Ms. Mary Woods, a retired teacher, appealed to the Trustees for assistance in enrolling in a health insurance plan.

Ms. Myrtle Bruce, a retired teacher, appealed to the Trustees for assistance in enrolling in a health insurance plan.

Mr. James Edminster, a retired teacher, appealed to the Trustees for assistance in enrolling in a health insurance plan.

Ms. Carlyn Tucker, a retired teacher, asked questions regarding the 2.2 upgrade cost for teachers who retired with less than 30 years of service.

On a motion by Mr. Ward, seconded by Mr. Sokolnicki, and by unanimous vote, the minutes of the meetings on November 20, 2001 and January 17, 2002 were approved as amended and ordered printed. (Ms. Anderson, Mr. Mayo, Ms. Rodriguez, and Mr. Silver were not present at the time the vote was taken.)

Mr. Eugene M. Barnes of E.M. Barnes and Associates updated the Trustees on the anticipated topics for discussion in Governor George Ryan’s February 20, 2002 State Address. He also reported on prior and upcoming meetings of the Illinois Pension Laws Commission. Mr. Barnes addressed questions raised by Trustees.

Mr. Brad Blalock of Mercer Investment Consulting Inc. reviewed the fourth quarter investment performance evaluation for the period ended December 31, 2001. He recommended that three Pension Fund investment managers be asked to attend the April Trustee meeting to discuss reorganization and operations. Mr. Blalock addressed questions raised by Trustees.

2002 Real Estate Investment Plan

Mr. Terry Ahern and Ms. Michele Dinn of The Townsend Group reviewed the real estate investment plan for the year 2002. They presented their recommendations and initiatives for the Fund. Townsend recommended that several Pension Fund real estate investment managers be asked to attend an upcoming Trustee meeting to give their perspectives on the changing markets and to discuss their strategies.

Actuarial Valuation

Mr. Sandor Goldstein of Goldstein and Associates presented the Actuarial Valuation as of June 30, 2001. He provided a summary of the results of the valuation.

Mr. Goldstein indicated that the same actuarial assumptions were used for the June 30, 2001 valuation as were used for the June 30, 2000 valuation.

He indicated that as of June 30, 2001, the total actuarial liability amounted to $10,387,568,945 and the actuarial value of assets was $10,387,568,945, resulting in an unfunded liability of $5,135,714 and a funded ratio of 99.9%. In comparison, as of June 30, 2000, the unfunded liability was $328,168,774, and the funded ratio was 96.7%.

He stated that on the basis of the results of the June 30, 2001 valuation and taking into account the funding plan currently in effect for the Fund, there is no Board of Education contribution requirement for Fiscal Year 2003.

He also discussed the results of the 45-year funding projections that were done as part of the valuation. He indicated that based on the results of these projections, the first year that the Board of Education will be required to make a contribution to the Pension Fund is 2008.

Management Letter

Mr. Jeff Markert and Ms. Julie Barrientos of KPMG presented their 2001 Management Letter. Mr. Markert and Ms. Barrientos made comments and recommendations involving internal control and other operational matters for consideration. They outlined recommendations on establishing a business continuity plan and a records retention policy.

Standards Communications of the Audit Committee

Mr. Markert noted general information related to conducting the audit. He also noted that there were no negative issues or reportable instances with management.

Financial Statements and Schedules

Mr. Markert reported that KPMG has audited the Statements of Plan Net Assets of the Fund as of June 30, 2001 and 2000. He reported that the audit was conducted in accordance with the auditing standards generally accepted in the United States.

He reported that the standards under which the audit was conducted require that KPMG plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatements. KPMG concluded that the financial statements fairly present the financial position of the Fund as of June 30, 2001 and 2000.

PENSION FUNDING LAWSUIT

Ms. Marilyn F. Johnson, general counsel of the Chicago Board of Education, reviewed with the Trustees the pension funding lawsuit involving the Chicago Board of Education and the four individual fund annuitants against James Ryan, Illinois attorney general. Mr. Buzz Sawyer, Office of Management and Budget, and Ms. Cynthia Asghar, Department of Finance of the Chicago public schools, were also in attendance to address questions raised by Trustees.

Ms. Johnson informed the Trustees of the three basic claims in the lawsuit that all stem from various provisions of the Constitution of the State of Illinois:

Ms. Johnson asked the Trustees to join with the Chicago Board of Education and the individual fund annuitants as a plaintiff in this litigation. She urged favorable consideration from the Board of Trustees.

Following review and discussion, Mr. Joseph Burns, fund counsel and Mr. Henry Anselmo, lobbyist addressed questions raised by Trustees.

Mr. Mitch Bramstaedt and Ms. Karen Paul of The Segal Company presented the results of the medical market survey they were asked to perform to ascertain what medical benefit programs might be available to the Fund. Segal performed this survey by contacting multiple Chicago area and national healthcare vendors. Mr. Bramstaedt and Ms. Paul addressed questions raised by Trustees.

The Segal Company was asked to provide information concerning the Fund’s policy on eligibility and enrollment in its sponsored plans and possible options to alter the policy. Mr. Bramstaedt reviewed with the Trustees the current policy for insurance eligibility. He then compared our policy for insurance eligibility with the Teachers’ Retirement System of Illinois (TRS).

A motion was made by Ms. Anderson, seconded by Ms. Rodriguez, and unanimously passed, to authorize Segal to conduct an analysis of the average cost of claims per health care enrollee, at a cost not to exceed $10,000. The motion passed by the following vote:

Ayes: Ms. Anderson, Ms. Finnegan, Mr. Katsulis, Ms. Knazze, Mr. Mayo, Ms. Nolan, Ms. Reilly, Ms. Rodriguez, Mr. Silver, Mr. Sokolnicki, Mr. Ward—11.

Nays: None.

Mr. Bramstaedt reviewed with the Trustees an appeal from a retired member of the pension fund regarding health insurance coverage for mental illness. He discussed the effects of the Mental Health Parity Act with the Trustees. He reported to the Trustees the Pension Fund’s current plan is in compliance with the law.

Mr. Michael Nehf reviewed with the Trustees requests of retired members regarding reconsideration for the continuation of health insurance beyond the open enrollment deadline date.

A motion was made by Mr. Ward, to adopt a policy for enrollment for health care applicants who missed the deadlines and to extend our insurance to them for a period of three months, starting the insurance the next appropriate month when it is due to errors, omissions, or mail failures. After further discussion, Mr. Ward withdrew his motion.

A recommendation was made by Mr. Nehf to follow the current enrollment rules and if retired members want to appeal to the Board, then the Board could approve an exception. The three retired members that made presentations were approved as exceptions to the normal enrollment rules.

The Committee on Finance reported that the following persons requested replacement warrants in lieu of the following described warrants which were lost or destroyed. Affidavits certifying these losses and in each case indemnifying the Fund against any liability, damage or expense which may result by reason of issuing such replacement warrants were duly filed. Therefore, the Committee recommended that warrants issued to the persons named below in the amounts indicated be duly recorded in the minutes of this meeting.

Mr. Silver moved the Report of the Committee on Finance to the omnibus.

Regular June Board Meeting

A motion was made by Mr. Ward, seconded by Mr. Mayo, and unanimously passed, to re-schedule the regular June Board meeting from June 18 to Wednesday, June 12, 2002 at 9:00 a.m.

REPORT OF COMMITTEE ON CLAIMS
AND SERVICE CREDITS

The Committee on Claims and Service Credits reported that applications for pensions were presented for persons, hereinafter listed, with the recommendation that they be approved and granted in the amounts and under the conditions set forth herewith.

In the case of each applicant for service and disability pensions, the employment of the teacher has terminated, the legally prescribed minimum years of teaching service were completed and requirements with respect to age, the Illinois Retirement Systems Reciprocal Act (if applicable), and the Illinois

Pension Code were fulfilled.

In accordance with the provisions of the Illinois Pension Code, each applicant for disability retirement pension was declared by two physicians appointed by the Board to be suffering from a disability which wholly and presumably permanently incapacitates him/her for teaching.

Each applicant for a survivor’s or reversionary pension furnished proper evidence of his/her right to receive such benefits.

he Committee on Claims and Service Credits reported that pursuant to the law, the pensions of the following persons were cancelled upon the date of attainment of legal age or re-entry to service. The Committee recommended that the cancellations shown below be confirmed and reported in the proceedings of this meeting.

Revision in Rate of Pensions

The Committee on Claims and Service Credits reported that changes in salary credits after pensions were granted necessitate the following revisions. The Committee recommended that (1) these revisions be approved, (2) the records of the Fund be changed accordingly, and (3) adjustments be authorized for pension payments made prior to this date, as applicable.

Death Benefits

he Committee on Claims and Service Credits reported that documents pertaining to claims for death benefits were examined and verified, and recommended approval thereof.

In support of these claims, the Committee reported that death benefits were for persons whose dates of death were certified and whose heirs, beneficiaries, administrators or executors furnished proper evidence to receive such payments.

Refunds

The Committee on Claims and Service Credits reported that documents pertaining to claims for refunds listed herewith, were examined and verified, and recommended approval thereof.

In support of these claims, the Committee reported that (1) refunds on separation from service are for persons no longer employed as members of the teaching force…(2) refunds of contributions for survivor’s pensions are for members with no eligible survivors at the time of retirement…(3) refunds of excess contributions are for deductions outside of the statutory requirements and/or overpayments towards the 2.2 upgrade option and…(4) refunds of creditable service withdrawn are for previously validated optional service.

REPORT OF THE EXECUTIVE DIRECTOR

Cash Flow Analysis

Mr. Michael Nehf and Mr. Kevin Huber, chief financial officer, discussed with the Trustees the concerns with current operating cash flow and recent actions taken to address these concerns. The Fund made every effort to avoid having to request the liquidation of a portion of the portfolio for cash flow purposes due to the turbulent market conditions. To address the current needs, the Fund chose to notify one of the large cap managers, and use approximately $20 million of their available cash in the month of February to cover operating needs.