HomeMy WebLinkAbout2004 04 27 Attachment Given to Board Members by Blake Myton~ ~ ~ ~ ' ~ ~~ ~ 1~ ~~ ~ ~ ~ ~ r r ~ ~ ~
TRl~SCO
CAPITAL
MANAGEMENT
Prepared Exclusively For:
City of Winter Springs
General Employees'
Pension Plan
Investment Review
Fourth Quarter 2003
Blake Myton
Investment Officer
407-237-5816
blake.myton @truscocapital.com
Dianne Garcia
Administrative Officer
407-237-4513
dianne.garcia Cap suntrust.com
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 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
Y~
~~~~~ ~.
Cit of Winter S rin s General Em to ees' `Pension Plan TRUSCO CAPITAL MANAGEMENT 1
Y p 9 p Y
rr rr ^r ~r rr rr rr rs r~r r rr rr ~I ~^r r r err ~r r
Period Ending I Market Snapshot
December 31, 2003
Source: FactSet
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 2
r .~ ~r .^m ~, s ~ s ~.r r s . ~1 ~ r +r ~ r ~
~C1V@StCll@Clt ~V@IVI@W
• 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 NASDAQ 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.
• Infixed-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
~ ~ rr rrii ~ s ~ rs ~ r err r ~ ~ ~ r r r r
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
1s
14
12
10
8
s
4
2
0
1.3 ~°
...but a Shift to Higher Rates Expected
1.2%
•~..
~ 1.1°~0
.Q
1 LO io
100°0
m
8O% Y
60°~~: Y
m
40°,~0
0
20°ro
0°0
~ ~ ~ ~ In Z ~ co ~ ~
N ~ N
r M ~
Dates of FOMC Meetings Indicated
1.0%
0.9%
Source: CBT
~~ ~ w
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 4
~ ~ ~ ~ ~ ~ ~ ~ >~ i ~ r ~ ~ ~ ~ ~ ~ ~
Consumer Stimulus Will Slow...
The Home Refi Boom is Over...
700 -,Index Index
r
1-Applications for Refi (Right) ' , ~- 11000
600 7 --" Application for Purchase (Left) ~ 10000
)
500 ~ '~ ~ 9000
~ f'• f 8000
' ~ ' ~~ l ~ 7000
400
t ~ ~ ~{ , ` ~ - 6000
~~'~'~
300 ~,'~~Y{ ~ ~~ ; r 5000
i .I ~ ~~ ~~ 4000
zoo ; ~ ~y~l~,,~~„~~": 3000
;~~,~, µ ~ ~'_ I,, 2000
100 ~y,.,; i1 ~ 1000
0 0
90 91 92 93 94 95 96 97 98 99 00 01 02 03
Source: MBA
...and Personal Tax Cuts will Fade
120
115
110
105
100
maex ~ izuuu = ~ uu
Disposable Income
--- Personal Income
.%
~~
.-
.-
00 01 02 03
Source: BEA, Trusco Cnpitc~!
• 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.
~~
~~~~' Lip
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 5
rr ~ r r ~ r +r rs >~ r .r ~ ~rrl r >~ r r r rr
...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.
Businesses Added to Inventories...
1 ~ Year Ago Percent Change
10%
1.52
1.50 ~ 8°r°
~' ~ ~„
1.48 ~ 6%
,,
',
1.46 - ~ ' ` - 4%
.~
r",,",,% '~ i
~'~ ,.k
1.44 ~` 2%
1.42 = ~ j
i ~~ ~ i~ 0%
1.40 ,
1.38 ' '~ = -2°r°
1.36 =-Inventory/Sales Ratio (Left) ~ -4%
--- Total Inventory Growth (Right) "
93 94 95 96 97 98 99 00 O1 02 03
Sou~~c~~: C~unnaerce Dept.
...and New Order Growth Continued
• New orders plunged over 10% on a year-
over-year basis during the recession but
showed signs of growth by the end of 2002.
New order volume continued to expand in
2003 and accelerated in the fourth quarter
reflecting broader, more balanced growth.
15%
10%
5%
o°r°
-5%
-10%
-15%
93 94 95 96 97 98 99 00 01 02 03
Sonire: C~~m.t~~s
~. »r
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT s
r ~ rl r ~ ~.. .~ lls r i .~ ~ ~ ll. ~ r ~• 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...
90 91 92 93 94 95 96 97 98 99 00 01 02 03
.Source: Nail. brconte & Product nccount,r-from BEA
...Support Increased Investment
40%
30%
20%
1 o°i°
o°i°
-1o°i°
-2o°i°
70%
60%
50%
40%
30%
20°r°
io%
o%
-io°i°
-20%
Year A Percent Cha e Year A Percent Cha e
.,
,, .
d
~.
-~
-Shipments (Right)
--- Equipment and Sottware Spending (Left)
-r
15%
1 o°i°
5%
0%
-5%
-10%
93 94 95 96 97 98 99 00 01 02 03
Source: Census, [3EA
~ - ': :-:,
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT ~
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Job Growth is Accelerating
Layoffs are Falling and Surveys are Up
550 Thousands Index ~0
~ ISM Jobs (Rignt)
• The most important and sustainable source
500 -Initial Jobless Claims (Left) s5 of consumer income (and spending) is job
so growth. Job growth in the current expansion
a5o has lagged the pace of previous recoveries.
' 55 However, the pace of layoffs slowed in the
aoo ~ ~ ~-
'
- 5o fourth quarter to the lowest pace since the
350 ' ;
~~ ~ ,
,;
~ ~ ,
~: ~ ;~
~~ ' r-
~ I r,
I '~
~ a5
, onset of the recession in the spring of 2001,
i
I
~ ~
,~ ,
,~~ - i ;~ ~I
I ',I ,~ , ~I ~
I; ~~,
' ',-ao and manufacturers reported a willingness to
300 ,; ~ ~ ' ~ ~ ' , ~ ~ ~
I hire new workers. This should help sustain
I ~
I ~, ~ '`
i i
~~ I~
~ , ;I ~ I C I
; ~~',, - 35
consumer spending, though an acceleration
250 3o is less likely.
00 0~ 02 03
Soinre: BLS, ISM
Household Survey Shows More Hiring
3
2
1
0
-1
-2
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.
~, s ~'~
-.W
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT s
I~ r,r r ~ ~ ~ ~ »rllrs ~ r +.r- r r ~ ~ r ~ ~r 1.
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.
• Businesses also managed costs in 2003
through gains in output/worker hour
(productivity) and by keeping employee
expenses (unit labor costs) under control.
6
5
4
3
2
1
0
Year C+ver Year % Chanae
-CPI All ttems (Right)
--• CPI Core (Left)
,,
,~
`~`, ~ .~.
~„
~,
- ., ~- , ,
- ~ _.-
,,
6
5
4
3
2
1
0
90 91 92 93 94 95 96 97 98 99 00 01 02 03
Source: BLS
...and Productivity Remained VERY High
v
6
4
2
90 91 92 93 94 95 96 97 98 99 00 01 02 03
Source: BLS
-2
-4
YOY%
;~ .
°,
f ''
`', . ,^
~,~ ~ -
,~~ ,~ ,~ ,
,, ~,
. ^ ~ '~
1 4~
-Unit Labor Costs
--- Productivity
~ ~ -. ~ _~
Cit of Winter S rin s General Em to ees' Pension Plan TRUSCO CAPITAL MANAGEMENT 9
Y p 9 p Y
i i i i~ i i i~ r i~~ i~ ri i~ >•
History Suggests Election "Hype" was Last Year
Roosevelt D 1932 41.4°0 -15.1%
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
Reagan R 1980 17.3% 25.8%
Reagan R 1984 2.0% 1.4%
Bush R 1988 26.3% 12.4%
Clinton D 1992 34.1 % 4.5%
Clinton D 1996 19.5% 20.3%
Bush R 2000 26.4% -10.1 °~~ F
a
????? ? 2004 28.7% __
??
Source: Ned Da~~is Resenrelr
• 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 ~~
ri ^r ~ ~ A ~ rr r~rs r~l r r ~• rr ~ rr ~ ~ ^r rr
Equity Markets Summary
• 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
~ I~ I~ ~ ~ ~ ~ ~ ~ ~ r rr rir ~ l~ ~ ~ ~ ~
Stocks Had A GREAT 2003
Tech Continued to Lead in Q4...
50.0
40.0
30.0
20.0
10.0
0.0 ie ~ ® ~ ~ ~ ~ ~ ~i
Disc Stpl Engy Fin Hfth Ind Tech Mat Te; lJtil
^ 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 Pe~fonna~ace S&P 500 Source: PactSet
Profits Growth to Slow from High Rate
0
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
Trniling P/E Ratio Source: t3aseline
Small-Caps Led Again in `03
50.0
40.0
30.0
20.0
10.0 ~`~
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 (YOY%) -Olive is est. Source: Trusco Capital Capitalization Performance Solace: FactSet
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 12
~Ir r r ~r ~ r +rr r r i~r r r~ r rr rl~ r r r
Low Quality Stock Outgerformance at Extreme
Quality Underperformed Since the Low
Compafties of
higher financial
quality
outperformed in
the bear market
that started in
March 2000, but
trailed in 2003.
1.2
1.0
0.8
0.6
0.4
0.2
• 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.
-A Rating -B Rating ~-C Rati
90 92 94 96 98 00 02 04
S&P A, B, & C-Rated Companies (Eg. Wt: J/90=1) Source: 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 Com~~anies (Eq. Wt. YOY°Io DiFf) Source: Trusco
so r°
ao°i°
20°i°
o°i°
-2o°r°
-40%
-so°r°
-8o°i
• 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.
~~' ~ ~ f
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT ~ 3
r r r ~ ~ rr rr r~ ~r ~ ~ ~• ~ r ~ r r~ . ~
DecembeE3l~,l 003 ~ MLQS "Quality" Indices Price Performance
CitS
Lower Quality Companies Significantly Outperformed
Higher Quality Companies in 2003
rs r~ rr rr ~r r~ ~r r rr rr ri r• rr r rr rr rr rs rr
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
~~ ~~ -
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 15
A+ A A- B+ B B- C&D
~ ~ ~ ~ ~ r r ilr r.^i r r . ~ Ili r ~r ~ rs I~
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 is
r rr ~r rr ~ r r r rr r r rr r rr rr ^r r 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
00
12/31/2003
9/30/2003
6/30/2003
12/31/2002
3
2
1
0
-1
-2
-3
-4
-5
_a
0 5 10 15 20 25 30
Treasu~~~ Yield Cun~e Source: Bloontberr;
Longer Bonds Bear Brunt of Rate Rise
Credit Spreads Narrowed Further
200
150
100
50 ' - '
90 91 92 93 94 95 96 97 98 99 00 01 02 03
10-Yr. "A "-Baled Corp. vs. Treasun~ Source: Mc n-1ll Lync{t
Corporate/High Yield Led Again in Q4
35
30
25
20
15
10
5
-5
^ 3-MOS. 0.27 0.32 U.09 -0.72 -1.33 -1.5ti ^ 3-MOS. u,sz -u.uz u.ub -u.bz -u.z4 u.4a u33 u.as b.a I V.tla
^ 6 Mos. 0.51 0.59 0.50 -1.15 -3.07 -4.86 ^ 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 ~ YTD 4.11 4.68 4.30 2.25 2.59 7.69 4.02 3.05 28.96 5.10
Treasury RetunTS Source: Lehman Brothers Sector Returns Source: Lehman Brothers
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT ~~
rw r~ r r rr r r~ rr rr ^r s r~ rr rr rr rr rr rr r
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 ~$
r r r r rr irr r r r r r irr ~ r r r r r r
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 market.
3,000
2,500
y 2,000
0
N 1,500
.y
m 1,000
500
0
2003 Annual Excess Returns
Aaa Aa A
200
0
-200
-400
~o
y -600
m -800
-1000
-1200
-1400
2002 Annual Excess Returns
75
50
25
0
a
N
.y
m 0
-25
-50
Baa High
Yield
10 Year Annualized Excess Returns
Aaa Aa A Baa High Yield Aaa Aa A Baa High Yield
~~' r
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
• Relative value
of FNMA
Bonds Vs. 1-
10Year Credit
Sector Bonds
Dntn Source: Citigroup Yieldbook
300
m
c
a 250
a
200
,so
100
a 50
0
0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
2so
200
y
m 150
a
,Oo
250
®Spreads on Current Coupon FNMA Bonds Vs. 1-10 Year Credit Sector
--
N 200
C
a 150 --
100
m
m 50
a
~,
-50
-,00
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
~,. ~ a f _s~..-
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
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
~ r r r~ ~ ^~ ~ r ~ ~ ~ I~ ~ Ili ~ ~ Ir i IIIII~
Period Ending ~ Accou nt Activity Summary
December 31, 2003
- - • 1
Portfolio Value on (9/30/2003) $ 7,039,995 Portfolio Value on (12/31/2002) $ 5,875,217
Beginning Accrued Income
P
tf
li
V
l $ 51 Beginning Accrued Income $ 99
or
o
o
a
ue
Contributions $
$ 7,040,045
226,763 Portfolio Value
Contributions $
$ 5,875,317
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
Market V
l $
$ (13)
7
884
327 Net Accrued Income
M
k
t V
l $ (62)
7
884
327
a
ue
Ending Accrued Income $ ,
,
37 ar
e
a
ue
Ending Accrued Income $
$ ,
,
37
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT ~ 22
Period Ending Performance Comparisons
December 31, 2003
Inception
Trailing Trailing Trailing Trailing to Date
Quarter f2 Months' 36 h1onttas' 5Q f4lonths' E20 R4onths' 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& P5001ndex 12.18% 28.68% -4.05% -0.57% 11.06% 1.10%
S & P 500 Barra Grovith 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%
Russe112000Grov~thlndex 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
Russe112000 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°i -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
~Retru-rt is annualized.
** -Inception 6/30/2002. Longer tern: results are linked to fire ST/ Classic Grox~th and Income Fund to shox~ results prior to inception.
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT ~ 2s
s ~ ~ ~ ar^ ~ ~ rr~t r ~ ~ l~r ~ Illy >! ~ ~ » ~
Period Ending (Portfolio Composition
December 31, 2003
Total Fixed
Income
27.2%
Total Equities
72.4%
SunTrust Retirement High Grade Growth Fund $ 1,624,242.36 20.6%
SunTrust Retirement High Grade Relative Value Fund $ 1,360,432.85 17.3%
SunTrust Retirement Mid Cap Equity Fund $ 835,147.77 10.6%
STI Classic Small Cap Growth Fund $ 617,560.02 7.8%
STI Classic Small Cap Value Equity Fund $ 466,526.12 5.9%
STI Classic Intemational Equity Index Fund $ 800,845.24 10.2%
STI Classic International Equity Fund $ 548.84 0.0%
Total Equities $ 5,705,303.20 72.4%
SunTrust Retirement High Grade Bond Fund $ 1,544,331.46 19.6%
SunTrust Retirement High Grade Intermediate Bond Fund $ 598,343.82 7.6%
Total Fixed Income $ 2,142,675.28 27.2%
Money Market Funds $ 36,897.83 0.5%
Total Monev Market $ 36,897.83 0.5%
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 24
Total Money
Market
,. ~~,
~- a r r^c a a a r ~^~r v a~ r ~t ~ r r r ~,
DecembeE31d,12003 ~ SunTrust Retirement High Grade Growth Fund
Value Blend Growth
NAV:
Large
Assets (mil):
Medium
Small
Investment Category
Large Growth
The fund seeks capital
$52.60 appreciation by investing primarily
$192.07 in large, well established domestic
corporations in the top three
quality rating categories of major
credit rating agencies, including
Value Line, Moody's or Standard
& Poor's, and must be listed on a
major exchange or NASDAQ.
Securitv Equity Securitv E uit
Pfizer Inc. 3.4% Health Management. 2.6%
Microsoft Corp. 3.3% Johnson & Johnson 2.5%
Exxon Mobil Corp 3.0% Affiliated Computer Svc 2.3%
Intel Corp. 2.9% Deere & Co. 2.3%
American Expres 2.8% 3M Co. 2.2°,0
'• • • -
Characteristics Fund _ .: ,_; ..
Dividend Yield (Current) 0.9% 1.6°0
Market Capitalization ($bil) 74.6 89.8
Price-to-Book 3.6x 3.1 x
P/E (12 mo fwd) 21.1 x 19.4x
EPS Growth (5 yr est) 15.5 12.2
ROE 19.4 17.3
Fund
S&P 500 Index
Lipper Growth Funds Index
Consumer Discretionary
Consumer Staples
Energy
Financials
Healthcare
Industrials
Information Technology
Materials 0.0%
3.0
Telecom Services 0.0
3.5 %
0 0~0
Utilities
`= 2.8
n.2
20.7 %
ie.o%
17.7
^ Fund
^ S&P 500 Index
Annualized
Three One Three Five Ten Inception
Months Year Year Year Year 04/01/1990
10.4% 20.9% -1.6% 2.7% 12.5% 12.8%
10.1 % 27.0% -11.4% -5.5% 7.8% 9.4%
Cash: 1.1%
U.S. Stocks: 98.9%
Non-U.S. Stocks: 0.0%
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 25
~t ~ rr ~ ~ ~ ~ r ~ ~ ~ r~ ~ ~ ~ rr i~ r ~
Period Ending SunTrust Retirement High Grade Growth Fund
December 31, 2003
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.
~ - - .. -
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%
$60,000
$50,000
$40,000
$30,000
$20, 000
$10,000
m m m~~~ it ~ m~ 8 g o 0
Fund S&P 500
• - - -
Fund Manager:
Elliott Perny, CFA 3 Year
Alpha Beta R-Squared Sharpe Ratio Std. Deviation
Fund 0.09 0.67 74.95 -0.28 13.89
5&P 500 Index 0.0(`: 1.i~i! 100.00 -0.35 '8.07
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT ~ 2s
Period Ending SunTrust Retirement High Grade Relative Value Fund
December 31, 2003
Value BIerW Growth The Fund seeks long-term capital Cash: 1.7%
Cusip: 990001182 U.S. Stocks: 98.3%
Large appreciation with a secondary goal of
NAV: $11.14 current income by using a value-
Medium Assets (mil): $61.5 oriented investment strategy focused
on large well-established companies
Small
in the top three quality rating
categories of major credit rating
Investment Category agencies, including Value Line,
Large Value Moody's or Standard & Poor's.
Securitv %EQUity Securitv %Equity
Exxon Mobil 2.2% Berkshire Hathaway 2.0%
ConocoPhillips 2.2% CR Bard 1.9%
Emerson Electric 2.0% United Tech 1.9%
Illinois Tool Works 2.0% Comerica 1.9%
ChevronTexaco 2.0% PNC Financial 1.8%
Characteristic Fund
Dividend Yield (Current) 1.9%
EPS Growth (5 yr.) 7.0%
Market Capitalization ($bil) 64.4 B
Price-to-Book 2.8x
P/E (12 months trailing) 18.2x
Return on Equity 16.0%
Fund
Barra Value Index
Barra
Value
2.0%
0.0%
63.0 B
2.2x
17.6x
11.4%
Three
Months
14.1%
1 ~.5°:;
Consumer Discretionary
Consurr Staples
Energy
Fnancials
Fleal[hcare
Industrials
Inf orrration Technobgy
Materials
Telecom Services
Utilities
Annualized
One Inception
Year 6/30/02
26.7% 7.5%
31.8,'- 9 9"<,
~ 1os%
15.8
- 8.3
2.6°.0
`~
10.9 %
- 9.9%
3.6
1 s.7 %
9.3 %
11.7%
4%
4.2
3.6
3.6
~ s.o%
3.a % ^ Fund
^ s.s % ^ Barra Value Index
36.3
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 27
Period Ending SUnTrUSI ~etll'~t'1'1~C~~ HIq~1 GrC~de Re~atl~/e Va~Ue FUt1d-
December3l, 2003 continued
Manager's quarterly Perspective
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%
1 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
$7,000 ~
Jun Sept Dec Mar Jun Sept Dec
- SunTrust High Grade Relative Value S&P/Barra 500 Value
~ ~ ~_ - - ~
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 28
~ r ~ r~ ~ r ~ +~ ~r ~ rr r ~ ~ ~ ~ ~r ~ ~r
Period Ending SunTrust Retirement Mid-Cap Equity Fund
December 31, 2003
- ~- .. ..
The fund seeks long-term capital Cash: 1.7%
Value Blend Growth NAV: $24.10 growth through investment in a Stocks: 98.3%
~a,~e
Assets (mil):
$37.43
diversified portfolio of stocks of
Medium domestic corporations with a
market capitalization between $1
small billion and $10 billion and must be
listed on a major exchange or '. ~ 5. Slcel¢
~~,
;
Investment Category ~~
,
Mid-Cap Blend NASDAQ. ,n,
.. -
Securi E ui
Security
Equity -
Rnancials 21.5
OGE ENERGY CORP. 1.9°/ WEBSTER FINANCIAL 1.6% zo.3%
F~TLATCH CORP. 1.7% PrrNEY BOWES INC. 1.6% Information Technology 17.9
15.7 %
COMERCIA INC. 1.7% ROCKWELL COLLINS 1.5%
17.0
ASHLAND INC. 1.7% RRST INDUSTRIAL REALTY 1.5% Consumer Discretionary
ns%
MARATHON OIL CORP. 1.6% MAY DEFT. STORF~ CO. 1.4% 12.0 %
Industrials
' • • • 11.4%
Health Care 11'1
Characteristic
Fund Russell Mid
-Cat7 12.6
Materials 5.6
Dividend veld (Current) 1.1 % 1.7°0 4.4 %
Market Capitalization ($bil) 3.4 5.7 ~ersy 5.64%
Price-to-Book 2.4x 2.4x Utilities 4.6 %
s.a
P/E (12 mo trailing) 20.Ox 17 Ox 3 7%
.
Consumer Staples ^ Fund
Price-to-Sales 1.2x 1.1x 4.6%
Telecommunication Services 1 "2 ~ ^ Russell Midcap Index
0.6
Annualized
Three One Three Five Seven Inception
Months Year Years Years Years 12/1996
Fund 13.2% 28.4% -3.3% 9.6% 13.4% 12.7%
Russell Mid-Cap Index 14.0°~ 40.1°~ 3.5°~ ~' %°': 10.5°0 10.2°'°
Lipper Mid Cap Core Funds 13.1 % 36.1 % 2.7% 8.7% 10.1 % N/A
City of Winter Springs General E mployees' Pension Plan TRUSCO CAPITAL MANAGEMENT
29
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~I ~ ~ ~ ~ ~ ~ ~
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 IndE-x 29 O-- 10-1=; 18.2~~~ 8.3°~ 5 6~_ -~v 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
$2s,ooo
$20, o00
$15,000
$10,000
$5, 000
$0
Dec-96
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT so
Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03
Fund Russell Midcap Index
3 Year
Alpha Beta R-S uare Sharpe Ratio Std. Deviation
Fund -0.65 1.03 0.87 -0.50 20.60 I
Russell Mid-Cap liidex O.GO 1.00 ' 00 -0.11 18.51 ~~
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°%
18.9% 17.2%
0.9 1.3
2.7x 3.7x
21.1x 22.7x
11.8% 14.8%
Consumer Discretionary
Consumer Staples
Energy
Rnancials
HeaRhcare
Industrials
kiformation Technobgy
Materials
Telecom Services
Utilities
2a.2
'3.0
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 600 Small Cep Growth Index 13.0°~, 37.3°~ 4.7°~ 3.7~~ 6.7°,, 10.5°0
Lipper Small Cap Growth Classification 12.6% 44.4% -3.5% -4.3% 4.9% 13.1
_~ AF
'~~~"-
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 31
Cash: 0.0%
U.S. Stocks: 100.0%
Period Ending STI Classic Small Cap Growth Stock Fund -
December 31, 2003 continued
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%
SAP r;00 Small Cap G~<,~~;tn ',-ilex ? 3 i ~L~~ i u ' -t~~" . ~ 1_, -1 ' -,
Lipper Small Cap Growth Classification 5.4% 63.4% -6.2% -11.3% -29.7% 44.4%
$30, 000
$2s, o00
$20, o00
$1s,ooo
$10,000
$s,ooo
$0 ~ i i r ~ iTi i i iJ
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 Cao 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 600 Small Cap Grov~t!~ h~dex ~~ 9 tU ~ 1~ 0.1 ~ ~,
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 32
Period Ending STI Classic Small Cap Value Fund
December 31, 2003
Value Blend Growth
Large
Medium
sman
Investment Cateoorv
Small Value
Securitv %Equity Securitv %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%
Ticker: SCETX
Expense Ratio: 1.25%
NAV: $17.44
Assets (mil): $656.8
The fund seeks long-term
capital growth and income by
investing in the stocks of
companies with a market
capitalization between $50
million and $2 billion.
Consuner Discretionary
Consumer Staples 6.7
4.0
3.0
Energy 4.3
Embraer-Empresa 2.7% Texas Instruments 1.7%
Reynolds & Reynolds 2.3% Church & Dwight 1.7%
Characteristic
Dividend Yield (Current)
EPS Growth (5 yr est.)
Market Capitalization ($bil)
Price-to-Book
P/E (12 months trailing)
Return on Equity
Fund
1.5%
13.1%
1.7
2.Ox
20.4x
10.1%
Russell
2000 Value
1.5%
11.1%
0.8
1.6x
17.4x
4.7%
Rnancials
0.6
Healthcare
Ind
i
l
t
r
us
a
s
Information Technobgy
Materials
o.o
Telecom Services
o.s
2.1
Utilities
Cash: 4.0%
U.S. Stocks: 79.9%
Non-U.S. Stocks 16.1%
~, .
1 s.1 %
23.3
31.0
4.5
2s.2
17.2 %
1a.s%
10.0
12.a%
7.7
^ Fund
s.3% ^ Russell 2000 Value Index
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 16.4°~0 46.0°~ 13.8°~ 12.3°~~ 11.9°0 13.6°~0
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
Period Ending
December 31,2003 TI Classic Small Cap Value Fund -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 34.2% 32.6% -13.5% -2.7% 18.0% 21.2% -1.7% 37.1%
Lipper Small Cap Value Index 20.2% 28.8% -6.7% 1.9% 16.1% 17.2% -11.2% 47.5%
$4°.~
~5.~°
°•~
$25.~
$2°.~
$, 6.000
$,°.~
$5.~
Sep-94 Sep-95 Sep-96 Sep-97 Sep-96 Sep-99 Sep-00 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 X000 Value index U.UC; ~ i)0 1;0.00 02. 2~.bG
~. ,,~. ~ -
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 34
,r ... r r .~,~ .~ r ...r .~ ~ ~. .~. ,.~. ~r .r .. r. rr
Period Ending STI Classic International Equity Index Fund
December 31, 2003
Value Blend Growth
Large
Medium
small
Investment Cateoorv
Foreign Stock
Securitv %Eguity
Siemens AG 2.0%
Toyota Motor Corp 1.8%
Total S.A. 1.7%
Ticker: SIEIX The Fund seeks to provide
Expense Ratio: 1.06% diversification and capital
appreciation by investing in
NAV: $10.91 securities of companies
Assets (mil): $324.63 headquartered or based in
foreign countries to replicate
the Morgan Stanley EAFE
GDP Index.
Securitv %Epuity
DaimlerChrysler AG 1.2%
Telefonica S.A. 1.2%
Deutsche Telekom AG 1.2%
Fnancials
Consumer Discretionary
Cash: 1.1
Non-U.S. Stocks: 96.9%
U.S. Stocks: 2.0%
Non~U.S. Stocks
U. S. Stocks 96.9°'e
z °~o
~a=~
,,
2s.s r
zs.s r
ia.2r
14.2
j ENIS.p.A. 1.4% EON AG 1.2% Industrials 10.8%
Deutsche Bank AG 1.3% SAPAG 1.1% to.ar
Telecormunication Services 8.5
• • • -
8.5
Infornation Technology 8.1 %
MSCI 8'1 %
Characteristic Fund EAFE GDP Energy '' %
~.t r
Dividend Yield (Current) 2.2% 2.2°'°
EPS Growth (5 yr est.)
11.1%
11.1°~,
Materials ~ o %
~o%
Market Capitalization ($bil) 29.5 29.5 Consumer Staples s.s %
s.s %
Price-to-Book 1.9x 1.9x s , ,o
P/E (12 months trailing) 18.6x 18.6x Health Care s ,,, ^ Fund
Return on Equity 9.6% 9.6°a utnities s.t°° ^ MSCI EAFE GDP Weighted
s.t r
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 GDF' Weighted 17 1`',, 40.0°0 :3 ~~ -O c~°,~ 3.3°~~ 4.0°~.
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 35
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%
0.1SC1 EAI L uDl' ~^Jrighf2~l 6. i _ 4.4"- 25.1'"':, 29.5'. - 15.4° ?3.3°; -11. -10 (~'
Lipper Intemational Funds 14.4% 7.3% 12.7% 37.8% -14.7% -19.3% -16.7% 34.7%
$25, 000
$20,000
$15, 000
$10, 000
$5,000 ~
Jun-94 Jun-95 Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03
Fund MSCI EAFE GDP Weighted
3 Year
Alpha Beta R-Squared Sharpe Ratio Std. Deflation
Fund 0.02 0.99 1.00 -0.50 18.01
t;1~; l LA,F I_ Gfii i~;l ,c;i ~ +. (:!ii 1 Cif ? ~1 !2i 1=;
Lipper Intemational Funds Objecti~,e 0.07 0.88 0.75 WA 18.12
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 36
r +~ r~ r. ~ ~ rr ~ ~ r ~ ~r• ~r +~ r~r ~^ir r ~ ~
oePeme E3di 003 ~ STI Classic International Equity Fund
Value Blend Growth
Ticker:
STITX The Fund seeks long-term Cash: 0.3%
Stocks: 99
7%
~e.~e
Expense Ratio:
1.45% .
capital appreciation by
investing primarily in a
Medium NAV: $10.07 Blocks
diversified portfolio of equity
smau Assets mil:
( ) $253.25 ss.ro
securities of foreign issuers.
Investment Category cash ` !
Foreign Stock 03~' -- "
Security %Eguity Security %Eguity
F
i
l zs.o
Vodafone Group PLC 2.5% Total S.A. 1.7% nanc
a
s
BP PLC 2.5%
TelefonicaS
.A.
1.3% 26.s
ts.s%
HSBC Holdings PLC 2.3% Nestle S.A. 1.3% Consumer Discretionary 12 ~
Novartis AG 2.2% BNP Paribas S.A. 1.3% Telecorrminication Services S.5
GlaxoSmithKline PLC 2.2°o Toyota Motor Corp. 1.3°% 78i°
Industrials s.2
8.9
'• • • -
Heatth Care 8.5 %
9.0
8.2
Characteristic Fund EAFE Energy a.3%
Dividend Yield (Current) 2.3% 2.4°e i
T
h
l 6.8%
Inforrrst
on
ec
no
ogy s.s %
EPS Growth (5 yr est.) 10.3% 10.4°.
6.3 %
Market Capitalization ($bil) 44.2 42.0 Consumer Staples $ 5%
Price-to-Book 2.Ox 2.OX rvlaterials s.s%
P/E (12 months trailing) 16.4x 17.9x s.a% ^ Fund
Return on Equity 12.8% 12.1°o utiltties a~°r~ ^ MSCI EAFE
-. -
Annualized
Three One Three Fi~,e Seven Inception
Months Year Years Years Years 2/01/1995
Fund 17.6% 36.9% -2.2% -0.3% 3.4% 8.9%
MSCI EAFE Index 1 ~ 1'~, 3i3-6` „ > ,~` -0 ', ~ ~i°~~ -1.9°-,
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
Period Ending 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%
rasci EarF ,~,~_i=- ~ 2~ . _ 2~ 3. ~ r~- ~ ~~_ -. ~~~
Lipper Intemational Funds Objective 6.2% 13.5% 41.7% -15.3% -21.7% -16.7% 34.7%
$25.000
$20, o00
$i s, o00
$10, o00
$s, o00
$o ~
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
~(_:I EAFE Inck~k. (1.00 t_00 L00 h q~, ~.~_y~'-,
Lipper Intemational Funds Objective 0.07 0.88 0.75 N/A 18.12
.- ~ ;: 5
City of Winter Springs General Employees' Pension Plan TRlISCO CAPITAL MANAGEMENT 38
DecembeE3ldl 003 ~ SunTrust Retirement High Grade Bond Fund
Short Int. Lon NAV:
High
Assets (mil):
Medium
Low
Investment Category
Intermediate-Term Bond
The fund seeks to provide a Cash:
$30.92 high level of total return Bonds:
$266.27 through current income and
capital appreciation by
investing in domestic corporate
investment grade bonds rated
A or higher by major credit
rating agencies and U.S.
Government securities.
2.9%
97.1
Sector Fund ML "A" C~/C
Corporate Bond 37.3% 32.2°0
Agency
9.9%
21 .1 °o 0-3 Years
Mortgages 12.8% 0.0°
US Treasury 32.3% 46.7°~ 3-5 Years
ABS 4.1 % U.0°~
Cash 3.6% 5-7 Years
'e • •
Characteristic Fund ML "A" CSC 7-10 Years
Aye rage Rating AA1 AAA
Average Coupon 5.0% 5.5°~ 10-20 Years
Current Yeld 4.7% 4.9°.
Yeld-to-Maturity 3.4% 3.4-
20+ Years
Average Maturity 7.56 %-
Effective Duration 5.05 '
-. -
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°-0 3.2°0 7.6°0 6.5°0 6.9°0 8.1°0
3.9
35.7°
1 n ... 3 z
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 39
r ~. rr r ~ ^w r ~. ~ ~ rs r ~r ^r r r r ~ r
DecembeE3ldl 003 ~ SunTrust Retirement High Grade Bond Fund
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 3Q 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 G/C A Rated 9 T',~ 9.7`?~ -2.2°~ 12.4°-~ 8.2'=x_ 11.6°z! 3.2°~~
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000 -~c '
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
:~:: ~ .
_. ..,_.
Cit of Winter S rin s General Em to ees' Pension Plan TRUSCO CAPITAL MANAGEMENT 40
~ Y p 9 p Y
rs ^r r~r r r r~ r^~ r r~ r r~ rr r rr r~ rr r ~ r
Period Ending I SunTrust Retirement Intermediate High Grade Bond Fund
December 31, 2003
Short Int. Lon
High
Medium
Low
Investment Cateoorv
Intermediate-Term Bond
The fund seeks to provide a
NAV: $10.15 high level of total return
Assets (mil): $98.19 through current income and
capital appreciation by
investing in domestic corporate
investment grade bonds rated
A or higher by major credit
rating agencies and U.S.
Government securities.
Sector Fund Leh Agg Int A+
Corporate Bond 13.9% 15.6°°
Agency 4.9°io 13.0" o O-3 Years
Mortgages 41.9% 49.3°
US Treasury 33.3% 20.0"
ABS 1.5% 2.1 `' s-s Years
Cash 4.5% 4.U"°
• - • • - s-7 Years
Characteristic Fund Leh Ac~~y l~,t A_+
Average Rating AGY ~1A
Average Coupon 4.5% 5 2°° 7-10 Years
Current Yeld 4.4% 5.0",:
Yeld-to-Maturity 3.6% 3.7".,
Average Maturity 4.4 5.2 10-20 Years
Effective Duration 3.7 3
46.7%
The SunTrust Retirement Interm edlate Hlgh OUahty Bond Fund is a new Tund
which benchmarks itself against the Lehman Aggregate Intermediate A rated or
higher index.
TWD Interest rates rose early in the quarter but than established a well defined trading
Months range thereafter. The rise in yields was a result of a lower dollar, a wide budget
dehcit, accelerating economic growth, and hints of an improving employment
Fund (] g% picture and a recovering manufacturing sector. Corporate bonds continued their
stellar year-to-date performance on the heals of above average economic growth
I_eflmclll A C f E" cite irltE'(llleCil:ate A OI Bf'ttef ~ ~ ~ ~ '
y.~ ~~ 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 Fad
is expected to remain accommodative keeping short-term interest rates low.
Fund Manager:
Rick Nelson
Cash: 4.5%
Bonds: 95.5%
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 41
~r r. a.. r~ .~ r ~r r r r ^r r are r r r
Period Ending ~ Fund Attribution Summary - A reciated more than 15%
December 31, 2003 PP
°""' ~"" "' " "'°"` ` " " ' """ SunTrust Hi h Grade Rela tiv e Val
e F nd
O
C
CO 42
3
6
0 38
2 u
u
A
H INC
M
C $ 2,200,380 $ ,0
,
5 .
8
GAP INC COM $ 3,073,040 $ 4,166,195 35.70 MEDCO HEALTH SOLUTIONS $ 29,690 $ - 37.82
DANAHER CORP $ 3,368,016 $ a,183,aoo 2x.26 ROCKWELL AUTOMATION $ 813,750 $ 1,068,000 36.25
clsco svsTEMS $ x,433,217 $ a,2a7,51s 23.66 PRECISION CASTPARTS $ 702
000 $ 908
200 29.46
3M CO COM $ 3,453,500 $ 4,251,500 23.59 , ,
ANADARKO PETE $ 2,589,120 $ 3,631,912 22.53 TEXAS INSTRS INC COM $ 684,000 $ 852,020 28.95
DEERE & CO COM $ 3,539,784 $ a,31s,32o 22.x3 NORFOLK SOUTHERN CORP $ 647,500 $ 827,750 28.27
CENDANTCORP $ 1,929,761 $ 3,316,003 19.15 HONEYWELLINTERNATIONAL $ 474,300 $ 668,600 27.66
DEVON ENERGY $ 2,308,301 $ 2,742,754 18.92 ILLINOIS TOOL WKS INC $ 993
900 $ 1
216
695 26
99
L-3 COMMUNICATION $ 2,962,625 $ 3,774,960 18.75 , ,
, .
BAUSCH LOMB INC $ 1,162,315 $ 1,3sa,sso 17.ea BRUNSWICKCORPCOM $ 642,000 $ 424,453 25.82
ALLSTATE CORP $ z,sao,sss $ 3,037,212 17.76 US BANCORP COM NEW $ 695,710 $ 923,180 25.21
ORACLE CORP $ 2,362,soo $ 2,712,150 17.so PRAXAIR INC COM $ 464,625 $ 764,000 23.91
WALT DISNEY CO $ 1,s3o,2ss $ 2,618,683 17.03 EMERSON ELEC CO COM $ 1
000
350 $ 1
230
250 78
23
PFIZER INC $ 4,891,180 $ 6,437,126 16.85 ,
, ,
, .
INTEL CORP $ 4,760,960 $ 5,474,140 16.53 CSCO SYSTEMS COM $ 391,800 $ 460,370 23.69
GENERAL DYNAMICS $ 1,701,708 $ 1,970,502 16.21 JOHNSON CTLS INC COM $ 567,600 $ 696,720 23.23
UNITEDHEALTH GROUP $ 3,612,976 $ 4,177,324 15.62 BOEING CO $ 617,940 $ 632,100 23.16
GILLETTE co $ 1,alo,osa $ 2,078,91a 16.36 UNITED TECHNOLOGIES $ 850
080 $ 1
137
240 23
12
STARBUCKS CORP $ 3,041,280 $ 2,453,840 15.14 , ,
, .
CHEVRONTEXACO CORP $ 857,400 $ 1,209,460 22.02
SunTrust Hi h Grade E u i Income Fu nd
ALCOA INC COM $ 346,312 $ 342,000 45.77 COMERICA INC COM $ 792,200 $ 1,121,200 21.63
PARKER HANNIFIN CORP $ 616,860 $ 362,950 33.32 CONOCOPHILLIPS $ 985,500 $ 1,311,400 20.63
ROHM & HAAS CO $ 568,650 $ 337,409 2a.26 SARA LEE CORP COM $ 550,800 $ 629,590 19.45
NORFOLK SOUTHERN CORP $ 382,950 $ 326,370 28.22 MAY DEPT STORES CO COM $ 615,750 $ 872,100 19.16
HONEYWELL INTERNATIONAL $ 661,386 $ ss8,soo 27.5o HEWLETT PACKARD COM $ 503
360 $ 712
070 19
13
US BANCORP COM NEW $ 628,538 $ 622,402 24.94 , , .
EMERSON ELEC CO COM $ 721,305 $ sos,oso z3.a6 SBC COMMUNICATIONS INC $ 333,750 $ 391,050 18.89
PPG INDUSTRIES INC $ x85,646 $ 339,306 23.3a LEXMARK NTL INC NEW $ 472,575 $ - 18.72
BOEING CO $ 212,6x6 $ 210,700 23.16 JONES APPAREL GROUP $ 598,600 $ 810,290 17.99
NUCOR CORP COM $ 467,976 $ 162,aoo 22.so
COMERICA INC COM
$
671,040
$
504,540
20.97 GOLDMAN SACHS GROUP $ 671,200 $ 789,840 17.98
BELLSOUTH CORP BLS $ a21,5oa $ 671,660 2o.a8 COMPUTER SCIENCES CORP $ 676,260 $ 796,140 17.73
LIMITED BRANDS INC $ 530,816 $ sos,6a3 2o.os PFIZER INC COM $ 668,360 $ 883,250 16.81
PALL CORP COM $ 1sz,sea $ 182,444 16.61 WALT DISNEY CO COM $ 645
440 $ 769
690 16.74
VULCAN MATLS CO COM $ 2o3,sa1 $ 1ss,7sa 1s.7o , ,
ROCKWELL COLLINS
$
381,275
$
171,171
19.08 INTEL CORP COM $ 825,600 $ 929,450 16.53
HEWLETT PACKARD COM $ 456,896 $ 431,836 18.98 PNC FINL SVCS GROUP INC $ 856,440 $ 1,094,600 16.14
SBC COMMUNICATIONS $ a3s,loo $ 578,75a 18.86 KIMBERLY CLARK CORP $ 718,480 $ 886,350 15.85
MAY DE PT STORES $ 622,166 $ 328,x61 1a.5s DU PONT E I DE NEMOURS $ 840
210 $ 1
055
470 15.57
BANK ONE CORP COM $ 378,770 $ 501,490 18.04 , ,
,
ALLSTATE CORP $ 730,600 $ 326,952 17.78 RYDER SYS INC COM $ - $ 717,150 15.37
MOTOROLA INC COM $ 363,280 $ 338,800 17.63 GILLETTE CO COM $ 639,600 $ 844,790 15.36
WALT DISNEY CO COM $ 407,434 $ 3os,s23 16.36 GANNETT INC COM $ 775,600 $ 891,600 15.28
KEYCORP NEW COM $ 539,527 $ 533,624 15.70 BURLINGTON RES INC COM $ 819
400 $ 840
996 15.25
KIMBERLY CLARK CORP $ 800,592 $ 496,356 15.50 , ,
GANNETT INC COM $ 713,552 $ 436,884 15.13 WELLS FARGO & CO NEW $ 927,000 $ 1,060,020 15.22
WELLS FARGO & CO NEW $ 654,050 $ 69x,786 15.12 MORGAN STANLEY COM $ 756,900 $ 868,050 15.14
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 42
Period Ending Fund Attribution Summary - A reciated more than 15%
December 31, 2003 pP
GRA FTECH INTL LTD $ - $ 3U5, ~JlU tiB.tiV
THERAS ENSE INC $ 145,616 $ 134,802 61.31
RJ REYNOLDS TOBACCO $ 246,334 $ 209,922 4H.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
ZJMMER 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
AMERITRADE HLDG CORP $ - $ 194,986 21.88
HUBBELL INC CL B COM $ 509,765 $ 351,918 21.38
ROHM 8~ HAAS CO $ 451,910 $ - 21.23
COMERICA INC COM $ 888,196 $ 613,857 20.92
MONSANTO CO NEW $ 378,013 $ 260,459 20.75
ZALE CORP COM $ 344,178 $ 225,568 19.79
ALTE RA 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
JEFFRIES GROUP INC $ 324,875 $ 211,658 15.01
SunTrust Retirement Small Ca Fund'
DITECH COIvMUNICATIONS COP S 199.206 S 360.990 81.21
GEVITYHRINC S 142,128 S 313,584 47.09
HARVESTNATRESINC $ 157,542 $ 341285 45.89
PERFORMMICETECH $ 116,368 $ 159,600 37.15
GEN•PROBE INC NEW $ 176,682 $ 240,702 3623
ULTRAPETROLEUM $ 168,360 $ 226,504 34.54
MARTEK BIOSCIENCES $ 154,912 $ 318,941 34.46
SILGAN HOLDINGS INC $ 159,550 $ 318,750 33.19
COPART 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
PEP80DYENERGYCORP $ 156,651 $ 271,115 25.14
SECURE COMPUTING $ 176,874 $ 220,293 24.55
DYCOM INDS INC COM $ 151,270 $ 284,292 24.11
SYBRON DENTAL SPECIN $ 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
MOORE WALLACE INC $ 163,020 $ 18.62
KEYENERGYSERVICES $ 139,680 $ 268,060 18.10
CELADON GROUP INC $ 150,040 $ 271,510 18.10
SIERRAHEALTHSVCS $ 163,030 $ 192,150 17.86
CORRECTIONS CORP OF AM $ 152,272 $ 268,119 17.39
AMERICAN AXLE 8 MANU $ 166,080 $ 194,016 16.82
HERCULES INC COM $ 161,975 $ 267,920 16.75
ANDRXCORPDEL $ - $ 432,720 16.59
CAL DIVE INTERNATIONAL $ 157,548 $ 264,616 16.35
ENDOPHARMACEUTICALS $ - $ 290,400 1626
ASTAFDGINCCOM $ 171,622 $ 297,975 15.92
MERCURYCOMPUTER SYST S 148.49 S 273.900 15.76
SunTrust Hi h Grade B ond Fun d
None
SunTrust Hi h Grade In termedia te 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 ~ 43
~ I~ ~ ~ ~ I~ i~ iii i~ ~ ~ i~ ~ ~ ~ ~ i~ ~ i~
Period Endin
December 3l, 003 FUnCI Attf IbUtlOn SUCY1CYlal'~/ -Depreciated more than 15%
NO SECURITIES DEPRECIATED MORE THAN 15% DURING THE QUARTER
KOHLS CORP COM $ S 584,220 -15.76
SunTrust High Grade Equity Income Fund
NO SECURITIES DEPRECIATED MORE THAN 15°o DURING THE QUARTER
SunTrust Retirement Mid Cap Fund
BIOVAIL CORP $ 366,671 $ - -31.55
CACHE INC COM $ 190,050 $ 222,881 -17.80
NEOWARE SYS INC $ 135,600 $ 274,800 -18.94
JOS A BANK CLOTHIERS $ 156,132 $ 312,210 -20.01
LEXAR MEDIA INC $ 174,116 $ 296,140 -23.96
TAKE-TWOINTERACIIVE $ 158,840 $ 175,802 -27.42
CHRISTOPHER i~ BANKS $ 157,680 $ 195.300 -32.90
BOMBAY INC COM $ 162,114 $ 203,500 -38.24
SunTrust High Grade Bond Fund
NO SECURITIES DEPRECIATED MORE THAN 159a DURING THE QUARTER
NOSECURITIES DEPRECIATED MORE THAN 15°~o DURING THE QUARTER
' -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
1
11 /2003
Trusco Capital Management Proxy Policy
Policy Statement
n
i~
0
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 Polic} 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
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 Management 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
' 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
t 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
t 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, Inv.'s U.S. Domestic Proxv
Policies, Taft Hartley Proxv Policies and Global/International Proxv 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 e-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 a-mail at:
PMP.operations@truscocapital.com.
IYusco Capital Management Prox~~ Police J revised I I .20.03