TO RETIREMENT ASSOCIATION MEMBERS

I am pleased to provide you with the Annual Report of the Stanislaus County Employees Retirement Association (StanCERA) for the fiscal year ended June 30, 2004.

StanCERA remains very healthy despite several years of down financial markets. Investments for the year returned 16.4% and outperformed the policy benchmark by 1%. Total asset of the fund were $1.104 billion.  Current year earnings in excess of the actuarial assumed rate (4% posted semi-annually, or 8.16% per year) were used to reduce the undistributed losses from prior years.

Interest of .125% semi-annually was credited to all members\' accounts.  Despite the lower than expected returns for two of the past three years, StanCERA expects an 8% average annual return over the long term.

The fund provided $48 million is retirement benefits during the year consisting of $41 million in regular retirement benefits and $7 million in supplemental, non-vested benefits. The supplemental benefits provided a substantial offset for the cost of health insurance for our retired members and their beneficiaries during the year. Administrative expenses amounted to $1.3 million or .11% of assets.

StanCERA\'s independent auditor, Brown Armstrong, has audited the financial statements and provided an opinion that the financial statements present fairly, in all material respects, the financial position of StanCERA for the years ended June 30, 2004 and 2003, and the results of its operations for the years then ended in accordance with generally accepted accounting principals. A complete Comprehensive Annual Financial Report (CAFR) can be located on StanCERA\'s website: www.stancera.org.

Sincerely,

Tom Watson, Acting Retirement Administrator
Stanislaus County Employees\' Retirement Association