid a disastrous situation in the future.



The Mayor, at this time, suggested that Mercer be called back for the meeting

in June via a conference call and that Lazard and Synovus be scheduled for a

meeting on July 7, 2004

.

It was suggested by Henry Swift that Mr. Rothschild summarize his concerns in a

question format so that Mercer could review them before the meeting. Mr.

Rothschild agreed to prepare a list of questions.





OLD BUSINESS:



None





NEW BUSINESS:



None





With no further business for discussion, the motion was tendered for

adjournment.



The next meeting is scheduled for June 2, 2004 at 2:00 p.m. in the Mayor=s

Conference Room. William M. Mercer will be coming back for a special

conference call meeting.







_____________________________

Julia A. Rasch

Recording Secretary