Columbus, Georgia

MINUTES OF THE

BOARD OF TRUSTEES MEETING OF THE

COLUMBUS GEORGIA EMPLOYEES' PENSION PLAN





February 2, 2005





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

Plan was held February 2, 2005 at 2:00 P.M. in the Mayor?s Conference Room.





PRESIDING: Mayor Robert Poydasheff, Chairman



PRESENT: Isaiah Hugley, Angela Cole, Morton Harris, Mary

Strozier-Weaver, Dan Gray, Alan Rothschild, Harvey Milner, Joe Smith, Jr., and

Capt John Starkey



ABSENT: Jack Nowell



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

Swift, (Salomon Smith Barney), Pam Hodge, (Financial Division), Jody Davis

(Accounting Division), Reather Hollowell, (Human Resources), Tom Barron, (Human

Resources), and Mike Reed (Columbus Water Works)









Mayor Poydasheff, Chairman called the meeting to order. The attendance was

taken by passing around the attendance roll sheet and having everyone present

check off their name.



The Mayor stated that he understood that someone on the board had resigned and

asked Ms. Rasch to check with the Clerk of Council to confirm who had resigned.







MINUTES OF THE PREVIOUS MEETING:



The minutes from the January meeting were presented for approval. Mr. Harris

had a few clarifications that he wanted made to the January minutes which would

be made by the secretary but would not change the content of the minutes. A

motion was made and seconded to approve the minutes as submitted but with the

clarifications. The vote was ratified.







INVESTMENT UPDATE:



Mr. Henry Swift began his presentation by passing out two handouts, one on the

S&P 500, stock market and the other on the Ten Year Treasury bond market. He

stated that he wanted to start with the S&P 500 so the board could understand

exactly what happened in the stock market in 2004 because it has a direct

impact on the performance that has been received in relation to the pension

fund. From 12/31/03 through 12/31/04 the stock market went from 1111 to 1212.

The equity portfolio was up 8.3% for the calendar year ending in December; it

was up 8.7% for the fourth quarter, indicating that all earnings made in 2004

were earned in the fourth quarter. The reason Pension Board Meeting

February 2, 2005

Page6



that?s important is that by mandate, of the investment policy statement, for

better or worse they are to occupy the large cap space of the market.



Mayor Poydasheff asked if maybe the managers should be allowed to invest in

small and mid cap stocks. Then asked Mr. Swift what was his recommendation.

Mr. Swift responded that it?s something the board should review. But, he

thinks that even though the small and mid cap stocks have been running strong

coming out of the recession, that what should be happening next is the large

cap stocks will start to do better and that now would probably not be a good

time to start chasing small and mid cap stock.



In the one year performance of the large, the mid and the small cap whether

its? growth, blend of value it doesn?t matter, the large cap in every category

has done worse than the mid cap or the small cap. So when the stock market had

this big move in the fourth quarter 2004, the flow of funds was going into

small cap and mid cap stocks and that hurt the managers? performance because of

being only in large cap stocks.



Mr. Rothschild asked what part of the S&P 500, our index, is considered large

cap stock?



Mr. Swift stated that he didn?t know the exact percentage, but he believes it?s

somewhere in the neighborhood of 55%. The underperformance by the managers is

not totally the size of the stock; some of the managers simply have not been

doing their jobs.



The Ten Year Treasury Bond Yield chart reflected just how crazy the bond market

has been and what an unusual set of circumstances are going on there. What has

happened with most of the fixed managers is they?ve shortened their maturities

in anticipation of rates going up, unfortunately that?s not what happened,

they?re going up on the very short end and on the long end they?re going down.



In the last 18 months the Feds have raised rates five times and are expected to

raise rates again. Over the past years, the Ten Year Bond, in spite of five

different times the short rates have been raised, the rate on a Ten Year Bond

has actually gone down, which means as you go out on the curve, the bond prices

are going up while bond prices at the very short end of the curve are coming

down and so what you?ve got, is a huge flattening in the yield curve.



The net result of all this is that, even though the equities were up 8.3%, the

bonds were up only 2.25%, so for the year with the total fund being up almost

6% most of that was dragged down by the bond market. The total portfolio was

up 5.7%.



Richard Swift prepared to give the interim report for the period from January

5, 2005 to February 1, 2005. First was a chart of the S&P 500 showing a slight

increase from 1184 to 1189. The second was the chart of the Ten Year Treasury

Yield indicating the yield went from 4.28% to 4.14% moving down a little which

means bond prices increased slightly.



In the performance report the fixed managers, Synovus, Tattersal and Madison

went from a combined fixed of $72,621 million to $72,847 million an increase of

.31%.



The Growth Managers, Eagle and Rittenhouse went from a combined growth of

$27,181 million to $27,232 million an increase of 019% versus the benchmark,

Russell Growth which was down -.27%, an out-performance by the growth managers.







Value managers, Deutsche Asset and Victory went from a combined value of

$37,951 million to $38,497 million or up 1.44% versus the Russell Value of up

1.56%, a little less than the benchmark.



The core managers, Trusco and National went from $24,306 million to $24,208

million a decrease of ?0.40% versus the S&P 500 of being up .48%, also a slight

under-performance.



The international manager, Lazard, combined value went from $11,405 million to

$11,358 million, down -.42% versus the international index of being up .51%.



The total combined equity account was up .45% for period and the total city

account went from $173,467,103 to $174,144,343, an increase of .39%.



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

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

is available for review upon request.







PRESENTATION:



Mr. David Frahm and his associate (could not get name) from William M. Mercer

presented the annual actuarial report. This report is presented each year to

summarize the actuarial valuations for the pension fund.





? Employee Census Data



This reflects the total number of active and inactive participants in the

General Government and Public Safety pension fund plans. The participants

graph shows the growth in the total number of participants from 1999 to 2004.



The age/service distribution graph gives the average age and number of years of

service in both the General Government fund and the in Public Safety fund.



The active payroll chart shows the total payroll for the valuation and the

average pay for each of the groups and how it?s projected to grow. This takes

into account historically, both changes in pay rates and changes in population

prospectively.



The reconciliation graph breaks out the participant data for this year compared

to last year to ensure that no one was dropped, showing the active, and the

inactive status of all employees, both General Government and Public Safety.



Pension Plan Provisions



This section is a summary of the plan provision. For both plans many of the

provisions are the same and where there are differences those are identified

separately. There were no changes to this section this year.

Actuarial Assumptions



This is a summarization of the assumptions that are used to complete the

valuation of the pension plan. The assumptions are arrived at using

information from the census population,



salary, asset information, and using that as a base, the actuarial assumptions

are applied to project when people will retire, how much their benefit will be,

how long they will live and how much money the fund is going to earn. For

example, it is assumed that the plan, long term will earn 7.5% interest, that

employees on average will have a pay increase of 3.25% per year until they

retire and that people will retire with various percentages at the ages between

55 and 65 forward depending on whether they are General Government or Public

Safety employees.



Benefits Payments



These two charts are designed to show the benefits payments for the current and

future retirees, both for general government and public safety using the

current assumption.



Assets Growth



This graph indicates the growth of the pension plan starting in 1999 and coming

forward. The value of the pension plan at the close of the 2004 fiscal year

was $181 million and is projected to reach $270 million by the end of the

fiscal year for 2008 using an assumption rate of 7.5%.



Benefit Security



The benefit security is measured by taking the ratio of what is called current

liability to the assets. The current liability is the measure of accrued

benefits in the plan to date compared with the market value of assets. The

fund?s assets have continued to drop over the past year tightening the margin

between assets and accrued benefits.



Funding Progress



This section shows the comparison of the assets to the present value of all

benefits including those which have not yet been earned for each person in the

plan, projecting them all the way out to retirement.



Minimum Contribution



The minimum contribution for FY-06 for the General Government plan is

$5,828,705 and for the Public Safety plan it will be $8,159,870. For the

Disability plan, the contribution requirement will

be $82,615 and the Death benefit is $121,032. Putting the totals together, the

total minimum requirement for FY-05 will be $14,192,222 and next year it is

projected to go to $14,868,922, if the assumption rate continues at 7.5%.





This concluded the actuarial report and Mr. Samples and Mr. Ford were thanked

for a well-presented report and were then dismissed.



NOTE: Throughout the actuarial report, the main topic of concern was the rate

of assumption and whether it should be lowered from 7.5% to 7.25% or maybe even

7.0%. There were good points made and several issues raised on what would be a

reasonable rate and in the best interest of fund and the participants as a

whole. At the end of the discussion it was recommended that the assumption be

lowered but a definite decision would be made at a later date.



The Mayor had to leave at 3:00 p.m. for another meeting, Mr. Hugley continued

with the meeting.







OLD BUSINESS:



Mr. Swift presented a brief update on the investment management search that the

subcommittee has been conducting. One is the replacement for a growth manager

to replace Eagle Asset Management. A study being conducted on terminating

Victory Asset Manager and a search is underway for a replacement for them.







NEW BUSINESS:



None



In closing, Mr. Rothschild stated that he would be much more comfortable with a

6.5% or 7.0% actuarial assumption and would like to have the issue placed on

the agenda for the next meeting.



Ms. Cole reminded the board that there is no regular meeting in March and that

a decision needs to be made before the meeting in April.



Mr. Hugley stated that there would be a called meeting to be held in March in

accordance with the Mayor?s availability.



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



The next regular meeting is scheduled for April 13, 2005 at 2:00 p.m. in the

Mayor?s Conference Room. The guest speaker(s) will be from Trusco.









_____________________________

Julia A. Rasch

Recording Secretary