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                         Thursday, January 31, 2002

Members of the Board of Trustees present at this meeting:

      Msgr. Robert L. McCarthy
      Mr. Brian Bass
      Mr. Robert H. Peterson
      Major David T. Pudlowski

Other persons present:

      Ms. Margaret Hart-Mahon, Associate County Counselor
      Ms. Dana Hutchings, Retirement Plans Office
      Mr. Kirk McCarley, Retirement Plans Administrator
      Mr. Chris McCarthy, Assistant County Counselor
      Mr. Glenn Pearl, Chief Accounting Officer
      Mr. Stephen Siepman, Buck Consultants
      Mr. Roger Gould, J.H. Ellwood & Associates
      Ms. Kari Creighton, Summit Strategies, Inc.
      Mr. William Carson, retired Police Captain
      Mr. Terry Whippler, retired Police Officer

Absent were:

      Mr. Thomas G. Wright (Excused)

                                     APPROVAL OF MINUTES
                                  BOARD OF TRUSTEES MEETING

ISSUE:            Presentation of the minutes of the Board of Trustees meeting of
                  December 18, 2001 and called for any additions, deletions or
                  corrections to the minutes.

                  Major Pudlowski recommended that on Page 4, in the last paragraph,
                  after the sentence that ends with Mr. Conley resigned in July, that
                  everything after that sentence be eliminated from the minutes. On
                  Page 5, under Other Business, under the Consultant Contract for
                  2002, the fourth sentence that reads the last option year be changed
                  to read the second option year.

DECISION:        A motion was made by Mr. Bass, seconded by Mr. Peterson and
                 unanimously carried to approve the minutes of the Board of Trustees
                 meeting of December 18, 2001 with the above corrections.


FOR APPROVAL: Requests for Retirement Benefits submitted by participants in the
                 Civilian Employees’ Retirement Plan.

DECISION:        There being no unusual circumstances regarding these requests, a
                 motion was made by Mr. Bass, seconded by Major Pudlowski and
                 unanimously carried to approve the Retirement Benefits for Civilian
                 Employees as presented.
FOR APPROVAL: Requests for Retirement Benefits submitted by participants in the
                 Police Officers’ Retirement Plan.

DECISION:        There being no unusual circumstances regarding these requests, a
                 motion was made by Mr. Bass, seconded by Major Pudlowski and
                 unanimously carried to approve the Retirement Benefits for Police
                 Officers as presented.


FOR APPROVAL: Requests for Vested Termination Benefits for Civilians.

DECISION:        There being no unusual circumstances regarding these requests, a
                 motion was made by Mr. Bass, seconded by Major Pudlowski and
                 unanimously carried to approve the Civilian Applications for Vested
                 Termination Benefits.

FOR APPROVAL: Requests for Vested Termination Benefits for Police Officers.

DECISION:        There were no Police Requests for Vested Termination Benefits for
                 December 2001.

                              APPLICATIONS FOR DEATH BENEFITS

FOR APPROVAL: Beneficiary’s Requests for Civilian Plan Death Benefits.

DECISION:        A motion was made by Mr. Bass, seconded by Major Pudlowski and
                 unanimously carried to approve the Beneficiary Requests for Civilian
                 Plan Death Benefits as presented.

FOR APPROVAL: Beneficiary’s Requests for Police Plan Death Benefits.

DECISION:        A motion was made by Major Pudlowski, seconded by Mr. Peterson
                 and unanimously carried to approve the Beneficiary Requests for
                 Police Plan Death Benefits as presented.

                                       FINANCIAL REPORTS

FOR APPROVAL: A.      Retirement Fund Balance Sheet through December 31, 2001
                      from the Division of Fiscal Management

                 B.   Jennison Associates LLC Account Reporting Package for period
                      ending December 31, 2001.

                 C.   Wellington Management Company Investment Report
                      December 31, 2001

                 D.   Chartwell Investment Partners Portfolio Summary dated
                      December 31, 2001

                 E.   Capital Guardian Trust Company Portfolio Statement as of
                      December 31, 2001

                 F.   Deutsche Asset Management Portfolio Review as of December
                      31, 2001

                 G.   Batterymarch Financial Management Performance Summary for
                      December 31, 2001

            H.   Summit Strategies Group Investment Performance Review and
                 ASAP Report 4th Quarter December 31, 2001

            I.   J.H. Ellwood & Associates, St. Louis County Retirement Plans
                 December 31, 2001 Performance Update and Executive
                 Summary December 31, 2001

            J.   Independence Investment Associates, Inc. Asset Summary
                 Report December 31, 2001

APPROVAL:   There being no unusual circumstances regarding the Financial
            Reports, a motion was made by Major Pudlowski, seconded by Mr.
            Peterson and unanimously carried to approve the Retirement Fund
            Balance Sheet and the Financial Reports as submitted.

                         ASAP REPORT – FOURTH QUARTER

            Recently, the latest economic data indicates that our downturn has
            not been as severe as expected. The Fourth Quarter GDP came out
            positive and it was expected to be down over 100%. Most likely this
            will be revised and will be slightly negative after all the revisions. It is
            still a positive indicator and the markets responded by going up
            yesterday. Recovery will probably come sooner than anticipated.
            Inventories continue to decline, so people are expecting corporations
            to start spending money because consumer confidence is continuing
            to rise and we are back at pre-September 11th levels. Consumers
            are still out there spending and as a result, corporations are going to
            need to rebuild their inventories. The PPI (Producer Price Index) and
            Consumer Price Index remain very tame which allows the Fed to
            continue to take an aggressive action. During the fourth quarter, the
            Fed reduced rates three times, 50 basis points in October and
            November and 25 basis points in December. For the whole year, the
            Fed reduced rates eleven times for a total of 475 basis points. So at
            the beginning of the year, the Fed rate was at 6.5 and now it is at
            1.75. We haven’t seen rates this low in 40 years. Unemployment
            went up to 5.78% and is expected to reach a peak of about 6.4 and
generally unemployment tends to lag when the economy starts to
recover. The U.S. Equity markets rebounded in double digits during
the quarter. This was a great quarter with the majority of the gains
coming in November. The S & P 500 gained 10.7% for the quarter
but did remain in the red for the year, down –11.9% for 2001. The
Dow Jones Industrial Average rose 13.8% for the quarter, finishing
the year down –5.4%. Small cap stocks outperformed large cap
stocks with a return of 21.1% for the quarter and for the year are
positive up 2.5%. Small cap value was the biggest outperformer for
the year, up 14%. During the fourth quarter, investors shifted toward
sectors with cyclical earning pattern screens, which typically benefit
coming out of a recession. As a result, we saw a lot of money
flowing into the technology sectors and the consumer cyclicals, which
now are reclassified as consumer discretionaries. The tech sector
increased the most during the quarter and was up 35% in large cap
and was up 47% in small cap. The tech heavy NASDAQ returned
30% for the quarter, but still down over 21% for the year. Growth
outperformed value by 7.8% in large cap and by 9.5% in small cap.
However, for the year, value was the outperformer over growth by
wide margins, 14.8% large cap and 23.2% in small cap. International
equity gained 7% for the quarter. International was hurt slightly by
the strengthening U.S. dollar and for the year is down 21%. The
fixed income markets lagged the equity markets for the quarter. The
yield curve continued to steepen, the very short end actually shifted
down, whereas the intermediate and longer-term bonds shifted up.
Treasuries underperformed the rest of the markets. The lower
quality corporates and high yield securities were the best perfomers
during the quarter. The Lehman Aggregate was just slightly positive,
up about 4 basis points for the quarter but for the year, there was
very strong performance in the fixed income markets finishing up

The St. Louis County Retirement Fund allocation is almost right on
top of the target at 67% equity and 33% fixed income. Jennison had
a good quarter, absolute as well as relative returns, they returned
16.2% vs. the benchmark at 15.1%, so they outperformed for the
quarter by 110 basis points due to their overweight in consumer
cyclicals. For the year, Jennison’s absolute return is negative but
their absolute performance was good, outperforming their benchmark
by 2.5%. Independence had a very good quarter, up 11.6%,
outperforming their benchmark by 90 basis points. They also had an
overweight to consumer cyclicals and technology, which helped their
performance vs. the benchmark. For the year, Independence had
negative performance but they had good relative performance
outperforming their benchmark by 2.0%. Chartwell had a good
quarter, they as well were in cyclical stocks. They outperformed by
50 basis points for the quarter and over the year their return is –4.9
but is still 70 basis points higher than the benchmark. Batterymarch
invested in very strong fundamentals for the quarter. During the
quarter, investors moved into more speculative stocks so their strong
fundamentals hurt their performance relative to the benchmark.
Batterymarch underperformed during the quarter by 7.4%, however
for the three quarters that the Plans have had them, they are about
even with the benchmark. Capital Guardian had a great quarter, up
12.5%, outperforming the EAFE index by 5.5%. For the year, they
are above the EAFE index by 4.7%, so their relative performance is
very strong. The Global Equity Composite is up 12.1%. This is a
very strong return for the quarter. The fixed income managers
struggled during the quarter. Wellington actually had negative
performance for the quarter, down 40 basis points and they
underperformed their benchmark by 50 basis points. Part of what
hurt Wellington was their lower BBB exposure than what the
benchmark holds. They are held in their guidelines to 10% allocation
in BBB’s. The index is 12 – 13% allocation in BBB issues. For the

year, Wellington is 20 basis points below the benchmark, but over
three years they are above the benchmark by 30 basis points.
Deutsche Asset Management had a good quarter, they outperformed
the benchmark by 20 basis points. It was a hard quarter for fixed
income managers and Deutsche did a good job bringing in some
positive returns. Deutsche for the year is outperforming the
benchmark by 1%, which is very good. The Fixed Income Composite
as a total for the quarter was down .3% but over the year, we had
8.9% returns from the fixed income portfolio. The total fund
performance is 7.5% for the quarter. It was a very strong quarter.
We outperformed the custom index by 70 basis points and over the
year, we did have slightly negative performance down 1.7%.

                    EXECUTIVE SUMMARY

It was a very tough, volatile year and the volatility will probably
continue into 2002. The quarterly returns last year varied widely.
The first quarter was terrible, one of the worst quarters we’ve had,
the second quarter was one of the best quarters we ever had, the
third quarter because of September 11 th, was one of the worst
quarters ever and the fourth quarter again was one of the best
quarters. The net effect was a negative year. The fourth quarter was
positive, up over 12% in terms of the total market, but it did finish the
year at a –11%. The S & P was much better, the large caps were hit
badly finishing the year down almost –12%. Through the end of the
third quarter, there wasn’t much of any place to hide. The only place
that was really performing reasonably well was small and mid cap
value stocks. The year 2001 was a unique period from the
standpoint that 83% of domestic equity managers had negative
returns. The average negative return for domestic managers was
10.89%. If you compare those numbers to what the County did in
terms of its overall portfolio, the County had a great year. The fact is
that the County came out of this market decline in reasonably good
shape.   The best place to be over the course of the year was
anything with the word value in it. Value was the area that had been
lagging the markets for the past five years ending in 2000. During
the fourth quarter though, we reverted back to the driving of the late
90’s to large cap growth in particular. Only four times in history has
the stock market experienced 2 or more consecutive years of
negative returns. During the Great Depression there were four years
of negative returns, during World War II there were two years, the
OPEC Crisis in the 70’s there were two years and then the most
recent period of 2000 and 2001. In the rebound year, the year after
the decline, very significant increases in terms of the market. There
are a lot of economic indicators out there that indicate that we could
possibly have a decent year in 2002. What we are looking at is that
some of these indicators are saying that the recession may be over
and possibly could be resuming an upward trend in terms of the
economic cycle which produce earnings, which produces increases
in stock prices. There is one other key indicator that says that the
recession may be over and that is because Greenspan says it is
over. If you look at the International markets, you can see that it was
a tough year. Difficult in the international sector because it was
following the U.S. in terms of technology, telecommunications, and
some of the other major issues. As we become more and more
global, the indicators for the U.S. are being felt overseas. The EAFE
Index was off 21.7% for the year, but if you take that same index and
look at it in the local currencies, it has only been off 16.5%. The
difference between the two of those is the relative strength of the
U.S. Dollar. The dollar has been very strong especially when you
look at it relative to the Yen, which is one of the largest components
of the EAFE Index. After a number of years of very difficult returns,
the emerging markets have come back very strongly. There has
been a very significant movement within fixed income at the short
end of the market. The short end of the market is what the Federal

            Reserve controls. The Federal Reserve cannot control the long end
            of the market. The short end of the market dropped 4.2% in terms of
            rates, the long end dropped .1%, and therefore anything you had in
            the short end of the market tended to perform quite well. If you look
            at the history of the total portfolio over the past five years, with an
            interim quarter as of September, you can see that September 2001
            was the fairly significant drop from where you were as of December
            31, 2000. We ended the year at $309.6 million, which is off $13
            million dollars from the prior year-end.


                               JANUARY 1, 2002

            A copy of Ordinance 20,726 on the Plan Improvement as of January
            1, 2002 (Supplement enhancements) is being provided to the Board.

            Brian Bass feels that this may be a good time to send a thank-you to
            both the County Executive and County Council for enacting this
            legislation. There was a lot of work and effort put forth by the Board
            and the County Executive’s Office in making the plan improvements
            over the past year.

DECISION:   Moved by Mr. Bass, seconded by Msgr. McCarthy and unanimously
            approved to have the Retirement Plans Administrator draft
            correspondence for Msgr. McCarthy’s signature and thank both the
            County Executive and the County Council for their support in
            enacting the legislation of the Retirement Plan Improvements over
            the past year.


The contract renewal letters for Buck Consultants, J.H. Ellwood and
Summit Strategies were signed and forwarded to the County
Executive and County Council.
Brian Bass questioned if the consultants would not have signed off
on receipt of the letter from the Board on their decision to exercise
the option to renew would that mean that they didn’t accept it? The
Plans Administrator commented that the letters are sent for
acknowledgement of the Board’s decision to exercise their option to
continue in the contracts for another year and for the Council to take
action. Chris McCarthy explained that it is the County’s option to
exercise the terms and conditions of the contract. In the original
contract, the consultants agreed to a three-year contract as long as
the Board exercises their option. The letter is just an
acknowledgement to inform the consultants that the Board has
exercised their option and the consultants are aware of that. It is a
mere formality that the original contracts are filed with the County
Clerk and that the options were exercised and here are the copies of
those letters.

                         OTHER BUSINESS

A question came up from a Highways employee to the Director of
Highways and Traffic concerning the Retirement Funds and if they
held any Enron stock. Summit Strategies informed the Board since
Enron was held in the S & P 500 Index, Independence held this stock
at the end of the third quarter, representing about 0.4% of the
account. Independence held 5100 shares at the end of September,
which were sold in October. They also purchased 2600 shares
during October, which were sold at the end of October and the first
part of November. The total loss of the Enron holding was $231,610.
However, Independence still outperformed the S & P 500 Index by 90

basis points for the quarter, returning 11.6% vs. the S & P 500 at

As a side note, Kari Creighton did check the portfolio holdings for K -
Mart. K-Mart is the latest one to come out announcing bankruptcy.
The Funds have no holdings in K-Mart.


Every year we get together and review the actuarial methods and
assumptions and see if there is anything that indicates a change is
needed and the impact on the Plans.

As far as the assumptions that we use, we use an Interest Rate
Assumption of 8.5%. There were some discussions concerning the
interest rate towards the latter part of 2001, where both consultants
commented that it was going to be more difficult to justify an
expectation that you could achieve an 8.5% rate of return long-term.
There was some re-allocation between small cap and large cap and
therefore the 8.5% is still considered to be something that the fund
can achieve. There is no need to change the interest rate
assumption yet. There is speculation out there that for the next ten
years or so, rates may not be that high. We are looking at a very
long expectation and the interest rate is something we need to keep
looking at. If we were to change the interest rate assumption, it
would be to lower it and if we lower the interest rate it would cause
the County’s contribution to increase. We will continue to keep
watching the interest rate assumption and if it appears that 8.5% is
an unrealistic expectation long-term, then it will have to be changed.

The Salary Increase Assumption used is 6%. The Board should be
aware that part of the conservatism in 6% is to accomplish
recognition of the fact that sick leave and vacation pay is paid out at
retirement. Often times the 3-year average salary is considerably
higher than even what that person might have made in one single
year. The salary augmented by sick and vacation pay adjustments
actually can generate a much higher benefit. The actuary is implicitly
taking the sick and vacation pay adjustments into account by
somewhat overstating the salary increase assumption.

As far as Mortality Rates, we have a fairly modern table. We have a
set forward in it because what is reflected in the full life expectancies
in those tables is not necessarily what the County employees are
experiencing. It bears watching and there will be a new table coming
out next year and we will take a look at the new table at that time.
Mortality in the scheme of things is really not all that important
because life expectancy really doesn’t change all that much.

Termination Rates would be those people let go and would include
those jobs eliminated and also those who quit voluntarily. For a long
time we were seeing lower turnover than assumed and the rate was
changed several times. In the most recent year of experience, once
again the rates were a bit lower on the Police side a nd a little higher
on the Civilian side. We have rates that are realistic now and we can
be comfortable with them. The number used varies by age. At age
30 for Civilian employees a weighted average of around 8%, at age
40 about 5%, at age 50 between 3-4% per year and the Police is
about half the Civilian rates.

The one assumption that may need to be looked at is Prevalence of
Retirement. There was some pent-up demand for retirement last
year with the anticipation of the plan improvements. Some

employees held off retiring until January 1, 2002 or beyond because
of the change in the supplements on both Plans. This is something
that will require watching. What we are finding over the last couple of
years is that the “Rule of 80” and employees retiring not long after
they reach “Rule of 80” is becoming more popular in the Civilian
Plan. We are seeing Civilian employees retiring in their early 50’s
and it seems to be stepping up. We have seen a pattern of more
early retirements than we have assumed. The actuary might be
inclined to raise some of the early retirement rates. The financial
impact of raising the early retirement rates for people whose benefits
are unreduced because they have reached “Rule of 80” would have a
tendency to increase the County’s contribution. Given that the
investment performance in 2001 was not good, the Plan is going to
feel some cost increases as a result. The actuary’s sense is that
there is no real need to push the pressure upward at this time. While
we are getting close to the point at which it is reasonable to change
Retirement Rates, the actuary feels that it can be put off until 2003.

There is no need to change the Method or the Asset Smoothing. The
actuary’s recommendation is to keep the methods and assumptions
all the same and realize that we will probably have to change
retirement rates a year from now.

                       JAMES E. CONLEY, SR.

Msgr. McCarthy asked the Board for a minute of silence in honor of
Jim Conley. James E. Conley, Sr. who served as a member of the
Board of Trustees from 1991 until his recent resignation in July 2001,
died January 25, 2002. The Board commends Mr. Conley for having
served as a member of the Board since 1991 and wishes to convey
its sincere appreciation for his ten years of dedicated service to the
St. Louis County Employees’ Retirement Plans.


It was unanimously agreed that the next meeting of the Board of
Trustees will be held on Thursday, February 28, 2002 in the St. Louis
County Meramec Building, 121 South Meramec, 1st Floor Training
Room at 10:00 A.M.


Moved by Mr. Bass, seconded by Major Pudlowski, and unanimously
carried to adjourn the meeting of the Board of Trustees at 11:00 a.m.

                    Msgr. Robert L. McCarthy, Chairman 02-28-02


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