HomeMy WebLinkAbout2004 02 25 Attachment Given Out by Blake MytonDate: February 25, 2004
ATTACHMENT GIVEN TO
BOARD
MEMBERS DURING MEETING B Y
BLAKE MYTON
TRl~SCO
CAPITAL
MANAGEMENT
Prepared Exclusively For:
City of Winter Springs
General Employees'
Pension Plan
Investment Review
Fourth Quarter 2003
The Hurt Building -Atlanta, GA
Blake Myton
Investment Officer
407-237-5816
blake. myton @ truscocapital .com
Dianne Garcia
Administrative Officer
407-237-4513
dianne.garcia @ suntrust.com
~ ~ ~ r ^r ~ r ~ r^^~ r~ ~r I~ri a^ rr r r r~ ~ r~r
Table of Contents
Economic Overview /Market Snapshot
Performance & Portfolio Composition
Fund Fact Sheets
Attribution Summary
Proxy Policy Statement _
Section I
Section II
Section III
Section IV
Section V
-x~~:
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT ~
rr . ~ r ~ ~ ~ r r t~s ^r r~ ~r /r ~ r r r r
Period Ending I Market Snapshot
December 31, 2003
Source: Fuc•tSet
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 2
~r .. r ~ ~r r.• •r s ~ ~s ~r is .. ~- .r r .. ~ ~r
Investment Overview
• The S&P 500 rose 12.2% in the fourth quarter and finished 2003 with a total return of 28.7%. This was the first annual
gain since 1999 and was the strongest performance since 1997. The Lehman Aggregate Bond Index improved 0.3%
during the quarter and was up 4.1 % for the year. This was the fourth consecutive annual increase and was the eighth in
the past nine years. The trailing price/earnings ratio for the S&P 500 rose to 21.5 by year-end, and yields on the 10-year
Treasury note and the 10-year A-rated corporate bond were 4.3% and 5.0%, respectively.
• The economic expansion broadened in the fourth quarter, lead by stronger manufacturing orders and output.
The labor market improved, but job growth remained cyclically weak. "Headline" inflation was low, but commodity
prices continued to rise and the value of the dollar fell. The Federal Reserve retained its steady interest rate policy, and
reiterated its ability to keep rates low fora "considerable period", but in a significant change, lowered the risk of
deflation.
• The modest rise in the Lehman Aggregate Bond Index was concentrated in credit-related sectors and in
mortgage-backed securities. Longer term yields rose, and the yield curve steepened. The Lehman High Yield Index
continued to lead the rest of the market, while the mortgage sector rebounded due to more stable yields and sharply
reduced refinancing activity.
• All 10 sectors in the S&P 500 rose in the fourth quarter, led by commodity-sensitive sectors (energy, materials) and
cyclically-sensitive stocks (tech, telecom, consumer discretionary). Lower quality company's stocks again outperformed
stocks of higher quality companies during the period but quality stocks recovered somewhat from relative extremes.
Small-cap stocks outperformed large-caps again in the fourth quarter and for all of 2003, but this
outperformance also moved to relative extremes. Value outperformed growth in the quarter, continuing the back-
and-forth relative performance shifts that characterized 2003.
• Near-term risks to major economic drivers are down substantially as we enter 2004, and above-trend growth is
expected through much if not all of the year. However, the pace of job growth is a key variable. Inflation will
remain comfortable near-term, but is likely to become an issue later in 2004.
• We continue to recommend an overweight position in stocks within current asset allocation ranges, due to the
relative attractiveness of stocks versus bonds and the cyclically low level of interest rates. However, we are no longer
at maximum weights due to the nearly 40% rally in the S&P 500 and the 60% gain in the NASDAG~ since March,
combined with the risk of higher long-term yields. We will be very price sensitive in entry and exit points, but will likely
view any market pullback as an opportunity to build equity positions.
• In fixed-income portfolios, we believe yields have reached a secular low, but are unlikely to rise sharply over the near
term given the steady rate policy from the Fed and the sensitivity of the housing market. Consequently, we have a
neutral duration on bond portfolios. Although yield spreads have narrowed considerably, we continue to
emphasize mortgage-backed and selective corporate securities as an effective strategy to enhance current yields.
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT
r~ ~ ~ ~ i ~ ~ ~ ~ ~ ~ ~ 1~ ~ ~ r rtr ~ ~
Fed Policv Neutral "for Considerable Period"
• While Fed policy remained unchanged in
the fourth quarter, the stronger economy
and evidence of some inflation pressures
caused a shift in their assessment to
balanced risks for both growth and
inflation. However, the Fed reiterated that
it was likely that monetary policy could
remain accommodative for "a considerable
period."
• While the Fed is satisfied with short-term
rates at four-decade lows, investors are
convinced that the next move in policy will
be more restrictive. The fed funds futures
market priced in higher rates later in 2004.
Funds Rate Stays at 4-Decade Low...
60 65 70 75 80 85 90 95 00
Source: FRB
20
18
is
is
12
10
s
s
a
2
0
1.3 ~°
1.2°%
...but a Shift to Higher Rates Expected
°
m
m
~ 1.1%
a
E
1 lU io
100°0
d
80°0
x
604% Y
N
4040 ~
20%
04:°
~ ~ g ~ cn Z ~ co v ~
N ~ N
r C7 ~
Dates of FOMC Meetings Indicated
1.0%
0.9%
Source: CBT
w: ~ .
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 4
rr rl >r lid it ~ iill . rl i~it ~ ~ r ~ rr r~r A ~ ~
Consumer Stimulus Will Slow...
The Home Refi Boom is Over...
120
115
110
105
100
700 Index
~-Applications for Refi (Right)
600 ~ -- Application for Purchase (Left)
500 ;
400 ~ ~ ~i;.ti~14+
300
200
100
0
...and Personal Tax Cuts will Fade
inaex i izuuu = i uu
Disposable Income
--- Personallncome
.%
`,~
.-
~~.
~ "` ..
.~
Index
11000
loooo
sooo
8000
7000
sooo
5000
aooo
3000
2000
1000
0
• The decline in mortgage rates through the
first half of 2003 not only made housing more
affordable, it also allowed existing
homeowners to refinance higher rate
mortgages. The myriad of benefits included
lower monthly payments, shorter loan terms,
and equity extraction for major purchases.
However, as shown by the solid line,
refinancing applications plunged as rates
bottomed and moved higher, removing an
important stimulus from consumer spending.
• Another significant source of consumer
stimulus in 2003 was the third round of tax
rebates and rate reductions. The solid line
shows that take-home, or after tax disposable
personal income grew an additional 5% faster
than personal income. While some of the
recent tax cuts will carry over into 2004, this
fiscal stimulus is peaking and will fade as a
support to personal income and spending.
00 01 02 03
Source: BEA, Trusco Cnpitnl
r s ~
,..~ .p'}' q n~. .'~
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 5
90 91 92 93 94 95 96 97 98 99 00 01 02 03
Source: MBA
rrt ~ r `. ar ~ ~ ~ ~r rr- ~ ~ r it ,ir r~ ~ +~r ~
...but Business Demand Improving
• Cautious businesses often cut inventories
as one way to reduce costs and conserve
cash flow. The inventory/sales ratio (solid line)
fell to a record low in 2003, but inventory
growth turned positive in the fourth quarter.
Higher inventories not only adds to aggregate
growth (GDP), it reflects a more positive
attitude on the part of companies about the
health of their markets.
• New orders plunged over 10% on a yl
over-year basis during the recession bu
showed signs of growth by the end of 21
New order volume continued to expand
2003 and accelerated in the fourth guar
reflecting broader, more balanced growl
City of Winter Springs General Emplc
Businesses Added to Inventories...
1 ~ Year Ago Percent Change
h 10%
1.52 ' `
1.50 ~ 8%
;,
1.48 ; , ~ s°r°
~,
1.46 " ~ ' ~,_ '~ ~ a°r°
.,,; _ ~,
1.44 -. ~ ~ r ~', ' 2%
1.a2 - ~,
o°r°
1.40 -' ,
1.38 - '~ -2%
1,36 ' -Inventory/Sales Ratio (Left) ~ -4%
--• Total Inventory Growth (Right) "'
93 94 95 96 97 98 99 00 01 02 03
Source: Conunerr•e Dept.
...and New Order Growth Continued
rr Ilr ~ i~ Ill l~ ~ ~ l~ wr ~ ~ ~ l~ l~ l~ lll~ lll~ r
Boosting Profits and CAPEX
• Cost controls helped to restore profit
margins and improve cash flow for many
companies. The increase in new orders
accelerated earnings growth and cash on
hand.
• Businesses typically postpone or cancel
investment spending during periods of weak
profitability. However, the increase in
corporate profits in 2003 raised the
willingness to increase investment outlays.
The spending so far has been concentrated
in equipment and software purchases rather
than new production facilities.
Strong Profits and Cash Flow Growth...
40% YoY%
-Cash Row
-- Profits ;;
30% '
~' ~ ;
a
20°r° ~ ~ ~', ~ ~•
;', ;~ ~ ,
, ~ ;
,
10% ,~ ~~
r, •' ,
,, ,~,
„ .
o°r° „'
' ~ ,~
-10% ~ '
-20%
70%
60%
50%
40%
30%
20%
1 o°r°
o°r°
-10%
-20%
90 91 92 93 94 95 96 97 98 99 00 01 02 03
Soiu•ce: Natl. /ncome & Product Accounts,fi•ont BEA
...Support Increased Investment
Year A Percent Cha e Year A Percent Chan e
„,
..,
,r, .
, ~ ~~
-Shipments (Right)
--- Equipment and Software Spending (Left)
-~-,~-~-r -----,--T-~-~-f ----
33 94 95 96 97 98 99 00 01 02 03
Source: Census, BEA
15%
1 o°r°
5%
0%
-5%
-10%
~ I
r
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT ~
rr l~ ~ r~ ~ ~ l~ +~^~ it ~ rr uil^r ~ r ~ ~ 1~^I ~ l~
Job Growth is Accelerating
3
2
1
0
-1
-2
Layoffs are Falling and Surveys are Up
55o Thousands Index ~o ~ The most im ortant and sustainable source
ISM Jobs (Right) p
-Initial Jobless Claims (Left) s5 of consumer income (and spending) is job
50o so growth. Job growth in the current expansion
aso 5s has lagged the pace of previous recoveries.
However, the pace of layoffs slowed in the
aoo ;, ~! - 50 fourth quarter to the lowest pace since the
35o I i ~ I I; r-;~ i ~~~ i - a5 onset of the recession in the spring of 2001,
300 ~ I I ~; I' ', _ ;' ~; ~ ~ ~~ ,.; i ~i {~ ~ ~ -ao and manufacturers reported a willingness to
~ ~ ~ '' ~ !~ ~ ~; , ~,, ~ 35 hire new workers. This should help sustain
a
~ 'i ~I ~ !'~ ~! ~ ~~ ~ ~', consumer spending, though an acceleration
250 ~ ~~ ' ~ ~-so is less likely.
00 01 02 03
Source: BLS, /SM
Household Survey Shows More Hiring
rur ro cnan
-Nonfarm Payroll Survey Growth
-- HousehddSurveyGrowth
- ~~
--- -~~ -,
~,
;, - ~ - ,
00 01 02 03
Source: BLS
• Increased hiring may already be underway.
The Labor Department releases two surveys
each month in its employment report. The
establishment survey (solid line) is typically
used to track actual job growth, but the data
is subject to considerable revision, especially
around economic turning points. However,
the household survey, which is used to
calculate the unemployment rate, shows
faster job creation. This survey suggests a
more normal jobs recovery, and a healthier
consumer.
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 8
~ r ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ' ~ ~ ~
Core Inflation Low and Productivity is High
"Headline" Inflation fell in 2003...
• "Headline" inflation, as measured by the
Consumer Price Index, trended lower in
2003 despite evidence of a strengthening
economy. Core inflation, which excludes
the volatile food and energy components,
was even lower, rising just 1.1 % in 2003,
the smallest rise in over forty years.
6
5
4
3
2
1
0
7
6
5
4
3
2
1
0
• Businesses also managed costs in 2003
through gains in output/worker hour
(productivity) and by keeping employee
expenses (unit labor costs) under control.
rear aver rear r° t;nan e
-CPI All Items (Right)
(~ --- CPI Core (Left)
` \` n ,~.
~„
~,
~- ' - ,
- ;,
.,
n - ~,.
90 91 92 93 94 95 96 97 98 99 00 01 02 03
Source: BLS
...and Productivity Remained VERY High
YoY%
~'
',
-, ,~ - ,
. ,y
-Unit Labor Casts
--• Productivity
---__-r"--_---~--~-----~-~--~-_- ---~~r-----
90 91 92 93 94 95 96 97 98 99 00 01 02 03
Source: BLS I+
0
6
4
2
0
-2
-4
'City of Winter Springs General Employees' Pension Plan TRLISCO CAPITAL MANAGEMENT s
~ ~ ~ ~ l~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
History Suggests Election "Hype" was Last Year
Roosevelt D 1932 41.4°% -15.1 °o
Roosevelt D 1936 -5.5% 27.9%
Roosevelt D 1940 19.4% -15.3%
Roosevelt D 1944 0.0% 13.8%
Truman D 1948 16.5% -0.7%
Eisenhower R 1952 26.4% 11.8%
Eisenhower R 1956 8.5% 2.6%
Kennedy D 1960 18.9% -3.0%
Johnson D 1964 20.1 % 13.0%
Nixon R 1968 10.8% 7.7%
Nixon R 1972 31.5% 15.6%
Carter D 1976 12.3% 19.1 °i~
Reagan R 1980 17.3% 25.8°i°
Reagan R 1984 2.0% 1.4%
Bush R 1988 26.3% 12.4°~0
Clinton D 1992 34.1% 4.5%
Clinton D 1996 19.5% 20.3°~~
Bush R 2000 26.4% -10.1 ° -
????? ? 2004 28.7% ~
Sourrc: Necl Dai•is Resecrrclr
• It is generally thought that politicians make
grand promises to get elected and that these
inflated expectations help drive equity prices
higher. While there is hype in the year of
presidential elections, the positioning by the
markets actually begins much earlier.
• The table at left looks at the performance of
the S&P 500 in the year prior to the
presidential election as well in as the election
year. The data goes back to Roosevelt and
the New Deal.
• The returns show that market expectations
begin before the year of the election and that
with few exceptions, the best year for stocks
is the year PRIOR to the actual elections.
Since 1932, the S&P 500 rose an average of
18.1 % in the year before the election, but
rose only 7.3% in the year of the election.
• 2003, the year prior to the presidential
election, enjoyed a total return of 28.7%.
..._'~,~
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 10
~ ~ 0~ ~ ~ ~ Ili ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
Equity Markets Summa
• The S&P 500 rose 12.2% on a total return basis in the fourth quarter following a 2.6% increase in the
third quarter. The index was up 28.7% for all of 2003, and this was the largest increase since 1997.
The rebound followed three consecutive years of decline.
• All ten sectors in the S&P 500 increased in the fourth quarter led by the commodity-linked materials
and energy stocks along with cyclically-sensitive industrials, consumer discretionary and
technology stocks. The stocks of lower quality companies continued to outperform stocks of higher
quality companies in the fourth quarter, though there was modest evidence that this "counter-quality" run
reached a relative extreme and was beginning to reverse.
• Small-cap stocks generally outperformed large-cap stocks the period. However, the three-year
outperformance of small-caps reached a relative extreme, and signs of a reversion back to long
term averages increased. The S&P 600 SmallCap Index rose 14.8% in the fourth quarter and 38.8% for
the full year. The Value style outperformed Growth in the fourth quarter, after trailing in the previous
quarter, continuing the see-saw leadership pattern in 2003.
• The combination of stronger demand and improved profit margins lifted estimates on S&P 500
operating profits growth for 2003 to 15%, with a further 14% gain projected in 2004. However, the
quarterly growth is likely to peak soon and slow as the year progresses. We also recognize that legal and
regulatory changes being discussed and implemented could cause companies to adopt new, more
conservative reporting practices which would affect profits growth. We believe the cost of compliance with
many of these changes could be significant.
• The underperformance of equities on an absolute basis and a relative basis versus bonds is still
historically significant, despite the strong performance in 2003. However, the S&P 500 rose nearly
40% between mid-March and the end of December, and will be vulnerable to some profit-taking,
particularly if interest rates rise significantly.
• The expansion in the economy, supported by continued accommodative fiscal and monetary
policy, will support further earnings growth and higher stock prices, and we remain overweighted
in equities. However, gains will tend to be sporadic and volatile as the market sifts out companies with
weaker business models. We will continue to emphasize individual company fundamentals in our equity
selection process, and our purchases will be both price and timing sensitive. We will also add to positions
on weakness.
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 11
~r wr ~r ~ i ~.- .~ ~ Ir r~r~ ~ ~ ~r ~ ~r r~ ~. ~ ~.
Stocks Had A GREAT 2003
Tech Continued to Lead in Q4...
50.0
40.0
30.0 ' ^ ~
20.0
10.0
g
0.0
Disc Stpl Engy Fn Htth Ind Tech Mat Te; Util
^ 3-Mos. 14.4 8.0 15.3 11.8 8.4 14.9 12.9 23.1 13.5 8.0
^ 6 Mos. 17.0 9.3 16.5 16.6 3.4 20.1 25.1 30.9 2.9 7.4
^ YTD 37.4 11.6 25.6 31.0 15.1 32.2 47.2 38.2 7.1 26.3
Sector Perfiu-mance S&P S00 Source: f~~rc•tSet
Profits Growth to Slow from High Rate
°
40 /°
30%
20%
10%
0%
-10%
-20%
-30°/
...and Valuations Moved Higher
35
30
25
20
15
10 '
90 91 92 93 94 95 96 97 98 99 00 01 02 03
Trailing P/1: Ratio Source: [3ase(ine
Small-Caps Led Again in `03
50.0
40.0
30.0
n:
20.0
10.0
0.0
1 Mo. 3-Mos. 6 Mos. YTD 1-Yr.
^ S&P 100 5.8 10.5 12.3 23.8 23.8
^ MidCap 1.7 13.2 20.6 35.6 35.6
°
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 ^ SmlCap 1.8 14.8 22.9 38.8 38.8
S&P Op. Earnings (YOYc/n) - Olire is est. Source: Trusco Capital CcgrituliZUtion Perfornaance Source: FactSel
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 12
r r r Ir r r ~r r r ^r r r r +~r rr rr r r ~r
1.2
1.0
o.a
0.6
0.4
02
Quality Underperformed Since the Low
Companies of
higher finarzeial
quality
outperformed in
the bear market
that started in
March 2000, but
trailed in 2003.
Low Quality Stock Outperformance at Extreme
~~ i~
~
,
-A Rating -B Rating - ~ - C Rati
i'"U/
90 92 94 96 98 00 02 04
S&P A. B, & C-Rated Compaqties (Ey. Wt:.l/90=1) So«rce: Trusco
...but Underperformance is at Extreme
°
91 92 93 94 95 96 97 98 99 00 01 02 03 04
S&P A, & C Rated Compmiies (Ey. Wt. YOYc/o Ui/f) Soiure: Tr~~sco
60%
40%
20°r°
o°i°
-2o°i°
-4o°i°
-60%
-80°/
• Since the market low on 10/9/02,
financial strength has not been
rewarded in the markets. The chart at
left shows an index of "A"-, "B"-, and
"C"-rated companies rated by S&P.
January 1990 =1. While the highest
quality "A"-rated company stocks
outperformed by a wide margin since
1990, the weaker "C"-rated company
stocks outperformed in 2003.
• The relative outperformance of "C"-
and "B"-rated company stocks reached
an extreme in the second half of last
year versus the highest quality "A"-rated
company stocks. If earnings growth
rates slow from the current pace as
most expect, investors will again seek
higher quality companies.
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 13
~ ~ ~ ~ i ~ ~ ~ ~ ~ ~ ~ i ~ ~ ~ ~ ~ ~
DecembeE31~,'2003 ~ MLQS "Quality" Indices Price Performance
City
Lower Quality Companies Significantly Outperformed
Higher Quality Companies in 2003
~ rI ~ ~ ~ ~ ~ r ~ ~ ~ ~ i ~ i ~ ~ ~ ~
Period Ending MLQS "Quality" Indices Avg. 2003 Estimated P/E Ratio
December 31, 2003
High Quality Remains Undervalued Relative to Low Quality
Source: Merrill Lynch Quantitative Strategy
~:~~ ~,-
"E. ~. ~ ~.
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 15
A+ A A- B+ B B- C&D
~r r r r r ar r~ rr r r r r r r r r rrl r r
Fixed Income Markets Summary
• The Lehman Aggregate Bond Index rose 0.32% on a total return basis during the fourth
quarter, and was up 4.11 % in 2003. This was the fourth consecutive positive year for the
index, and the eighth increase in the past nine years. However, Treasury yields rose during
the quarter, primarily in the longer maturities, with the yield on the 10-year note finishing the year
at 4.26%.
• The Treasury yield curve steepened in the fourth quarter, with the spread between 3-month
and 10-year yields widening to 332 basis points on December 31 from 298 on September 30. The
yield increases were concentrated in maturities of 2 years and beyond.
• Credit spreads narrowed slightly during the quarter, with the spread between 10-year "A"
rated corporate bonds and 10-year Treasury securities falling to 74 basis points, the lowest
differential in nearly five years, and within 20 basis points of the low in early 1997. While additional
declines in credit spreads are likely, we do not look for a repeat of the sharp declines of 2003.
• Mortgage-backed bonds again led the investment-grade sector of Lehman Aggregate in the
fourth quarter, although credit-sensitive bonds continued to outperform Treasuries. The
Lehman Mortgage-Back Security Index rose 0.93% in the quarter, and the Credit Index increased
0.49%, while the Lehman Treasury Index declined 0.52%. The High Yield market added 5.91
in the final quarter, and was up 29% in 2003.
• Although we believe that the 20-year secular decline in interest rates is ending, a sharp rise
from this point is unlikely over the near-term given current Fed policy and the vulnerability of
interest-sensitive sectors. As a result, we are positioning portfolio durations neutral relative to
benchmarks. We remain overweight in mortgage-backed securities and, to a lesser extent,
corporates even though yield spreads have narrowed. We believe this will allow portfolios to "out-
yield" the market, during this low bond yield period.
_ ~
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 16
rr rr r r rr rr r rr rlr rr r rr ~r r rr r rr r r
Bond Returns Positive Again in 2003
Yields Higher, Curve Still Steep...
6.0
5.0
4.0
3.0
2.0
1.0
Credit Spreads Narrowed Further
200
150
100
0.0 ' ' 50 I ~ I
0 5 10 15 20 25 30 90 91 92 93 94 95 96 97 98 99 00 01 02 03
Treasur-~• Yield Cun~e Source: 6loontberg 10-Yr. "A °-Rated Coy jz vs. Treastu~' Source: Merrill L~•nek
Longer Bonds Bear Brunt of Rate Rise Corporate/High Yield Led Again in Q4
3 35
2
1 ;'_~:p
~ ~ t' 30
25
0
20
-1 ~
15
-2
_3 10
5
-4
-6 -5
3 Mo 6 Mo 2 Yr 5 Yr 10 Yr 30 Yr Agg G/Cr I G/C Tr Agy Cred ABS MBS HiYd Mun
^ 3-Mos. 0.27 0.32 0.09 -0.72 -1.33 -1.58 ^ 3-Mos. 0.32 -0.02 0.06 -0.52 -0.24 0.49 0.33 0.93 5.91 0.86
^ 6 Mos. 0.51 0.59 0.50 -1.15 -3.07 -4.86 I^ 6 Mos. 0.18 -0.52 0.04 -1.44 -0.80 0.34 0.61 1.44 8.84 1.24
^ YTD 1.15 1.29 2.20 2.13 1.27 0.66 s YTD 4.11 4.68 4.30 2.25 2.59 7.69 4.02 3.05 28.96 5.10
TreasurvReturns Source:GehntanBrotl:ers SectorRetnrns Source:LehnaanBr-others
City of Winter Springs General Employees' .ter
Pension Plan TRUSCO CAPITAL MANAGEMENT
17
12/31/2003
9/30/2003
6/30/2003
12/31/2002
r~ r rr rr r~ r~ r~ rr rr r r r~ err r rr rr rr r rr
Period Ending Credit Sector Performance
December 31, 2003
• The credit sector of the fixed income markets rebounded sharply
in 2003 from the scandal-depressed levels of late 2002. The rally
was led by the lowest quality sub-sectors, which posted well
above average returns for the year.
• In addition to much-improved investor sentiment, the credit rally
was fueled by a stronger economy, company managements
focusing on cash flow and balance sheet enhancement, and a
dramatic decline in credit rating downgrades.
• The most dramatic improvement was in the most speculative
names, which drove high yield to its second best year ever.
Cross-over names (those rated investment grade by only one
agency) enhanced index returns and held back the relative
performance of most funds which require investment grade
ratings both Moody's and S&P.
• The significant difference in sector performance, in the current
environment of low absolute levels of interest rates
(approximately 4% on the ten year Treasury note), resulted in
meaningful differences in index results. For example, the "A or
better" credit index which earned 5.46% in 2003 trailed the broad
credit index by 224 basis points.
~~ ~-
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 18
Period Ending I Duration-Adjusted Returns by Credit Quality Sector
December 31, 2003
The credit
markets recovered
sharply in 2003 as
investors began
discounting
improved
fundamentals,
especially for the
weakest segments
of the fnarket.
3,000
2,500
2,000
c
'o
y 1,500
.y
W
m 1,000
500
0
2003 Annual Excess Returns
Aaa Aa A
200
0
-200
-400
~o
~, -600
.y
f0
m -800
-1000
-1200
-1400
2002 Annual Excess Returns
75
50
25
0
N
.N
m 0
-25
-50
Baa High
Yield
10 Year Annualized Excess Returns
Aaa Aa A Baa High Yield Aaa Aa A Baa High Yield
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 19
~ ~ ~ ~ ~ ~ r ~ ~ ~ ~ ~ ~ ~ . ~ . ~ ~
Period Ending I Historical Sector Spread Relationships
December 31, 2003
Credit sector
spreads
declined
significantly in
2003 to the lows
of late 1998. We
are taking
advantage of the
relative
attractiveness of
mortgages with
an overweight in
that sector.
• Option-
Adjusted
Spread on 1-
10Year Credit
Sector Bonds
• Spread to
Weighted
Average Life
on FNMA
Bonds
300
m
c
S 250
a
N
200
iv
~ iso
100
° 50
0
0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
2so
~, 200
C
O
m 150
a
~ 100
250
^Spreads on Current Coupon FNMA Bonds Vs. 1-10 Year Credit Sector
-- 200 -
• Relative value a ,50 -
of FNMA m ,oo -----
Bonds Vs. 1- ~ 50
10 Year Credit ~ o
Sector Bonds -50
-,oo .
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Datn Source: Citigro~~p Yreldbook
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 20
50
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
~ ~ ~ l~ ~ i ~ i ~ ~ ~ ~ ~ ~ ~ l~ ~ ~ ~
Summary of Investment Outlook and Strategy
• Equities finished 2003 on a strong note, lifting the S&P 500 to its best performance since
1997. Fixed-income performance, while mixed, was positive in aggregate during the fourth
quarter, and rose for a fourth consecutive year.
• Economic activity broadened in the fourth quarter, particularly in the corporate sector, as
increased orders, amid relatively lean inventory levels, spurred higher production and capital
spending. Job growth, however, was only modest.
• The economy is in a cyclical "sweet spot," characterized by stronger growth and stimulative
fiscal and monetary policies, but an absence of inflation. Continued growth in corporate profits will
power further gains in capital spending and increased job growth in 2004. Job growth is an
essential element of a sustained recovery.
• Inflation will likely remain low over the near term, but we expect no further declines from this
point, and believe that upward inflation pressures will re-emerge in 2004. The Federal
Reserve will retain a supportive monetary policy until pricing firms, and job growth
accelerates.
• Stocks remain historically attractive relative to bonds and we recommend an overweight
position in equities within asset allocation ranges, though not a maximum allocation,
given the sharp market rally since March, and increases in bond yields. We will be wary of any
excessive market euphoria that outstrips fundamental strength, and we will be very price
sensitive in the entry and exit strategies for individual stocks. However, we will use any periods
of market weakness to add to equity positions.
• In fixed-income portfolios, we believe yields reached a secular low in mid-2003, but significant
increases are unlikely while inflation remains low and the labor market is weak. We recommend
a neutral relative duration of bond portfolios. We continue to emphasize mortgage-backed
securities and selective corporates as effective investments to enhance current yield in
portfolios.
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT ~ 21
~ 1~ r !~ ~ ~ ~ i ~ ~ 1.11 ~ ~ ~ ~ ~ ~ +• ~
Period Ending ~ Accou nt Activity Summary
December 31, 2003
~ - - • ~ -
Portfolio Value on (9/30/2003) $ 7,039,995 Portfolio Value on (12/31 /2002) $ 5,875,217
Beginning Accrued Income $ 51 Beginning Accrued Income
V
l $
$ 99
875
317
5
Portfolio Value
Contributions $
$ 7,040,045
226,763 ue
Portfolio
a
Contributions $ ,
,
922,258
Withdrawals $ (53,484) Withdrawals $ (202,191)
Gain (Loss) $ 656,545 Gain (Loss) $ 1,267,927
Interest and Dividends $ 14,508 Interest and Dividends $ 21,115
Net Accrued Income $ (13) Net Accrued Income $ (62)
Market Value $ 7,884,327 Market Value $ 7,884,327
Ending Accrued Income $ 37 Ending Accrued Income $ 37
4~ ~.r.
5 ~-.
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 22
~ ^r rr r ~ r sr ~ r rr r ors ~r rrf .~r ~ r w i^r
Period Ending Performance Comparisons
December 31, 2003
Inception
Trailing Trailing Trailing Trailing to Date
Quarter 12 Months` 36 Months' 60 Months' 120 Months` 121 Months"
.~ ~ ~
Total Equity 13.48% 28.34% -0.39% 4.76% 10.79% 10.89%
SunTrust Retirement High Grade Growth Fund 10.41% 20.94% -1.55% 2.66% 12.47% 12.55%
S & P 500 Index 12.18% 28.68% -4.05% -0.57% 11.06% 1. i 0%
S & P 500 Barra GroKth Index 9.93% 25.66% -5.72% -3.49°% 11.11 % 11.09
SunTrust Retirement High Grade Relative Value Fund** 14.05% 26.68% -1.68% 1.93% 9.76% 9.83%
S & P 500 Barra Value Index 14.45% 31.79% -2.71 % 1.95 % 10.54% 10.63%
S & P 500 Index 12.18% 28.68% -4.05% -0.57% 11.06% 1.10%
SunTrust Retirement Mid Cap Equity Fund 13.23% 28.37% -3.33% 9.57% N/A N/A
S & P Mid Cap 400 Index 13.19% 35.62 % 4.84% 9.21 % 13.92% 14.32%
Russell Mid Cap Index 13.97% 40.06% 3.47% 7.23% 12.14% 12.43%
STI Classic Small Cap Growth Fund 14.21% 45.64% 3.74% 8.51% N/A N/A
S & P Small Cap 600 Index 14.78% 38.79% 8.07% 9.73% 11.44% 11.76%
Russell 2000 Grovtth Index 12.68% 48.54% -2.03% 0.86% N/A N/A
STI Classic Small Cap Value Equity 15.92% 37.05% 17.74% 13.37% N/A N/A
Russell 2000 Value Index 16.37% 46.03 % 13.83 % 12.28 % 12.69% 12.91
STI Classic International Equity Fund 17.63% 36.86% -2.23% -0.25% N/A N/A
STI Classic International Equity Index Fund 17.02% 40.54% -3.53% -0.54% N/A N/A
MSCI EAFE Index 17.07% 38.57% -2.99% -0.10% 4.44% 5.13%
Total Fixed Income -0.17% 3.51% 7.77% 6.50% 6.97% 6.95%
SunTrust Retirement High Grade Bond Fund -0.06% 3.62% 7.79% 6.53% 7.00% 6.99%
Lehman Govt Credit Bond Index -0.03% 4.67% 8.04% 6.66% 6.98% 6.97%
Lehman Aggregate Bond Index 0.32% 4.10% 7.57% 6.62% 6.95% 6.94%
°Return is annuali<ed.
*M -Inception 6/_30/2002. Longer tern/ results are linked to the STl Classic Crox•th and /nconte Fund to sho~c results prior to inception.
City of Winter Springs General Employees' Pension Plan TRLISCO CAPITAL MANAGEMENT ~ 23
r r ,r IIII~ ar ~ rr Illllllr ~r Illlli~ irll lis r ~^^~ » Ir r 1r r
Period Ending I Portfolio Composition
December 31, 2003
Total Fixed
Income
27.2%
Total Equities
72.4%
SunTrust Retirement High Grade Growth Fund $ 1,624,242.36
SunTrust Retirement High Grade Relative Value Fund $ 1,360,432.85
SunTrust Retirement Mid Cap Equity Fund $ 835,147.77
STI Classic Small Cap Growth Fund $ 617,560.02
STI Classic Small Cap Value Equity Fund $ 466,526.12
STI Classic International Equity Index Fund $ 800,845.24
STI Classic International Equity Fund $ 548.84
Total Equities $ 5,705,303.20
SunTrust Retirement High Grade Bond Fund $ 1,544,331.46
SunTrust Retirement High Grade Intermediate Bond Fund $ 598,343.82
Total Fixed Income $ 2,142,675.28
Money Market Funds $ 36,897.83
Total Monev Market $ 36,897.83
20.6%
17.3%
10.6%
7.8%
5.9%
10.2%
0.0%
72.4%
19.6%
7.6%
27.2%
0.5%
0.5%
~x } ~ ~ ~"
~a,.
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 24
Total Money
Market
n r~i
~ ~ r fir ~ `s ,~ s ~r ~ ~ ~ ~ rr rr Ir r~la r ~
Period Ending SunTrust Retirement High Grade Growth Fund
December 31, 2003
Fund Description
Value BIerW Grow[h NAV: $52.60
Large
Assets (mil):
$192.07
Medium
Smell
Investment Category
Large Growth
..
Security Equity
Securit
Equity
Pfizer Inc. 3.4% Health Management. 2.6%
Microsoft Corp. 3.3% Johnson & Johnson 2.5%
Exxon Mobil Corp 3.0% Affiliated Computer Svc 2.3%
Intel Corp. 2.9% Deere & Co. 2.3%
American Expres 2.8% 3M Co. 2.2%
The fund seeks capital
appreciation by investing primarily
in large, well established domestic
corporations in the top three
quality rating categories of major
credit rating agencies, including
Value Line, Moody's or Standard
& Poor's, and must be listed on a
major exchange or NASDAQ.
Consumer Discretionary
Consumer Staples
Energy 6.4
s.a%
Financials
Cash: 1.1
U.S. Stocks: 98.9%
Non-U.S. Stocks: 0.0%
~~~s ~o~~
111.3
o.s%
11.0%
Healthcare 16.0
20.7
Characteristics Fund S&P 500 Index Industrials 14'0%
1o.s%
Dividend Yield (Current) 0.9% 1.6°'~ h
l
T 16.°%
Information no
ec
ogy 7.7 %
Market Capitalization ($bil) 74.6 89.8
0
0
Price-to-Book 3.6x 3.1 x Materials .
3.0%
P/E (12 mo fwd)
21.1x
19.4x Telecom Seruces 0.0
3.s%
~ Fund
EPS Growth (5 yr est)
15.5
12.2
utilities o.o %
2 e,
^ S&P 500 Index
ROE 19.4 '
-. - -
Annualized
Three One Three Five Ten Inception
Months Year Year Year Year 04/01/1990
Fund 10.4% 20.9% -1.6% 2.7% 12.5% 12.8%
S&P 500 Index i'?.2°.~ 2~~ ~~~~ -4.1°~ -U.6 ~~ 11.1°0 1t~°~o
Lipper Growth Funds Index 10.1% 27.0% -11.4% -5.5% 7.8% 9.4%
17.2 %
__ _.
City of Winter Springs General Employees' Pension Plan TRl1SC0 CAPITAL MANAGEMENT 25
r r. r l~ ~ ~s r lllis ~r ra .~ Its ~r r ,.~ ~: t~s I>• ~
Period Ending SunTrust Retirement h Grade Growth
Hi Fund
December 31, 2003 g
The stock market surged in the fourth
quarter of 2003 with the S&P 500
Index returning 12.2%. For the year,
the index was up 28.7%, reversing a
three year fall in prices. The High
Grade Growth Fund advanced 10.4%
in the quarter and 21.0% for the year.
The primary reason the Fund lagged
was the surge of low quality stocks
which had little or no earnings. For the
quarter, the sectors that performed the
best were Materials, Energy and
Industrials. Lagging was Consumer
Staples, Utilities and Healthcare,
despite returning 8% to 9%. The
source of investor's enthusiasm for
stocks was a continuing series of
positive economic statistics. Looking
ahead, above average economic
growth and strong corporate profits
will be seen in 2004. While the stock
markets initial rebound from the low in
October of 2002 favored depressed,
low quality issues, the emphasis in
2004 will shift to those stocks showing
strong earnings, which are the stocks
that make up our portfolios.
Fund Manager:
Elliott Perny, CFA
~ - - -
1997 1998 1999 2000 2001 2002 2003
First Quarter 2.6% 15.4% 5.6% 0.2% -4.8% 2.4% -2.2%
Second Quarter 18.8% 5.7% 5.1% 0.6% 5.8% -10.9% 9.6%
Third Quarter 7.3% -12.4% -7.7% 2.6% -13.6% -14.9% 2.0%
Fourth Quarter 3.7% 25.9% 14.8% -1.7% 12.3% 4.0% 10.4%
Fund 35.5% 34.7% 17.6% 1.6% -2.3% -19.3% 20.9%
Lipper Growth Funds Index 28.1 % 25.7% 28.0% -10.9% -18.0% -24.2% 27.0%
Growth of $10,000 from 04/01/1990 to 12/31/2003
$60, 000
$50,000
$40,000
$30,000
$20,000
$10,000
$0 -~
m m~~~~~~ m 8 s o 0
Fund S&P 500
- - -
3 Year
Alpha Beta R-Squared Sharpe Ratio Std. Deviation
Fund 0.09 0.67 74.95 -0.28 13.89
S&I' SU0 in~i~x O.UO ? OU ' ~, ~.. 35 '8.07
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 26
~s ~ r r~ a~ ~ ~ ~ air rs ~r li^a L~ ~ ~ r~ r~^r ~ r~
Period Ending SunTrust Retirement High Grade Relative Value Fund
December 31, 2003
Velue BlefW Growth The Fund seeks long-term capital Cash: 1.7%
~r~ Cusip: 990001182 appreciation with a secondary goal of U.S. Stocks: 98.3%
NAV: $11.14 current income by using a value-
Medium Assets (mil): $61.5 oriented investment strategy focused
on large well-established companies
small in the top three quality rating
Investment Cate o categories of major credit rating r.
9 rY agencies, including Value Line,
Large Value Moody's or Standard & Poor's.
Securitv %Equity Securitv %Equity
Exxon Mobil 2.2% Berkshire Hathaway 2.0%
ConocoPhillips 2.2% CR Bard 1.9%
Emerson Electric 2.0% United Tech 1.9%
Illinois Tool Works 2.0% Comerica 1.9%
hevronTexaco
.0%
NC Financial Consumer Discretionary 9
consumer Staples
Energy
1.8% Fnancials
Fieatthcare 9's
36'-
Barra Industrials 15.7°/
36.3
Characteristic Fund Value s.3%
Dividend Yield (Current)
1.9%
2 0°~~ 11.7%
Inf orrtetion Technobgy 6 Qo,
EPS Growth (5 yr.) 7.0% 0.0°~ az%
Market Capitalization ($bil)
64.4 B
63.0 B Materials 3.6
Price-to-Book
2.8X
2.2x 3.6
Telecom services
s.o %
P/E (12 months trailing) 18.2x 17 6x 3,a % ^ Fund
Return on Equity
16.0%
1 1 <L° Utiltties
s.s% ^ Barra Value Index
-. - -
Annualized
Three One Inception
Months Year 6/30/02
I Fund 14.1% 26.7% 7.5%
Barra Value Index 14.~`.~ 31.8'-: 9.9~.,
2.6
8.3
a.o
1o.s %
1s. %
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 27
Period Ending l SunTrust Retirement High Grade Relative Value Fund -
December 3' . =?^~'?
Strong profit reports along with
encouraging economic news
drove the equity market to a
strong finish for 2003. The Barra
Value Index rallied 14.5% during
the fourth quarter, boosting its
annual return to 31.8%. The
Fund also posted robust quarterly
results, gaining 14.1 % for the
period and returning 26.7% for
the full year. Final period Fund
results benefited from surging
industrials, energy, and financials
as the pro-cyclical positioning
regained sync with the market's
increasing conviction in economic
rebound. While it appears that
the best is now "here" for equities,
that does not immediately
translate into "over". Thus
economic and market tailwinds
heading into 2004 should propel
additional gains, albeit with
increasingly difficult sledding.
Fund Manager:
Charles B. Arrington, CFA
~ - -
2002 2003
First Quarter N/A -4.1
Second Quarter N/A 13.5%
Third Quarter -17.4% 2.1%
Fourth Quarter 6.5% 14.1
Fund -12.1 % 26.7%
Barra Value -12.6% 31.8%
Growth of $10,000 from 6/30/2002 to 12/31/2003
$12, 000
$11,500
$11,000 '~ __~/
$10,500
$10, 000 .~ _
$9, 500
$9,000 - ~
$8,500 ~ / ~,
$8, 000
$7, 500
$~,ooo
Jun Sept Dec Mar Jun Sept Dec
- SunTrust High Grade Relative Value S&P/Barra 500 Value
'~ a y~~ _~ 'fir
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 28
rr ~^^ ~ ~ ~r ~ ~ ~ ~ i~ ~ ~ r~r ~ ~ ~ ~ r rr
Period Ending SunTrust Retirement Mid-Cap Equity Fund
December 31, 2003
Value Blend Growth NAV: $24.10
`e`er Assets (mil): $37.43
Medium
smen
Investment Category
Mid-Cap Blend
Securi Equity Securi Equity
OGE BVERGY CORP. 1.9% WEBSTER FINANCIAL 1.6%
POTLATCH CORP. 1.7% PfTNEY BOWES INC. 1.6%
COMERCIA INC. 1.7% ROCKWELL COLLINS 1.5%
ASHLAND INC. 1.7% FIRST INDUSTRIAL REALTY 1.5%
MARATHON OIL CORP. 1.6°b MAY DEPT. STORES CO. 1.4°~b
•• • e -
Characteristic Fund Russell Mid-Ca p
Dividend Yeld (Current) 1.1% 1.7°0
Market Capitalization ($bil) 3.4 5.7
Price-to-Book 2.4x 2.4x
P/E (12 mo trailing) 20.Ox 17.Ox
Price-to-Sales 1.2x 1.1 x
The fund seeks long-term capital Cash: 1.7%
growth through investment in a Stocks: 98.3%
diversified portfolio of stocks of
domestic corporations with a
market capitalization between $1
billion and $10 billion and must be
us sa~~
listed on a major exchange or ~~ ~~°~
NASDAQ. , ~o
21.5
Fnancials
20.3
r7.s%
Information Technology o
15.7°
n.o %
Consumer Discretionary
17.6 %
12.0 %
Industrials
11.4%
11'1
Flealth Care
12.6 %
Nhterials 5.6
4.4 %
5.2
Energy 6.4
Utilities 4.8
6.4
Consumer Staples 3.7 % ^ Fund
4.6
1.2 ~ ^ Russell Midcap Index
Telecommunication Services
Annualized
Three One
Months Year
Fund 13.2% 28.4%
Russell Mid-Cap Index 14.0°0 40.1°,0
Lipper Mid Cap Core Funds 13.1 % 36.1
Three Five Seven Inception II
Years Years Years 12/1996
-3.3% 9.6% 13.4% 12.7%
3.5° , ~' ?' 10.5°'0 10.2°-a
2.7% 8.7% 10.1 % N/A
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 29
i~r r ~t ~ ~ ~ ~ ~ ~1^f ~ r era ~ ~ ~ rr Ewa it ~
Period Ending SunTrust Retirement Mid-Cap Equity Fund -continued
December 31, 2003
The Russell Mid Cap Core was up 3.0% in
December, bringing the QTD return to
+14.0%, and YTD return to +40.1 %.
Sectors with the highest Q4 returns were:
Materials +21.9%, Industrials +16.5%, and
Information Technology +16.1 %.
Sectors with the lowest returns were
Healthcare +9.0%, Utilities +9.3%, and
Consumer Staples 10.5%. Higher Beta
stocks outperformed lower Beta stocks.
The gap between returns of Low Quality
and High Quality stocks was high again in
Q4. This trend led to an enormous spread
of 55% for full year 2003. Investors are
thus paying a premium for risky, Low
Quality Stocks. As this anomaly unravels
performance of the Fund should improve
based on its significantly higher quality
profile.
Fund Managers:
Kevin Shea, CFA
Chad Deakins, CFA
1997 1998 1999 2000 2001 2002 2003
First Quarter -1.2% 13.8% -0.6% 21.5% -11.7% -5.5% -4.9%
Second Quarter 14.5% -1.3% 19.1 % -1.5% 16.5% -13.4% 14.1
Third Quarter 16.7% -17.9% -3.1% 6.0% -21.0% -15.3% 4..5%
Fourth Quarter -0.5% 25.9% 35.8% -11.6% 24.5% 0.5% 13.2%
Fund 31.4% 16.0% 55.9% 12.2% 1.2% -30.4% 28.4%
Russell Mid-Cap Index 29-0~', 10.1°~ 1H.2"~, 8.3°0 -5.6°~~ -16.2°-~ 40.1°~
Lipper Mid Cap Core Funds 22.2% 7.8% 28.2% 6.3% -4.9% -17.4% 36.1
$35, 000
$30, 000
$25, 000
$20, o00
$1 s,ooo
$10, o00
$5, 000
$0
Dec-9
3 Year
Alpha Beta R-S uare Sharpe Ratio Std. Deviation
Fund -0.65 1.03 0.87 -0.50 20.60
Russell Mid-Cap Index 0.00 t00 ? .~Oi: -~:~_ 1 1 i 8.51
~~~~,. ,:
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 30
6 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03
Fund Russell Midcap Index
.r +11^~ amt 1~ ~rs ~ ~ r 1i ~ rr r rs r ~ ~ ~ ~
De emberE31d12003 STI Classic Small Cap Growth Stock Fund
Value Blend Growth
Large
Medium
Small
Investment Cateoorv
Small Growth
Ticker: SSCTX The fund seeks long-term
Expense Ratio: 1.20% capital appreciation by
investing in the stocks of
NAV: $19.69 companies with market
Assets (mil): $843.8 capitalization between $50
million and $2 billion at the
time of purchase
Securitv % Equity Securitv % Equity
Protein Design Labs 1.0% JOS. A. Bank Clothier .9%
R & G Financial Corp .9% Sierra Health Svcs .9%
Dot Hills Systems .9% SM&A .9%
Kos Pharmaceuticals .9% Cypress Semicon. .9%
4 Kids Entertain. .9% Integrated Device .9%
Characteristic
Dividend Yield (Current)
EPS Growth (5 yr est.)
Market Capitalization ($bil)
Price-to-Book
P/E (12 months trailing)
Return on Equity
S&P 600
Fund Sm. Cap Grth
0.2% 0.5°0
18.9% 17.2°~0
0.9 1.3
2.7x 3.7x
21.1x 22.7x
11.8% 14.8%
Consumer Discretionary
Consumer Staples
Energy
Rnancials
Healthcare
Industrials
Information Technology
Materials
Telecom Services
Utilities
2a.2 %
!3.0
Annualized
Three One Three Four Five Inception
Months Year Years Years Years 10/08/1998
Fund 14.2% 45.6% 3.7% 5.7% 8.5% 16.3%
S&P G00 Small C~:,p C=r~o~wih "i,c'.E%~ 3~.0`'. "~~ ',' 6.7~<, ?0.5°~,
Lipper Small Cap Growth Classification 12.6% 44.4% -3.5% -4.3% 4.9% 13.1%
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 31
Cash: 0.0%
U.S. Stocks: 100.0%
~r r a~ r~ ~ ~ ~s r~ t~s ~ ~ ~. ~ ~ ~ r r~ •~
Period Ending STI Classic Small Ca Growth Stock Fund -continued
December 31, 2003 p
Small cap stocks outpaced large
caps in the 4th quarter as the S&P
600 and Russell 2000 indices
returned 14.8% and 14.5% versus
the 12.2% return of the S&P 500.
However, December did exhibit a
reversal of this trend; the S&P 500
returned 5.3% versus 1.8% for small
caps. The quarter was characterized
by robust, double-digit returns across
most sectors. Technology performed
well, but a December sell-off held
returns to below the index average.
The Small Cap Growth Fund posted
a 14.2% return for the quarter, ahead
of the S&P 600 Barra Growth return
of 13.0% and the Lipper SmallCap
Growth Average of 12.6%. The Fund
capitalized on its broad market
exposure, including overweights in
Energy, Industrials, and Materials.
Fund Manager:
Mark Garfinkel, CFA
1998 1999 2000 2001 2002 2003
First Quarter -11.4% 16.4% -10.6% 1.1% -6.4%
Second Quarter 20.8% -0.1 % 16.0% -10.2% 24.2%
Third Quarter -5.2% 0.3% -22.8% -19.9% 9.7%
Fourth Quarter 46.3% 18.8% -4.1% 23.9% 6.2% 14.2%
Fund 0.0% 20.6% 11.8% -0.8% -22.7% 45.6%
S&P 60(1 Snu~ii ~ ,i, _?.r :~th ir~~rrx 2 3°_ ~'± 6 -L2~ 'S -1'' 37 3~ _
Lipper Small Cap Growth Classification 5.4% 63.4% -6.2% -11.3% -29.7% 44.4%
$30, 000
$2s.ooo
$20,000
$1 s,ooo
$t o, o00
$5, 000
Oct-98 Apr-99 Oct-99 Apr-00 Oct-00 Apr-01 Oct-01 Apr-02 Oct-02 Apr-03 Oct-03
Fund
S&P 600 Small Cap Growth Index
3 Year
Sharpe Std.
Alpha Beta R-Squared Ratio Deviation
Fund 0.7 0.9 1.0 0.1 6.7
S&P GUU ti~nall Crap ~iio~lUl Index t) 0 tai ~ (! i) t .:
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 32
Period Ending I STI Classic Small Cap Value Fund
December 31, 2003
Value Blend Growth The fund seeks long-term Cash: 4.0%
Ticker: SCETX U.S. Stocks: 79.9%
Large ° capital growth and income by °
Expense Ratio: 1.25 /° investing in the stocks of Non-U.S. Stocks 16.1 /°
Medium NAV: $17.44 companies with a market
amen Assets (mil): $656.8 capitalization between $50
million and $2 billion.
Investment Category
Small Value "°"'~_
Top Ten Holdings Industry Concentration
Securit %Equity Security %Equity
Harris Corp. 4.0% Winnebago Ind. 2.2%
Autodesk Inc. 3.7% CP Ships Ltd. 2.0%
Brink's Co. 2.8% Circuit City Stores 1.9%
Embraer-Empresa 2.7% Texas Instruments 1.7%
Reynolds & Reynolds 2.3% Church & Dwight 1.7%
• • • -
Russell
Characteristic Fund 2000 Value
Dividend Yield (Current) 1.5% 1.5%
EPS Growth (5 yr est.) 13.1% 11.1%
Market Capitalization ($bil) 1.7 0.8
Price-to-Book 2.Ox 1.6x
~ P/E (12 months trailing) 20.4x 17.4x
E 't 101°/ 47°%
Consumer Discretionary
Consumer S[aples
Energy
Fnancials
Healthcare
Industrials
Infornetion Technobgy
Materials
o.o
Telecom Services 0 9
23.3
15.1
6.7
4.0
3.0 %
.4.3%
1 z.7%
31.0
®4.5
zs.z%
7.7
~ r7.z%
1as%
1 z.a %
^ Fund
^ Russell 2000 Value Index
Return on qul y ° - ~~~~~~~_ ~ 5.3%
- • - • • - •
Annualized
Three One Three Five Seven Inception
Months Year Year Year Year 8/31/1994
Fund 15.9% 37.1 % 17.7% 13.4% 8.4% 15.4%
Russell 2000 Value Index 16 ^°~ 46.0°~ X3.8°~ 1?.3°~ 11.9°~~ 1~.5°~,
Lipper Small Cap Value Index 16.5% 47.5% 15.4% 12.7% 11.8% 12.8%
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 33
.~r .~ a~ ~ r ~r ~ ~ ~ ~ r ~r. .rs ^r .~ r ~ rr ^s
Period Ending STI Classic Small Cap Value Fund -
December3l, 2003 continued
The STI Classic Small Cap
Value Fund returned 3.5% for
the quarter versus 3.6% for
the Russell 2000 Value Index.
Poor quality companies were
the top performers for the
quarter and the year. While
the Fund lagged the index, it
also took on considerably less
risk than the benchmark.
However, our strict adherence
to quality, lower risk
companies allows the Fund to
outperform in the long run.
We believe the market is
refocusing on fundamentally
strong, profitable companies.
This bodes well for our
bottoms-up, dividend paying
investment process which
prefers quality stocks over
high risk, unprofitable
companies.
Fund Manager:
Brett Barner, CFA
.. - - -
1996 1997 1998 1999 2000 2001 2002 2003
First Quarter 8.3% 4.8% 9.7% -13.3% -4.1% 5.5% 9.7% -6.4%
Second Quarter 6.2% 15.0% -8.9% 19.8% 5.9% 8.9% -1.8% 17.1%
Third Quarter 4.0% 12.5% -22.0% -8.1% 6.7% -8.1% -12.6% 7.9%
Fourth Quarter 12.2% -2.1% 11.0% 1.9% 9.0% 14.9% 4.3% 15.9%
Fund
~ sti<~il ?~?n0 Value li~ri~=*
Lipper Small Cap Value Index
$4°.~
$36.°~
$~°.~
$25.~
$z°.~
$15,000
$,°.~
34.2% 32.6% -13.5% -2.7% 18.0% 21.2% -1.7% 37.1
_ - _ ~ ~ 1 " 1 1 .. ~ , ,
20.2% 28.8% -6.7% 1.9% 16.1% 17.2% -11.2% 47.5%
$5.~
SeP-94 SeP-95 Sep-96 Sep-9] Sep-9B Sep-99 SeP-W Sep-Ol Sep-02 Sep-03
Fund Russell 2000 Value
3 Year
Alpha Beta R-Squared Sharpe Std. Deviation
Fund 5.73 0.74 95.90 0.41 19.67
Russell ~uOU Value Index u uii 1 u0 lu~~ vu U ~- ~~ ~6
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 34
r~ i ~ ~ r~ ~ ~r ~. rs ~ rr r. r ~ ~ .ia ^r. r~r +~r
Period Ending sTl Classic I nternational E u it Index Fund
December 31, 2003 a y
Value Blend Growth
Ticker:
SIEIX The Fund seeks to rovide
P
Cash:
1.1%
~ar~e
Expense Ratio:
1.06% diversification and capital Non-U.S. Stocks: 96.9%
appreciation by investing in U.S. Stocks: 2.0%
Medium NAV: $10.91
securities of companies
small Assets (mil): $324.63 headquartered or based in
foreign countries to replicate
N s. stocks Non-U.S. Stocks
9s 9~
Investment Catedorv the Morgan Stanley EAFE 20~°
Foreign Stock GDP Index. gash
~,o
.. -
Security %Equity
Security %Equity -
Siemens AG 2.0% DaimlerChrysler AG 1.2% Fnancials 25.5%
25.5
Toyota Motor Corp 1.8% Telefonica S.A. 1.2% ta.2r
Total S.A. 1.7%
Deutsche Telekom AG
1.2% Consumer Discretionary 142%
FNI S.p.A. 1.4% EON AG 1.2% Industrials 10 8
Deutsche Bank AC 1.3% SAPAG 1.1% to.si
Telecorrrrunication Services S'S~
'• • • - 8.5
Inforrretion Technobgy 8.t
81
MSCI
Characteristic Fund EAFE GDP Energy ''
7.t i
Dividend Yield (Current) 2.2% 2.2% ~o,
EPS Growth (5 yr est.)
11.1°~,
11.1% fvtateriats ~o~
Market Capitalization ($bil) 29.5 29.5 Consumer Staples s.s r
s.s r
Price-to-Book 1.9x 1.9x s.t,
P/E (12 months trailing) 18.6x 18.6x Health Care s.t r ^ Fund
Return on Equity 9.6% 9.6°a Utilities s.t ~ ^ MSCI EAFE GDP Weighted
s .t r
- -. e - . -
Annualized
Three One Three Five Seven Inception
Months Year Years Years Years 6/01/1994
Fund 17.0% 40.5% -3.5% -0.6% 4.7% 4.9%
MSCI EAFE GDP Weighted ~ i -1='- 40-i~°~ 3 ~°: ~ ~~., 4.0°;,
Lipper International Funds Objecti~,e 15.6% 34.7% -4.0% 1.3% 3.4% N/A
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 35
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~1 ~ ~
Period Ending ~ STI Classic International Equity Index Fund -continued
December 31, 2003
The MSCI EAFE GDP was up 17.4% for
the 4"' quarter of 2003, topping off a
very strong year for International equity
markets. In the 4'h quarter Europe
regained its leadership from Asian
markets. European markets were up
23% vs. 9% for Asian markets. Higher
beta stocks outperformed lower beta
stocks as may be expected in an
upward market. The best performing
sectors were Materials, Energy, and
Financials while Healthcare, Consumer
Staples and Information Technology
had lower returns. One of the big
stories of '03 was the weakening of the
U.S. dollar; the Euro gained 8% vs. the
~~, U.S. dollar in the 4th quarter and 20%
for the full year of 2003.
Fund Manager:
Chad Deakins, CFA
1996 1997 1998 1999 2000 2001 2002 2003
First Quarter 1.9% 0.5% 17.6% 1.9% -0.6% -12.2% 0.9% -8.2%
Second Quarter 3.0% 11.8% 4.8% 4.3% -4.3% -1.4% -1.5% 20.1%
Third Quarter -0.9% 2.6% -13.0% 5.7% -8.5% -15.5% -20.5% 8.9%
Fourth Quarter 2.0% -5.5% 21.3% 16.4% -4.7% 4.5% 5.7% 17.0%
Fund 6.0% 9.0% 30.0% 30.7% -17.1% -23.5% -16.5% 40.5%
~~1SCi f r i;i~ J;au~ b'~_f > 1 ~i' , ~ _ 1~_.d'_ 2:3 3~~ i .. -lU_0~
Lipper Intemational Funds 14.4% 7.3% 12.7% 37.8% - 14.7% -19.3% -16.7% 34.7%
$25, 000
$20, o00
$15,000
$10,000
$5,000 ~
Jun-94 Jun-95 Jun-96 Jun-97 Jun-99 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03
Fund MSCI EAFE GDP Weighted
Alpha Beta R-Squared Sharpe Ratio Std. Deviation
Fund 0.02 0.99 1.00 -0.50 18.01
,. ~ ~,,. , w ~ ~ i~ ~ ,; c~; ~ ~
Lipper Intemational Funds Objective 0.07 0.88 0.75 N/A 18.12
- S by
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 36
rs ~ ~ rr r ~ ~ r r ~ r r r rr rr ~ it r r
DecembeE3l,l 003 STI Classic International Equity Fund
Cash: 0.3°%
~~ - = •-= ~~, Ticker: STITX The Fund seeks long-term
Stocks: 99.7 /°
Large Expense Ratio: 1.45% capital appreciation by
investing primarily in a
Medium NAV: $10.07 diversified portfolio of equity 99 00
sa,au Assets (mil): $253.25 securities of foreign issuers.
Investment Category ca51, `
Foreign Stock
Top Ten Holdings Industry Concentration
Security %Eguity Security %Eguity
Vodafone Group PLC 2.5% Total S.A. 1.7% Fnancials
BP PLC 2.5% Telefonica S.A. 1.3% t5.s%
Consumer Discretionary
HSBC Holdings FLC 2.3% Nestle S.A. 1.3% t 2.7 %
Novartis AG 2.2% BNP Paribas S.A. 1.3%
Telecorrrrunication Services s.5 %
GlaxoSmithKline PLC 2.2%
Toyota Motor Corp.
1.3% 7.8
s z %
Industrials
8.9
• • • -
HeaRh Care
8.5%
9.0
Characteristic Fund EAFE Ener9Y ss%
Dividend Yield (Current) 2.3% 2.4°~ InformationTechnology 68ss%
EPS Growth (5 yr est.) 10.3% 10.4°~ ss%
Market Capitalization ($bil) 44.2 42.0 Consumer Staples a 5 %
PrICe-tO-Book 2.Ox 2.OX tvtaterials 5.5%
P/E (12 months trailing)
16.4x 17.9x ss % ^ Fund
%
4
Return on Equity 12.8% 12.1°o Utilities .~
a.~% ^ MSCI EAFE
zs.o%
26.5
Annualized
Three One Three Five Seven Inception
Months Year Years Years Years 2/01/1995
Fund 17.6% 36.9% -2.2% -0.3% 3.4% 8.9%
MSCI SAFE Index , ~ ,. 38 E~": ~ :~~'..~ -0 '~ 4 `?'~~
Lipper International Funds Objective 15.6% 34.7% -4.0% 1.3%
~ 3.4%
~: N/A
-.~ ~ ~~ • ~~~
. -
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT ~ 37
err rrr ar r`i ^t rr r~ r~ r ~r r r~ r ~ r r r r r
Period Ending I STI Classic International Equity Fund -continued
December 31, 2003
The MSCI EAFE index was up 17.1
in the 4"' quarter of 2003. Sectors that
benefit from strong economic growth,
like Materials and Energy were the
best performers. Information
Technology stocks and Consumer
Staples were the laggards in the 4`h
quarter. Higher beta stocks continued
to outperform lower beta issues as may
be expected in an upward market.
European markets took back the
market leadership from Asia with the
average European stock up 20% vs.
9% for the average Asian stock.
Looking forward we believe the bias is
toward the upside, but focus will
continue to shift to higher quality stocks
that can demonstrate earnings growth.
Fund Manager:
Chad Deakins, CFA
1997 1998 1999 2000 2001 2002 2003
First Quarter 4.1 % 15.2% 0.2% -1.4% -11.7% 1 1 % -7 8%
Second Quarter 12.2% 1.1% 2.8% 5.3% 1.1% -2.5% 18.8%
Third Quarter 5.3% -18.3% 0.4% -8.1% -11.3% -19.9% 6.2%
Fourth Quarter -7.8% 16.9% 6.0% 1.1 % 3.9% 4.9% 17.6%
Fund 31.1 % 11.2% 9.5% -3.5% -17.7% -17.0% 36.9%
'`.15~~1 Eaf- ~ h1C1px ~ 1 ~ ;'L s'... 17 3'' 1 a. i 1. ;a"- "; b°"
Lipper Intemational Funds Objecti~,e 6.2% 13.5% 41.7% -15.3% -21.7% -16.7% 34.7%
$2s,ooo
$20,000
$1 s, o00
$10, o00
$s, o00
Feb-95 Feb-96 Feb-97 Feb-98 Feb-99 Feb-00 Feb-01 Feb-02 Feb-03
Fund -MSCI EAFE Index
3 Year
Alpha Beta R-Squared Sharpe Ratio Std. Deviation
Fund 0.01 0.91 0.97 -0.44 16.46
Lipper Intemational Funds Objective 0.07 0.88 0.75 N!A 18.12
~~ t ~. -
City of Winter Springs General Employees' Pension Plan TRUSCO CA['ITAL MANAGEMENT 3s
Period Ending SunTrust Retirement High Grade Bond Fund
December 31, 2003
Fund Description Fund Philosophy
sn°n In[. Lon The fund seeks to provide a Cash: 2.9%
NAV: $30.92 high level of total return Bonds: 97.1%
High Assets (mil): $266.27 through current income and
Medium capital appreciation by ~~
investing in domestic corporate s~ ~
Low
investment grade bonds rated
A or hi her b major credit
Investment Cateporv g y
c~h
rating agencies and U.S.
Intermediate-Term Bond
Government securities. z.g°~
~ - - ~
Sector Fund _ ^"` _'
Corporate Bond 37.3% 32.2°
A
9
9%
1°o
21 0-3 Years
s.sr
gency . .
Mortgages 12.8% 0.0°0
US Treasury 32.3% 46.7°0 3-5 Years 35.7°
Cash 3.6% ':' ''" 5-~ Years
•. -
Characteristic Fund ML "A" C,~C 7-10 Years
Average Rating AAi ~
Average Coupon 5.0% 5.5°-0 10-2o Years
Current Yeld 4.7% 4.9°~,
Yeld-to-Maturity 3.4% 3.4°0 20+ Years
Average Maturity 7.56 % %%
Effective Duration 5.05 ~ 0-t
- -. - - -
Annualized
Three One Three Five Ten Inception
Months Year Years Years Years 9/1/1989
Fund -0.1 % 3.6% 7.8% 6.5% 7.0% 8.2%
Merrill Lynch G/C A Rated and Above -0.3°% 3.2°~0 7.6°% 6.5°~'0 6.9°0 8.1%
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 39
S ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ I' ~ ~ ~ ~
Period Ending Su nTrust Retirement High Grade Bond Fund
December 31, 2003
Interest rates rose quickly in October and then
began a gradual uneven decline over the
remainder of the quarter. For the period,
interest rates were generally up 30 to 40 basis
points, while the yield curve flattened slightly.
The credit sector continued its stellar
performance during the quarter and mortgages
bounced back after a weak showing earlier in
the year. The stronger than expected 30 GDP
of 8.2% combined with a Federal Reserve
keeping short rates low continued the trend of a
steep yield curve and better credit
fundamentals. The higher quality of our
corporate portfolio limited our returns from the
sector. Looking forward solid economic growth
is expected to cause interest rates to gradually
increase.
Fund Manager:
Earl Denney, CFA
1997 1998 1999 2000 2001 2002 2003
First Quarter -0.7% 1.7% -0.4% 2.3% 3.2% -0.5% 1.6%
Second Quarter 3.5% 2.7% -1.0% 0.7% 0.2% 4.2% 2.5%
Third Quarter 3.4% 5.2% 0.9% 2.5% 5.2% 5.7% -0.4%
Fourth Quarter 3.5% 0.2% -0.5% 4.9% -0.1% 1.5% -0.1%
Fund 10.0% 10.0% -1.1 % 10.7% 8.6% 11.4% 3.6%
Merrill Lynch U','C A Rated 9.7°~ 9 7°~- -2.2~~~ 12.-1'~_ H2°~_~ 11.6`,0 3.2°>~
$35,000
$30, 000
$25,000
$20,000
$15,000
$10,000
Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
Fund ML A Rtd G/C
~ ::
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 40
Period Ending I SunTrust Retirement Intermediate High Grade Bond Fund
December 31, 2003
Short Int. Lon
NAV: $10.15
High
Assets (mil): $98.19
Medium
Low
Investment Category
Intermediate-Term Bond
~ f - - .-
Sector Fund L.el-e Ae1}; int A+
Corporate Bond 13.9% ~,
Agency 4.9% ~ 3.0°%
Mortgages 41.9% 49.3°%
US Treasury 33.3% 20.0°i°
ABS 1.5% 2.1%
Cash 4.5% 0.0°'6
Characteristic Fund Leh Aqg Int A+
Average Rating AGY AAA
Average Coupon 4.5% 5.2%
Current veld 4.4% 5.0%
Yeld-to-Maturity 3.6% 3.7°i°
Average Maturity 4.4 ~.2
Effective Duration 3.7 3.2
Total Performance
Two
Months
Fund 0.9%
Lehman Aggregate Interrnediate a or Better" 1.1~'~
.. ..
The fund seeks to provide a Cash: 4.5%
high level of total return Bonds: 95.5%
through current income and
capital appreciation by
investing in domestic corporate gs~°;
investment grade bonds rated
A or higher by major credit ~
rating agencies and U.S. Qa„~' `__ ,
Government securities.
~ ~t
O-3 Years
3-5 Years
5-7 Years
7-10 Years
10-20 Years
46.7
The SunTrust Retirement Intermediate High Quality Bond Fund is a new fund
which benchmarks itself against the Lehman Aggregate Intermediate A rated or
higher index.
Interest rates rose early in the quarter but then established a well defined trading
range thereafter. The rise in yields was a result of a lower dollar, a wide budget
deficit, accelerating economic growth, and hints of an improving employment
picture and a recovering manufacturing sector. Corporate bonds continued their
stellar year-to-date performance on the heels of above average economic growth
and higher confidence. Similar to the equity markets the lower the quality the
bond the higher the return.
Our expectation for the economy continues to be favorable while much of that
outlook hinges on future strength in the labor markets. In the near-term, the Fed
is expected to remain accommodative keeping short-term interest rates low.
Fund Manag¢r:
RicK Nelson
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 41
~ ~ ~ ~ ~ r i ~ ~ ~ r ~ r ~ ~ >~ ~ ~
Period Ending Fund Attribution Summary - a nreciated more than 15%
December 31, 2003 pN
COACH INC COM $ 2,200,380 $ 3,042,650 38.28
GAP INC COM $ 3,073,040 $ 4,166,195 35.70
DANAHER CORP $ 3,368,016 $ 4,183,800 24.25
CISCO SYSTEMS $ 4,433,217 $ 4,247,519 23.69
3M CO COM $ 3,453,500 $ 4,251,500 23.59
ANADARKO PETE $ 2,589,120 $ 3,631,912 22.53
DEERE & CO COM $ 3,539,784 $ 4,319,320 22.43
CENDANTCORP $ 1,829,751 $ 3,316,003 19.15
DEVON ENERGY $ 2,308,301 $ 2,742,754 18.92
L-3 COMMUNICATION $ 2,962,625 $ 3,774,960 18.75
BAUSCH LOMB INC $ 1,152,315 $ 1,354,590 17.84
ALLSTATE CORP $ 2,940,665 $ 3,037,212 17.79
ORACLE CORP $ 2,362,500 $ 2,712,150 17.60
WALT DISNEY CO $ 1,930,269 $ 2,918,583 17.03
PFIZER INC $ 4,891,180 $ 6,437,126 16.85
INTEL CORP $ 4,760,960 $ 5,474,140 16.53
GENERAL DYNAMICS $ 1,701,708 $ 1,970,502 16.21
UNITEDHEALTH GROUP $ 3,612,976 $ 4,177,324 15.62
GILLETTE CO $ 1,810,068 $ 2,078,918 15.36
STARBUCKS CORP $ 3,041,280 $ 2,453,840 15.14
PARKER HANNIFIN CORP $ 616,860 $ 362,950 33.32
ROHM & HAAS CO $ 568,650 $ 337,409 28.26
NORFOLK SOUTHERN CORP $ 382,950 $ 326,370 28.22
HONEYWELL INTERNATIONAL $ 661,385 $ 668,600 27.50
US BANCORP COM NEW $ 628,538 $ 622,402 24.94
EMERSON ELEC CO COM $ 721,305 $ 505,050 23.46
PPG INDUSTRIES INC $ 485,646 $ 339,306 23.34
BOEING CO $ 212,846 $ 210,700 23.19
NUCOR CORP COM $ 467,976 $ 162,400 22.50
COMERICA INC COM $ 671,040 $ 504,540 20.97
BELLSOUTH CORP BLS $ 421,504 $ 571,660 20.48
LIMITED BRANDS INC $ 530,816 $ 506,643 20.09
PALL CORP COM $ 192,984 $ 182,444 19.91
VULCAN MATLS CO COM $ 203,541 $ 199,794 19.70
ROCKWELL COLLINS $ 381,275 $ 171,171 19.08
HEWLETT PACKARD COM $ 456,896 $ 431,836 18.98
SBC COMMUNICATIONS $ 436,100 $ 578,754 18.89
MAY DEPT STORES $ 522,156 $ 328,491 18.55
BANK ONE CORP COM $ 378,770 $ 501,490 18.04
ALLSTATE CORP $ 730,600 $ 326,952 17.78
MOTOROLA INC COM $ 363,280 $ 338,800 17.53
WALT DISNEY CO COM $ 407,434 $ 305,623 16.35
KEYCORP NEW COM $ 539,527 $ 533,624 15.70
KIMBERLY CLARK CORP $ 800,592 $ 496,356 15.50
GANNETT INC COM $ 713,552 $ 436,884 15.13
WELLS FARGO & CO NEW $ 654,050 $ 594,789 15.12
MEDCO HEALTH SOLUTIONS $ 29,690 $ - 37.82
ROCKWELL AUTOMATION $ 813,750 $ 1,068,000 36.25
PRECISION CASTPARTS $ 702,000 $ 908,200 29.46
TEXAS INSTRS INC COM $ 684,000 $ 852,020 28.95
NORFOLK SOUTHERN CORP $ 647,500 $ 827,750 28.27
HONEYWELL INTERNATIONAL $ 474,300 $ 668,600 27.66
ILLINOIS TOOL WKS INC $ 993,900 $ 1,216,695 26.99
BRUNSWICK CORP COM $ 642,000 $ 424,453 25.82
US BANCORP COM NEW $ 695,710 $ 923,180 25.21
PRAXAIR INC COM $ 464,625 $ 764,000 23.91
EMERSON ELEC CO COM $ 1,000,350 $ 1,230,250 23.78
CISCO SYSTEMS COM $ 391,800 $ 460,370 23.69
JOHNSON CTLS INC COM $ 567,600 $ 696,720 23.23
BOEING CO $ 617,940 $ 632,100 23.16
UNITED TECHNOLOGIES $ 850,080 $ 1,137,240 23.12
CHEVRONTEXACO CORP $ 857,400 $ 1,209,460 22.02
COMERICA INC COM $ 792,200 $ 1,121,200 21.63
CONOCOPHILLIPS $ 985,500 $ 1,311,400 20.63
SARA LEE CORP COM $ 550,800 $ 629,590 19.45
MAY DEPT STORES CO COM $ 615,750 $ 872,100 19.16
HEWLETT PACKARD COM $ 503,360 $ 712,070 19.13
SBC COMMUNICATIONS INC $ 333,750 $ 391,050 18.89
LEXMARK INTL INC NEW $ 472,575 $ - 18.72
JONES APPAREL GROUP $ 598,600 $ 810,290 17.99
GOLDMAN SACHS GROUP $ 671,200 $ 789,840 17.98
COMPUTER SCIENCES CORP $ 676,260 $ 796,140 17.73
PFIZER INC COM $ 668,360 $ 883,250 16.81
WALT DISNEY CO COM $ 645,440 $ 769,890 16.74
INTEL CORP COM $ 825,600 $ 929,450 16.53
PNC FINL SVCS GROUP INC $ 856,440 $ 1,094,600 16.14
KIMBERLY CLARK CORP $ 718,480 $ 886,350 15.85
DU PONT E I DE NEMOURS $ 840,210 $ 1,055,470 15.57
RYDER SYS INC COM $ - $ 717,150 15.37
GILLETTE CO COM $ 639,600 $ 844,790 15.36
GANNETT INC COM $ 775,600 $ 891,600 15.28
BURLINGTON RES INC COM $ 819,400 $ 996,840 15.25
WELLS FARGO & CO NEW $ 927,000 $ 1,060,020 15.22
MORGAN STANLEY COM $ 756,900 $ 868,050 15.14
.~ ~. _-
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 42
rr r~ rr ^r rr rr rr r~ r rr r r r rr rr r r r r
Period Ending I Fund AttrlbUtlOn SUI'1'lYYlal'~/ -Appreciated more than 15%
December 31, 2003
tiHArltlih IN IL LIU Y - D - -
THERASENSE INC $ 145,616 $ 134,802 61.31
RJ REYNOLDS TOBACCO $ 246,334 $ 209,922 48.46
TEXTRON INC COM $ 536,915 $ 447.921 45.12
NVIDIA CORP $ 265,421 $ - 44.44
SIEBEL SYSTEMS INC COM $ 264,886 $ 216, 178 42.62
GETTY IMAGES INC $ 259,481 $ 212,551 42.58
PACIFICARE HEALTH SYS $ 149,328 $ 119,652 38.52
UNITRIN INC COM $ 439,842 $ 342,461 36.73
ASHLAND INC COM $ 781,502 $ 602,741 34.60
XE ROX CORP COM $ 275,276 $ 212,934 34.50
BMC SOFTWARE INC COM $ 170.643 $ 131,856 33.88
AVNET INC COM $ 366,414 $ 276,165 31.11
MARVEL ENTERPRISES INC $ 49,618 $ 38,716 30.83
COUNTRYWIDE FINL CORP $ 557,354 $ 174,910 29.31
BLOCK H & R INC $ 524,704 $ 388,144 28.59
FERRO CORP COM $ 492,562 $ 359,444 27.78
INTERNATIONAL GAME TECH $ 298,390 $ 217,056 27.02
DADE BEHRING HLDGS INC $ 565,000 $ 408,866 26.51
ARROW ELECTRONICS INC $ 435,659 $ 315.167 25.83
NOV ELLUS SYS INC COM $ 548,016 $ 394,429 25.15
LEXMARK INTL INC NEW $ 163,826 $ 115,601 24.81
ZIMMER HLDGS INC $ - $ 323,840 22.32
COVENTRY HEALTH CARE $ 260,008 $ 185,086 22.28
EATON CORP COM $ 501,589 $ 349,855 22.18
MOLEX INC COM $ 358,679 $ 249,812 22.13
GOODRICH CORP $ 627,089 $ - 21.95
ELECTRONIC DATA SYS $ 223,412 $ 154,847 21.91
AMERITRA DE HLDG CORP $ - $ 194,986 21.88
HUBBELL INC CL B COM $ 509,765 $ 351,918 21.38
ROHM & HAAS CO $ 451.910 $ - 21.23
COMERICA INC COM $ 888,196 $ 613,857 20.92
MONSANTO CO NEW $ 378,013 $ 260,459 20.75
ZA LE CORP COM $ 344,178 $ 225,568 19.79
ALTERA CORP COM $ 283,212 $ 195,039 19.65
AVAYA INC $ 378,492 $ 257,558 18.72
FEDERATED DEPARTMENT ST $ 938, 141 $ - 18.21
COMMERCE BANCSHARES $ 493.063 $ 331,473 17.94
V ERITAS SOFTWARE CORP $ 511,885 $ 345,397 17.45
SCP POOL CORP COM $ 444,584 $ 299,512 17.43
NEXTEL COMMUNICATIONS $ 349,064 $ - 17.32
POTLATCH CORP COM $ 1,242,890 $ 622,035 17.28
QUEST SOFTWARE INC $ 176,198 $ 118,002 16.78
MARATHON OIL CORP $ 891,195 $ 595,289 16.61
UNIONBANCAL CORP COM $ 360.592 $ 239,942 16.37
ARCHER DANIELS MIDLAND $ 186,686 $ 73,817 16.35
GTECH HOLDINGS CORP COM $ 278,097 $ - 16.14
AMSOUTH BANCORPORATION $ 180,794 $ 119.315 16.11
STATE STREET CORP COM $ 581,850 $ 385,913 15.92
ANNALY MTG MGMT INC $ 470,761 $ 302,128 15.40
W EBSTER FINANCIAL CORP $ 874,170 $ 576,919 15.31
AON CORP COM $ 236,022 $ 154.892 15.23
STARBUCKS CORP COM $ 518.400 $ 343.206 15.14
LINCOLN NATL CORP IND $ 707,600 $ 461,833 15.02
JE FFRIES GROUP INC $ 324,875 $ 211.658 15.01
' 1 ~ 1 1 1 9
SunTrust Retirement Small Cap Fund* Ii1
DITECHCOtvTAUNICATIONSCOR 5 199,206 $ 360,990 81.21
GEVITYHRINC $ 142,128 $ 313,584 47.09
HARVESTNATRESINC $ 157,542 $ 341285 45.89
PEAFOAMANCETECH $ 116,368 $ 159,600 37.15
GEN-PROBE INC NEW $ 176,682 $ 240,702 36.23
ULTRAPETROLEUM $ 168,360 $ 226,504 34.54
MAATEK BIOSCIENCES $ 154,912 $ 318,941 34.46
SILGAN HOLDINGS INC $ 159,550 $ 318,150 33.19
COPAAT INC COM $ 165,851 $ 330,340 33.12
PROTEIN DESIGN LABS $ 150,976 $ 384,850 32.79
OMI CORP NEW $ - $ 312,550 27.41
AEROFLEXINCCOM $ 159,100 $ 234200 26.59
PEABODYENERGYCORP $ 156,651 $ 271,115 25.14
SECURE COMPUTING $ 176,874 $ 220293 24.55
~ DYCOMINDS INC COM $ 151,270 $ 284292 24.11
SYBRON DENTAL SPECIW $ 147,200 $ 278,190 22.17
POSSIS CORP COM $ 147,150 $ 282,425 20.80
POWER ONE INC COM $ 120,498 $ 324,900 19.54
MOOREWPLLACEINC $ 163,020 $ - 18.62
KEYENERGYSERVICES $ 139,680 $ 268,060 18.10
CELADON GROUP INC $ 150,040 $ 271,510 18.10
SIERRAHEPLTHSVCS $ 163,030 $ 192,150 17.86
CORRECTIONS CORP OF AM $ 152,272 $ 268,119 17.39
AMERICAN AXLE & MPNU $ 166,080 $ 194,016 16.82
HERCULES INC COM $ 161,975 $ 287,920 16.75
ANDRXCORPDEL $ - $ 432,720 16.59
CAL DIVE INTERNATIONAL $ 157,548 $ 284,616 16.35
ENDOPHAAMACEUTICPLS $ - $ 290,400 1626
PSTAFDGINCCOM 5 171,622 $ 297,975 15.92
MERCURYCOMPUTERSYST S 148,419 $ 273,900 15.76
SunTrust Hi h Grade B ond Fund
None
SunTrust Hi h Grade In termediate Bond Fund
None
* -Inception date was October 20, 2003. Attribution information is for the 2 month period ending December 31, 2003.
City of Winter Springs General Employees' Pension Plan TRUSCO~CAPITAL MANAGEMENT I 43
~ r ~ ~ i ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
Period Ending I FUCICI Attl'IbUtlOn SUI'1'll'Ylal"~/ -Depreciated more than 15%
December 31, 2003
• -Inception date was October 20, 2003. Attribution information is for the 2 month period ending December 31, 2003.
`~'
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 44
11 /2003
Trusco Capital Management Proxy Policy
Policy Statement
[1
Trusco Capital Management, Inc. ("Trusco") employs a Proxy Committee approach
("Trusco Committee") that is responsible for establishing policies and procedures
designed to ensure the firm ethically and effectively discharges its fiduciary obligation to
vote all applicable proxies on behalf of all discretionary client accounts. The Trusco
Committee will annually (or more often if needed), review, reaffirm and amend guidelines
and strategies for all domestic and international client and product lines.
Trusco has engaged Institutional Shareholder Services ("ISS") as its agent to provide
certain services and support related to the firm's proxy voting policies, procedures and
processes.
Trusco has contracted with ISS to provide administrative as well as functional services
that include but are not limited to:
1. Access to and adoption of its U.S. Proxy policies, Taft Hartley Proxy policies and
Global Proxy policies.
2. Collection and coordination of proxy material forwarded by Trusco's client
custodians
3. Access to issuer-specific research and proxy analysis
4. Proxy voting (both standard and exception based), reconciliation, and disclosure
5. Record keeping and voting record retention
The Trusco Committee will affirmatively vote proxies for proposals that, as interpreted,
are deemed to be in the best economic interest of its clients as shareholders and
beneficiaries to those actions.
Generally, the Trusco Committee will follow the established ISS proxy voting guidelines.
However, Trusco will at all times retain the ability to consider client-specific preferences
and/or develop and apply criteria unique to its client base and product lines. This
information will, as needed, be communicated to ISS and relative shares will be voted
accordingly. Trusco has reviewed ISS capabilities, including ISS conflict policies, and will
monitor such capability on an annual basis or more frequently if deemed appropriate.
An Independent, Objective Approach to Proxy Issues
In the absence of express contractual provisions to the contrary, Trusco Capital
Management, will vote proxies for all discretionary investment management clients and
Trusco managed mutual funds. Trusco utilizes the services of an independent third
party agent, Institutional Shareholder Services, Inc., ("ISS") to assist with facilitating and
managing its fiduciary obligations regarding proxy voting, reviewing issues of corporate
governance, and dealing with material conflicts of interest. Accordingly, Trusco will
Trusco Capital Management Proxy Policy I revised 1120.03
' generally follow the pre-approved ISS proxy voting principles in matters concerning
domestic and global proxy voting issues, as well as guidelines applicable to "Taft Hartley"
plans and relationships. ERISA accounts will be voted in accordance with the U.S.
Proxy policies.
Trusco has extensively reviewed ISS's policies along with prior years' actual voting
records and has determined that, as a general rule, Trusco agrees with ISS's existing
policies and will usually follow those guidelines to fulfill its proxy voting duties.
Trusco will, however, continue to obtain and review all information regarding each
issuer's proxy related material as it recognizes that there may not be one decision that is
right for all situations and that each proxy vote must be evaluated on its own merits.
' Although this typically means that most issues are voted on a case-by-case basis, the
Trusco Committee utilizes the firm's standard voting guidelines whenever possible to
ensure consistency and relevancy with the overall proxy voting process. For example,
some factors that are always considered include: an in-depth look at each company's
organizational structure; executive and operating management styles, the independence
of its Board of Directors, its corporate culture and governance processes, implicit and
' explicit social and economic product benefits and the impact or economic implications of
the available alternatives.
' Exceptions to Policy
The guidelines as outlined herein, do not apply where Trusco has contracted
discretionary authority to vote shares to a sub advisor or agent such as may be the case
t in some managed, separate, or wrap accounts.
In those situations proxy votes cast by the sub advisor will be governed by the sub
' advisor's own proxy voting procedures. The Trusco Committee will annually review but
need not necessarily approve the sub advisor's or agent's proxy voting policies.
' Conflicts of Interest
Due to its diversified client base, numerous product lines, independent board of directors,
and affiliation with SunTrust Banks, Inc, occasions may from time to time arise, in which
the Trusco Committee believes that an actual material or a perceived material conflict
exists. Several of the currently identified proxy voting conflicts include:
1. Common stock of SunTrust Banks, Inc., The Coca-Cola Company, Inc., Coca-
Cola Enterprises, Inc., and/or other public corporate issuers with which either
Trusco or SunTrust Banks, Inc., may have a similar on-going non-investment
' management associated relationship.
2. Other conflicts of interest may arise from time to time where the shares to be
' voted involve;
a. An issuer with a director, officer or employee who presently serves as an
independent director on the board of Trusco or SunTrust Banks, Inc.
b. An issuer having substantial and numerous banking, investment or other
financial relationships with Trusco or SunTrust Banks, Inc.
' l'nisco Capital Manaeement Proxy Policy 2 revised 1120.03
c. A direct common stock ownership position of five percent (5%) or greater
held individually by Trusco or in conjunction with SunTrust Banks, Inc.
and/or SunTrust Banks, Inc. affiliates
Where a material conflict of interest exists or is perceived to exist on any proxy proposal,
the Trusco Committee will determine the most fair and reasonable arrangements to be
followed in order to properly address all conflict concerns. Trusco may employ one or
more of the below listed suggestions:
1. Retain an independent fiduciary to vote the shares.
2. Vote according to ISS's (or similar agent's) standard policies.
3. Pass the proxy material on to the client so that the client can vote on all issues.
Although Trusco does its best to alleviate or diffuse known conflicts, there is no
guarantee that all situations have been or will be mitigated through proxy policy
incorporation.
Securities Lending Program
C
Trusco also manages assets for several clients who engage in "security lending"
programs. (The client loans fully paid stock to various broker-dealers and collects
interest based on the underlying value of the position.) Trusco will generally refrain from
voting securities loaned out under this lending agreement when the costs and lost
revenue to the client combined with the administrative effects of retrieving the securities
outweigh the benefit of voting the proxy. In addition, the Trusco Committee must make a
good-faith determination that the individual proxy ballot decisions would not materially
impact the portfolio manager's desire to retain the position in the portfolio, and that the
entire position of loaned shares' votes would not significantly affect the overall voting
outcome. If any factor is determined to be material, Trusco will initiate a total recall of the
shares on loan to vote accordingly.
Additional Information
Extended summaries of Trusco Capital Management, Inc.'s U.S. Domestic Proxy
Policies, Taft Hartley Proxy Policies and Global/International Proxy Policies are
available upon request. (Complete copies are quite voluminous but are also available.)
Please contact: Trusco Capital Management, Inc, Attn: Proxy Voting Committee
Administrator, 50 Hurt Plaza, 14th Floor, Atlanta, Georgia, 30303, telephone:
404.827.6177 or via a-mail at: PMP.operations@truscocapital.com.
To attain information regarding specific voting issues, please contact: Trusco Capital
' Management, Inc, Attn: Proxy Voting Committee Administrator, 50 Hurt Plaza, 14th Floor,
Atlanta, Georgia 30303, telephone: 404.827.6177, or via e-mail at:
PMP.operations@truscocapital.com.
Trusco Capital Management Prow Policy 3 revised 11.20.03