ATTENDANCE: James Murphy, Chairman; Don Nelson; Vicki Bove; Michael Salvator; Tim Scheibel; Charles Pirro, Esq.

STAFF: Sara LeTourneau, Director of Personnel and Labor Relations; Fred Gilden, Comptroller.

OTHERS: David Macey, Matt Bucci and Mike Palermo, The Boston Company; Carolyn Nelson and Marco Vangelisti, GMO (via teleconference); Ellen Petrino, EAI.

CALL TO ORDER

Chairman Murphy called the meeting to order at 6:05 p.m. and said that there was no Personnel Committee meeting held this evening.

THE BOSTON COMPANY

Mr. Palermo said that The Boston Company’s investment objective is to outperform the S&P 500 over a full market cycle. Their total assets for year ended 2003 were $36.5 billion, and large cap stocks accounted for $7.5 billion of that. Norwalk’s portfolio’s ended 2003 with a market value of $39,365,006. He said that as of today, the portfolio is up 4.4% year to date.

Mr. Macey thanked the group for their business relationship. He reiterated Boston Company’s objective, and said that Norwalk’s portfolio did much better than the S&P 500. He reviewed the performance attribution analysis sheet, commenting that the heaviest concentration of equities is in the financial sector. Mr. Macey said that the technology stocks did not perform as well, but Intel added significant value. Stocks that subtracted value from the portfolio were AT&T, ConAgra Foods, Verizon Communications, Abercrombie & Fitch and Merck & Co. He said that some of the stocks were purchased when they were low and many have accelerated since then. Most of the stocks in Norwalk’s portfolio have been in it for a long time. He said that the 10 largest holdings comprise 30% of the portfolio.

Mr. Macey said that Alan Greenspan made a statement to the media that interest rates would remain low; perhaps they are the lowest in a 50-year history. He said that there is no reason for the Government to increase them; accordingly, the GNP may grow by five percent (5%) in 2004. He said there is little if any inflation, and the country is in a recovery phase. Many companies that have been off shoring have become lean and mean and profits should be robust. All in all, Mr. Macey said that this is a good equity market, and Norwalk’s portfolio is postured appropriately. Mr. Macey said that bond markets will most likely not be profitable for anyone. He predicted that the financial and technology stocks would regain and prosper.

Chairman Murphy asked when Anthem was added to the portfolio. Mr. Macey said that he was not certain of the exact date but would find out and let the Board know.

Ms. Petrino commented that the market cap was very high compared to other value managers and asked if this was because Boston Company was so large or if it was a decision that was made. Mr. Macey said that a host of measures are used when reviewing a stock – how it is traded, over what period of time, average daily value, etc. Mr. Macey spoke about the Gulf War, and is impact on the market. He said that stocks are held anywhere from 12 to 18 months, and when the targeted price is reached, the stock is moved.

Chairman Murphy asked about Kroger, whose stock is suffering badly. Mr. Macey said that this was largely due to union issues, strikes, etc. but that on the other side of the coin, Wal-Mart is extremely successful. Chairman Murphy asked what Boston Company’s three most recent acquisitions were; Mr. Macey responded that they were Auto Zone, Kraft and a re-insurance company in Bermuda. Mr. Salvator asked if Boston Company was accepting more capital into the large cap stocks. Mr. Palermo said that there is room for that.

GMO (via conference call)

Ms. Petrino said that GMO did a fabulous job. Mr. Vangelisti said that he was a product manager for emerging markets. He said that the portfolio performed well and Norwalk joined at the right time. GMO’s objective is to deliver a 40% rate over the benchmark on an annualized basis over three business cycles (3-5 years). Mr. Vangelisti explained in detail the hardcopy presentation. He said that emerging markets seem to be running parallel with the NASDAQ. One of the beliefs that GMO follows is to look at countries that have experienced slow growth and throughout have maintained stable currencies. At the same time, he said, seeing a declining risk is equally important. Mr. Vangelisti said that the countries of Brazil and Turkey are GMO’s favored. Korea, South Africa, Russia and Mexico are underweighted and too volatile. Ms. Petrino said that favoring Latin America is contrary to what other managers are doing. Chairman Murphy asked if GMO was still adding to its Brazilian holdings. Mr. Vangelisti said that they have reached their maximum weight and cannot take more then 10% active bets. Chairman Murphy asked if GMO owned any stock in the ‘145 jet planes’ in Brazil. Mr. Vangelisti said that the 50-seater jets are owned by Continental; GMO is closed to new business; they have $10 billion in assets. Ms. Carolyn Nelson, Norwalk’s client manager at GMO, also participated on the call.

EAI

Ms. Petrino said that it was a good year. She said that the portfolio is not over weighted in emerging markets and is benefiting from the asset association because of the extra money at Zesiger. U.S. equity markets also did well. Commenting on Boston Company, Ms. Petrino said that their sector allocation is good but their stock selection was not favorable for the year. Boston Company was underweighted in the technology sector. She spoke about the employee at Boston Company that terminated and has not been replaced; performance has suffered as a result. Ms. Petrino said that TCW reduced from a buy to a hold because the heir apparent left and two named replacements will need to work closely together to be successful. She said that Zesiger had an excellent year. Their U.S. equity portfolio went up to 61%. LSV outperformed – 49% vs. 46%; their local manager is doing very well. Ms. Petrino said that Artisan under-performed and ended 29% vs. EAFE 38%. She said that the portfolio manager will meet with EAI in two weeks. Silchester is in a transition period, moving from Europe into the United Kingdom. GMO ended strong … 70%.

Ms. Petrino said that energy materials seem to be cyclical. Capstone outperformed. As it relates to targets, they are doing well. Chairman Murphy said that if the market does better than expected, Norwalk’s portfolio will be even more underweighted.

Mr. Gilden and Mr. Scheibel discussed the City’s contribution to the plan. Mr. Gilden said that the City will put in about $2.6 million in the new fiscal year. Chairman Murphy said that this would mean a $5 million negative for the year. He asked Mr. Gilden to have those doing the interim evaluation to join the Board’s next meeting.

APPROVAL OF MINUTES

Chairman Murphy said that the November 20, 2003 and January 14, 2004 minutes would be held over for discussion at the next meeting. Ms. Petrino said that she would have the October 20th minutes of the Pension Administration Review Subcommittee and the Pension Board ready for the Board’s next meeting as well.

APPROVAL OF PENSION APPLICATIONS

The Board members discussed the specifics of the pension application of Robert DePaulis, who was granted a regular pension in November 2003. Ms. LeTourneau said that the form is not completely accurate and should be redone. She said that applications really become effective the date that payments commence. Mr. Scheibel said that due to contract settlements there are many retirees; some going back 18 months.

Chairman Murphy asked Ms. LeTourneau to prepare a letter to the Mayor, the finance department with regard to the negotiations the City is involved with that no increases should be given until a signed agreement and a new summary plan description has been received. He said that the agreement with SPD is still in arbitration, but in the interim the City and the employees need to understand what is going on. He said that he would review the letter at the next meeting.

** MR. PIRRO MOVED TO APPROVE THE PENSION APPLICATION OF ROBERT L. DEPAULIS, EARLY RETIREMENT, NORMAL PENSION, IN THE AMOUNT OF $43,218 ANNUALLY OR $3,601.50 MONTHLY PAYMENT.
** MR. SCHEIBEL SECONDED THE MOTION.
** MOTION PASSED UNANIMOUSLY.

** MR. PIRRO MOVED TO APPROVE THE REQUEST THAT THE ESTATE OF LYNN BOSSERT RECEIVE A LUMP SUM DISTRIBUTION OF $12,902.31 RATHER THAN 21 CONSECUTIVE MONTHLY PAYMENTS OF $661.92.
** MR. SCHEIBEL SECONDED THE MOTION.
** MOTION PASSED UNANIMOUSLY.

OTHER BUSINESS

Ms. LeTourneau said that she scheduled herself to attend a meeting with NFEP, and planned to provide a copy of the draft plan document. NFEP ultimately decided they did not want her or any Board members to attend. Chairman Murphy said that he does not have any issues with the custodial union; Ms. LeTourneau said that they are in receivership but she would check into this further. She said the group of about 11 or 12 individuals has formed a coalition and she would continue her discussions with them.

ADJOURNMENT

** MR. NELSON MOVED TO ADJOURN.
** MOTION PASSED UNANIMOUSLY.

The meeting was adjourned at 8:30 p.m.

Respectfully submitted,
Carol A. Wiggins for
Telesco Secretarial Services