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Home My WebLink About2004 05 26 Attachment Given to Board Members by Blake MytonDate: May 26, 2004 ATTACHMENT GIVEN TO BOARD MEMBERS DURING MEETING BY BLAKE MYTON ~ ~ ~ ~ '~ ~ ~ /J ~ ~ ~ ~ ~ ~ ' ~ ~ r~ ~ TRl~SCO CAPITAL MANAGEMENT Prepared Exclusively For: City of Winter Springs General Employees' Pension Plan Investment Review First Quarter 2004 Blake Myton Investment Manager 407-237-5816 blake.myton @truscocapital.com Dianne Garcia Relationship Manager 407-237-4513 dianne.garcia @ suntrust.com The Hurt Building -Atlanta, GA ~r r r^~ r rr r .r r Iw ~ r r~ r r r r rr pr Table of Contents Economic Overview /Market Snapshot Performance & Portfolio Composition Fund Fact Sheets Fund Attribution Summary =_~~ . - - City of Winter Springs General Employees' Pension Plan Section I Section II Section III Section IV TRUSCO CAPITAL MANAGEMENT I 1 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ r ~ ~ ~ Market Snapshot ~ ~. llw rl r r r~ ~ ~ ~ irlli ~ I~ ~ ~ >r +~ ~ ~ Investment Overview • The S&P 500 rose 1.7% on a total return basis in the first quarter following a 12.2% increase in the fourth quarter 2003. It was the fourth consecutive quarterly gain. The Lehman Aggregate Bond Index improved 2.7% after increasing just 0.3% in the fourth quarter. This was the 16th gain for bonds in the past 17 quarters. The trailin price/earnings ratio for the S&P 500 slipped to 20.3X, and yields on the 10-year Treasury note and the ~0-year A-rated corporate bond were 3.9% and 4.6%, respectively. • The economy continued along an expansionary path during the quarter, but the lack of significant job growth in the early months dampened investor optimism and helped keep monetary policy neutral. "Headline" inflation was low, but commodity prices, particularly gasoline, rose sharply. • The sluggish pace of job growth and steady Fed policy helped Treasury yields fall to the lowest levels since Julyy 03 and caused the yield curve to flatten, prompting an increase in mortgage refinance activify. The Treasury and Credit sectors outperformed while mortgage-backed securities lagged. • Cyclically sensitive stocks tended to lag in the first quarter after a strong performance in 2003. Consumer staples, energy, utilities, financials, and telecom outperformed, while technology, materials and health care declined. The relative performance of stocks of higher financial quality companies appeared to reach a relative extreme during the quarter. Small-ca stocks again outperformed large-caps, but this outperformance also moved to relative extremes. Value outperformed growth in the quarter. • Near-term risks to major economic drivers are down substantially in 2004, particularly given the recent improvement in lob growth. 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 not at maximum weights due to the nearly 50% rally in the S&P 500 since March '03, 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, especially if interest rates dip. • In fixed-income portfolios, we believe yields have reached a secular low, and will be sensitive to signs of cyclical economic pressures. However, an aggressive tightening move from the Fed near-term is unlikely. Consequently, we have a neutral duration on bond portfolios. 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 f ~ ~ ~ ~ ~ ~ ~ ~ ~ Economic Summary The economy is in a "sweet spot" but there is nervousness about future strength. Orders are up, profits are higher, jobs are increasing albeit slowly, inflation is low, attd policies remain friendly. High Neutral Neutral Positive High Positive Low Positive Low Neutral Stimulative Neutral Stimulative Stimulative Neutral/ Cyclical job gains expected to offset Fading diminishing fiscal and monetary stimulus and possible sustain consumer demand. However, further cyclical acceleration unlikely. Positive New order growth being funded by strong profits. Uncertainty and unused capacity could affect spending pace. Positive Higher defense spending enhanced by election-year politics. Stress at state and local level easing. Positive Record trade deficit likely to narrow. Exports are improving. Somewhat Stimulative fiscal and monetary policies, rising Higher commodity and energy prices, and a lower dollar, will put upward pressure on inflation in coming quarters. Global vs. local likely to affect pricing power. Neutral / Fed "patient" regarding need for higher rates. Turning Key factors affecting rate hike decision are job restrictive growth, published inflation reports, and inflation expectations. Becoming Tax package adds $2836 in stimulus during less FY04 with most in first half. Defense spending Stimulative a plus. FY04 deficit likely to exceed $5008. ~:~ ~ ~~ ~: ~~ _ . ~: . City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 4 i r r i i r i i~~ i i i i~ r i i ~ Stimulus Continued to Support Q1 Spending Retail Sales Growth Firm in Q1... 12% 1 o°r° 8% 6% 4% 2% o°i° -2% -4% 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 YOY~k Source: Census ...Due to Tax Cuts & Low Rates 1 o°i° 9% r 8°i° ~, t 6% 5% f 4% 3% ` ~ ~ 2% ~ ,~ - -Total Inc. Disposable. Inc. ~ 1% 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 YOYc7~ Source: BEA • The pace of consumer spending slowed in the first quarter from the torrid rate in the second half of 2003, but year-over-year growth remained firm. Retail sales increased nearly 8% in the twelve months ended February. Further cyclical acceleration from this pace is unlikely after the current stimulus subsides. • Consumer spending has been supported by falling mortgage rates and federal tax cuts; both of which increase spending power. The chart (lower left) plots the year-over-year increase in total personal income and disposable income (after-tax income.) Despite below-average job growth, disposable income increased at a relatively healthy rate due to tax rebates and lower withholding. This stimulus will begin to wind down at the end of the current tax season. City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 5 ~ r ~ ~ ~ r ^rr ~Ir ~ ~. nr ~ ~ ~ s >. ~ . . Business Demand Improving... New Order Growth is Strong... 20°i° 15% 10% 5% o°i° -5% -10% -15% -20% 93 94 95 96 97 98 99 00 01 02 03 04 YOY~I~ Source: Contmcrre Dept. ...and Production is Rising 1 o°i° 8°i° 6% - - - 4% - 2 0% -2% -4% -6% 93 94 95 96 97 98 99 00 01 02 03 04 YOY~/ Source: FRB • New order growth continued in the first quarter and is becoming a key driver to the current expansion. Technology equipment has been very strong. • The increase in orders is sufficient to raise production levels for many companies, providing a further source of economic growth and profits. Recent reports suggest that business caution has subsided. r,~ ~~ 4; City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 6 ~ r >~ +~ ors r rr rlr r~ ~ ~ r rr ~ rs r r~ r r^ Boosting Inventories and CAPEX • Inventory growth has been sluggish during this recovery, but with commodity prices rising and inventory/sales ratios at record lows, some rebuilding has taken place and should add to total growth throughout 2004. • Businesses increased capital spending on new equipment in 2003 and that is likely to continue in 2004. The chart (right) shows the year-over-year change in the two major pieces of investment spending; structures and equipment. Equipment spending has increased significantly over the past year, while the building of new structures has lagged. However, new building projects are likely to return this year. Inventories Increasing Gradually 12°/ 93 94 95 96 97 98 99 00 01 02 03 04 YOY~k Source: BEA Investment Spending Up 2° ° 10% 8% 6% 4% 2% o°i° -2% -4% -6% 0 /° 15% 10% ~ t~~ 1 0% ~.. ~ - ~ -5% ` ~ ~ ~- -15% ~ -20% - -Structures Equipment `! -25% 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 YOY~/c So«rc~: BEA r~ s-~~~: ~ L ~~ City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 7 ll~ rr ~ ~ ~ r r ~ ~ rr •~ rr ~r ~ t~ ~ ~ s ~ Job Growth is Finally Accelerating • The most important and sustainable source of consumer income (and spending) is job growth. Job growth in the current expansion has lagged the pace of previous recoveries. However, the pace of layoffs slowed in recent months, and surveys of businesses show an increased willingness to hire new workers. • Frustrations with the sluggish pace of job growth eased considerably with the March employment report showing again of over 300K workers. While one data point is far from a trend, the creation of new jobs is reasonable and normal given the recovery in corporate profits thus far. Continued job growth can help sustain consumer spending. Layoffs Down & Surveys Improving 60 50 40 ~ ISM E m p.(L) Jobless Claims 200 250 300 350 400 450 500 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 Lr~,~, 1, (OOOs it/in~~c rted sccrlc 1 Source: BLS. !SM Job Growth Finally Reflected in Mar. Data 30 600 500 400 - 300 -- 200 100 0 -100 -200 -300 -400 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 Monthly Change (OOOsI Source: BLS ~. E fir' `~~ ,.~ ~~ ~ - City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT $ r r r r r r r rr r~ .is rrr r r r r r rr rl~ Core Inflation Low and Productivity is High... "Headline" Inflation Remains Low... 7°r° 6% ~ • "Headline" inflation, as measured by the - - Cpl Core Consumer Price Index, remained low in 5°~° the first quarter. Core inflation, which '~ ~ 4% excludes the volatile food and energy ~ components, was even lower, and was still 3% ~~^ ~~"_., J ~ ~ ~,~ ~I 1 below 1'h /° on ayear-over-year basis. 2% ~ ~ uv 1 °r° o°i° 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 YOYrIc Source: BLS ...and High Productivity is a Big Reason 6 • One of the key factors citing for holding 5 down inflation is high productivity growth 4 along with the attendant low level of unit 3 labor costs. Businesses kept costs under 2 control, but that could prove to be more of 1 a challenge if new order and production o gains continue. -1 -2 -3 -4 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 YUY~h Source: BLS ~~ City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 9 ~r ~ l~ r ~ r ^r r ~ ~ ~ r s r ~ r ~ r ~ ...but Commodity Prices are Up & Dollar is Down Commodity and Energy Prices Higher... 40 25% 20% 35 15% 30 10% 25 5% 0% 20 -5% 15 -10% -15% 10 -20% 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 /Bung!,[., YOY~% (Ill Snu,re: WSJ. CRB ...and a Lower $ Raises Import Prices 20°i° 15% 10% 5% o°i° -5% -10% -15% -20% 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 YOY~7o Socu-re: FRB • "Headline" inflation reports are under control, but rising energy costs along with the costs of many industrial commodities are becoming a potential headwind for consumers. Nominal gasoline prices hit record levels in the first quarter. • The dollar was relatively stable in the first quarter, but the year-over-year decline has been reflected in recent import price reports. The lower dollar improves the competitive position of domestic producers, but it is also a source of future inflation. City of Winter Springs General Employees' Pension Plan ~T TRUSCO CAPITAL MANAGEMENT 10 ~ r ^~r l~r~ ~ r r ~ ~ rr ~ ~ ~ ~ +~r . ~ ~s rr Fed "Patient" on Next Move • While Fed policy remained unchanged in the first quarter, the stronger economy and fading risks of deflation made them comfortable with a neutral bias. Chairman Alan Greenspan stated the current low level of inflation allowed the Fed to be patient in making any near-term policy shifts. • However, the March employment report raised the specter of stronger growth an a potential Fed tightening sooner than many investors expected. The chart (lower right) plots the fed funds futures rate for the remainder of 2004 both before and after the March jobs report. Investors are becoming more nervous about the possibility of an increase in short-term rates. Funds Rate Stays at 4-Decade Low... 20 60 65 70 75 80 85 90 95 00 Source: FRB is 16 14 12 10 8 6 4 2 0 Job Gains Raised Risk of Rate Hike 1.60% 1.58` 1.50% After 1.40% Before 1. 1.30% 1.20% 1.10% 1.00% ~ LL. g Q~ o~ o r p o~ L j C\7 ~ N \ r ~ ~ ~ ~ a r ~ Dates of FOMC Meetings Indicated Source: CL3T 4 ~M. City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 11 rs r ~ r ~ ~ r ~ r Ir liter r ~ . ~r Ili l~ lllr ~ Equity Markets Summa • The S&P 500 rose 1.7% on a total return basis in the first quarter following a 12.2% increase in the fourth quarter. The index reached a recent peak on February 11 before correcting over 5% through mid-March. • Performance within the S&P 500 was mixed during the quarter, as cyclically sensitive sectors such as technology lagged, while defensive sectors such as consumer staples and commodity-based energy stocks rallied. • Small-cap stocks again outperformed large-cap stocks during the period. However, the three-year outperformance of small-caps was at a relative extreme, and signs of a reversion back to long term averages increased. The S&P 600 SmallCap Index rose 6.2% in the first quarter and 56.5% during the past year. The Value style again outperformed Growth in the quarter. International equities again outperformed the S&P 500. • The combination of stronger demand and improved profit margins lifted S&P 500 operating profits growth 25% year over year in the fourth quarter. First quarter profits could be up as much as 20% year- over-year, but the pace of earnings growth is expected to slow throughout 2004 and into 2005. 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 on a rolling three-year basis remains historically significant, but the performance spread by stocks over the past year has been wide. The S&P 500 rose nearly 45% between March 2003 and the end of March 2004, 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 cyclically overweight 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. ~,~~~ -~ City of Winter Springs General Employees' Pension Plan TRUSCO CA['1TAL MANAGEMENT 12 r w w ~ r r .r ~ ^~ r r~r r ^l~ r ~Ir r r rls rr Stock Market More Cautious in Q1 Market More Defensive in Q1 Valuations Held Relatively Steady 50 35 40 30 30 20 25 10 20 0 10 Disc Stpl Engy Fn Hlth Ind Tech Mat TeI Util 15 ^ 3-Nbs. 1.2 5.6 5.2 4.9 -0.6 -1.0 -2.5 -1.8 5.0 5.2 ^ 6 Mos. 15.8 14.1 21.3 17.3 7.8 13.8 10.0 21.0 19.1 13.5 10 ^ 1-Yr. 41.0 26.0 31.2 44.8 13.1 37.7 44.1 46.3 31.4 37.1 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 Sector PerFornumcc S&P 500 Source: FactSet %~railiirg P/f:~ Rulio Snurce: Baseline Profits Growth to Slow from High Rate Small-Caps Led Again in Q1 40% 30% 20% 10% 0% -10% -20% -30°/ 60 50 40 30 20 10 0 3-Mos. 6 Mos. 1-Yr. ^ S&P 100 0.1 10.5 28.4 ^ MidCap 5.1 18.9 49.1 ° 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 ^ SmlCap 6.2 21.9 56.5 S&P Op. Earnings (YOY%) -Olive is est. Source: Trusco Capital Capitalization Performance Source: FactSet ~~ - City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 13 ~ r ~ r ~ r ~ ~ ~ ~ ~ ~ ~ +r ~ ~ ~ ~ Low Quality Stock Outperformance at Extreme Earnings Mattered More in Q1 110 100 90 80 70 60 50 C'7 C'7 Ch f7 M M C7 ~ C'7 ~ ~ ~ O O O O O O O Q O O O O ~ i Q ~ ~ 3 ~ ~ U O ~ c3 ~ ~ Q g ~ ~ Q (~ O Z p -~ ~~ Ratio ojSto~-ks ti•/EarnrnKs to Storks u~/No Fcn-nin,~s IS&P 1500)So~mce: ISl Quality Underperformance is at Extreme 60% 40% 20% - - o°i° -20% - -40 -60% -80% 91 93 95 97 99 01 03 S&P A, & C Rated Conymnies (Ey. Wt. YOY~Ir Dr(f c7c Soe~rrn: Tru.r~n • The market rally that initially began in October 2002 has been called a "dash to trash" due to the Outperformance of stocks of lower quality companies. The chart (upper left) plots the ratio of stocks in the S&P 1500 with no earnings against the stocks of companies with earnings. The downward trend that characterized the "dash to trash" moderated in the first quarter. • The Outperformance of lower quality stocks may have reached an extreme in the first quarter and is reversing in favor of higher quality stocks. The chart (lower left) plots the difference or performance spread between stocks of companies rated "A" by S&P and those rated "C" on a rolling twelve-month basis. '~w. "`~. ~... City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 14 Fixed Income Markets Summary • The Lehman Aggregate Bond Index rose 2.65% on a total return basis during the first quarter, and was up 5.40% in the past year. Treasury yields declined during the quarter to the levels of July ~03, with the yield on the 10-year note closing the quarter at 3.84%. • A lack of job growth and continued accommodative policy language from the Fed helped lower longer-term yields and flatten the yield curve. The spread between 3-month and 10-year yields narrowed to 279 basis points from 332 on December 31. Short-term yields remained steady. • Credit spreads remained relatively narrow during the quarter, with the spread between 10-year "A" rated corporate bonds and 10-year Treasury securities closing at 76 basis points. While additional declines in credit spreads are likely as the economy continues to improve, we do not look for a repeat of the sharp declines of 2003. • The Treasury and investment grade corporate sectors led all sectors during the quarter, due to the flattening in the yield curve and the gradual improvement in credit quality. Mortgage-backed and High Yield bonds lagged the overall index. • 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. As a result, we are positioning portfolio durations slightly long 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 15 ~ ~ ^~ ~ ~ ~ ~ ~ r i ~ ~ ~ ~ ~ ~ ~ ~ Bond Returns Positive Apain in Q1 Long Yields Fall, but Curve Still Steep... 6.0 5.0 4.0 3.0 2.0 1.0 „~ ._- - r.. --- "~ - _ `' ~-_ 3/31 /2004 - - 12/31/2003 9/30/2003 3/31 /2003 Credit Spreads Down Significantly 200 150 100 0 0 ~ ~ 50 ~ - ~ . 0 5 10 15 20 25 30 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 Tr-ecrsur~• Yield Cut1~e Source: Blootnber;~ 10-Yr. "A "-Rated Corp. s~s. Trensun• Sotu-ce: Merrill L~•nch Flatter Curve Helps Longer Bonds Corporate/Treasuries Led in Q1 7 0 25 0 . . 6.0 20.0 5.0 4.0 15.0 3.0 10.0 2.0 5.0 1.0 0.0 U -~~ 0.0 3 Nb 6 Mo 5 Yr 10 Y r 30 Yr 2 Yr Agg G/G I G/C Tr Agy Cred ABS NBS HiYd Mun ^ 3-Nbs. 0.24 0.29 1.19 3.12 4.65 5.70 ~ 3-Nbs. 2.65 3.08 2.48 3.06 2.69 3.27 2.31 1.92 2.35 1.80 ^ 6 Nbs. 0.51 0.61 1.26 2.37 3.26 4.03 ^ 6 Nbs. 2.98 3.06 2.54 2.52 2.45 3.78 2.64 2.87 8.40 2.67 ~ ^ 1-Y r. 1.08 1.24 2.64 4.35 4.86 5.95 ^ 1-Y r. 5.40 6.16 5.30 4.35 4.11 8.61 4.85 4.07 22.65 5.52 Treusurs Renrr-ns Source:l_elunan Brodrers Aggregate & SectorRetw•ns Source:Lehnu~tt Brothers .._ _. , -l City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 1 s ^~ Ili ~ ll~ ~ i. r . 1. Ili l~ 1. ~ 1. l~ 1. l~ ~ Ili Summary of Investment Outlook and Strategy • Renewed concerns about the pace and sustainability of the current expansion slowed the stock market rally and gave renewed support to bonds during the first quarter. Equities rose modestly point-to-point, increasing nearly 45% above the level of March 2003, before correcting just under 6% on an intra-period basis. The fixed-income markets improved broadly as longer-term bond yields fell back to the levels of last summer. • The economy continued to expand, and surveys of corporate confidence and hiring plans pointed to further gains, fueled by higher corporate profits and capital spending. However, measurable job growth was reported for March. Headline inflation remained low, though energy prices, especially oil and gasoline, rose further. • 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 appears to have accelerated in March and 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 intensify in 2004. The Federal Reserve will retain a supportive monetary policy until pricing firms, and job growth accelerates. We believe the next shift in Fed policy will be in the direction of higher rates. • 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, especially if interest rates dip. • Infixed-income portfolios, we believe yields already reached a secular low in mid-2003, but significant increases are unlikely while cyclical pressures remain muted. We recommend a slightly long 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 17 .~ (9/30/2003) $ 7,039,994.80 Ilncome $ 50.62 $ 7,040,045.42 $ 484,174.93 $ (103,318.88) $ 914,799.47 ~idends $ 19,584.30 come $ 65.03 $ 8,355,234.62 come $ 115.65 ~~- ~ iC0 CAPITAL MANAGEMENT 118 ~ ~ r ~ ~ ~ ~ ~ r ~ ~ ~ ~ S ~ ~ ~ ~ ~' Period Ending ~ Performance Comparisons March 31, 2004 Fiscal Inception Year to Date Trailing Trailing Trailing Trailing to Date Qut~ri~r 6 fNonths '2 Mr~nths' 36 PJlon~hs_ Ei0 Mor 7_-` i fir) [L9onths' ~~A Months ~. ~ Total Equity 3.58% 17.54% 39.02% 3.42% 5.97% 11.50% 10.99% SunTrust Retirement High Grade Growth Fund 1.30% 11.85% 25.05% 0.52% 1.81% 12.88% 12.37% S & P 500 Barra Gro~th Index 0.02% 9.96% 26.73% 0.49 % -4.76% 11.61 % 10.81 S&PSOOlndex 1.69% 14.08% 35.12% 0.63% -1.20% 11.68% 11.00% SunTrust Retirement High Grade Relative Value Fund ** 2.35% 16.73% 35.21% 1.74% 1.88% 10.34% 9.83% S & P 500 Barra Value Index 3.35 % 18.28% 44.14 % 0.60% 2.05% 11.27% 10.71 Russell 1000 Value Index 3.03% 1765% 40.82% 4.31 % 3.89% 12.65% 12.03% SunTrust Retirement Mid Cap Equity Fund 3.78% 17.51% 40.12% 2.03% 10.52% N/A N/A S & P Mid Cap 400 Index 5.06% 18.92% 49.10% 10.71 % 11.75 % 14.93 % 14.49 Russell Mid Cap Index 5.14% 19.83% 50.83% 9.18% 8.42% 13.05% 12.66% STI Classic Small Cap Growth Fund 8.08% 23.43% 68.22% 10.51% 12.90% NA NA S & P Small Cap 600 Index 6.22% 21.92% 56.49% 12.80% 13.18% 12.75 % 12.11 °r° Russell 2000Gro~thlndex 5.58% 18.97% 63.16% 5.40% 2.31% N/A N/A STI Classic Small Cap Value Fund 5.69% 22.51% 54.75% 17.81% 17.95% N/A N/A Russell 2000 Value 6.92% 24.42% 64.49% 16.02% 16.13% 13.61 % 13.31 STI Classic International Equity Index Fund 4.77% 22.59% 60.29% 2.31% 0.01% N/A N/A MSCI EAFE Index 4.33% 22.14% 57.51 % 3.36% 0.47% 4.52% 5.43% Total Fixed Income 2.69% 2.51% 4.65% 7.60% 7.14% 7.56% 7.05% SunTrust Retirement High Grade Bond Fund 2.90% 2.83% 4.98% 7.71% 7.23% 7.62% 7.11% Lehman Govt Credit Bondlndex 3.08% 3.05% 6.15% 8.00% 7.56% 7.65% 7.10% Lehman Aggregate Bond Index 2.66 % 2.98% 5.40% 7.44 % 7.29% 754% 704% SunTrust Retirement High Grade Intermediate*** 2.18% N/A N/A N/A N/A N/A N/A Lehman Intermediate A+ GoWCredit Bond Index 2.37% 2.23% 4.49% 7.11 % 7 11 % 7 03 % 6 63% °Rehun is annualized. ~* - /ncepdon 6/_30/2002. Longer term results ure linked to tke STI Classic Growth and Leconte Fund to show resarlts prior ro inception. *** - Liception !0/202003. City of Winter Springs General Employees' Pension Plan TtZUSCO CAPITAL MANAGEMENT 19 Period Ending ~ Portfolio Composition March 31, 2004 Total Fixed Income 26.3% Total Equities 71.8% SunTrust Retirement High Grade Growth Fund $ 1,645,415.82 SunTrust Retirement High Grade Relative Value Fund $ 1,392,456.98 SunTrust Retirement Mid Cap Equity Fund $ 866,729.40 STI Classic Small Cap Growth Fund $ 723,590.24 STI Classic Small Cap Value Fund $ 533,275.50 STI Classic International Equity Fund Total E uities $ $ 838,440.68 99 q SunTrust Retirement High Grade Bond Fund $ 5, 9,908.62 1,740,620.94 SunTrust Retirement High Grade Intermediate Bond Fund $ 459,612.73 Market Funds 155,092.33 19.7% 16.7% 10.4% 8.7% 6.4% 10.0% 20.8% 5.5% 1.9% 1.9% };_ ~_ City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 20 Total Money Market rr ~r r r r ~^s r r ^r ~t lllr +~ ~r rr r r r rr 1. Period Ending SunTrust Retirement High Grade Growth Fund March 31, 2004 The fund seeks capital Cash: 0.0% Value Blend Growth NAV: $53.29 appreciation by investing primarily U.S. Stocks: 100.0% Large in large, well established domestic Non-U.S. Stocks: 0.0% Assets (milj: $172.64 corporations in the top three Medium quality rating categories of major Small credit rating agencies, including Value Line, Moody's or Standard Investment Category & Poor's, and must be listed on a Large Growth major exchange or NASDAQ. °°° Security E uit Security Equity Pfizer Inc. 2.9% Johnson & Johnson 2.4% Consumer Discretionary 14.5 % 11.2% Exxon Mobil Corp. 2.9% Intel Corp. 2.4% 11 4% American Express 2.9% Deere & Co. ° 2.3 /° Consumer staples . 1 t 4 Microsoft Corp. 2.8% L-3 Communications 2.3% Energy 4 1 s.o% Health Management 2.4°,o UnitedHealth Group 2.2°-o Financials 17 2 % 21.3 '• Healthcare 13.7 % 13.1°0 Characteristics Fund ~ Industrials 181 % -- ---- 10.7 Dividend Yield (Current) 0.9% 1.7°0 2,.0% Information Technology 17 0 % Market Capitalization ($bil) 69.5 88.2 Price-to-Book 3.5x 3.Ox Materials 2 9 % P/E (12 mo fwd) 20.6X 18.Ox Telecom services 3.s% ^ Fund EPS Growth (5 yr est) 13.8 12.2 utilities 2 s % ^ S&P 500 Index ROE 17.9 18.3 Annualized Three One Three Five Ten Inception Months Year Year Year Year 04/01/1990 Fund 1.3% 25.1 % 0.5% 1.8% 12.9% 12.9% S&P 500 Index 1.7°~ 3~; 1°, 0.6° ~ -1.2°., t'. ,'~~ _ 1 ~ G°~ Lipper Large Cap Growth Index 1.2% 30.5% -3.4% -6.7% 8.2% 9.3% City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 21 Period Ending S u n T ru st Retirement Hi h G d th G F d March 31, 2004 g ra row e un ~ - .- - The first quarter of 2004 saw a modest gain of 1.7% for the S&P 500 Index, while the High Grade Growth Fund advanced 1.3% for the quarter. After a strong start to 2004, stocks corrected in the second half of the quarter as investors again worried about below average job growth and the potential for rising interest rates. Defensive sectors were the best performing sectors for the quarter, including Consumer Staples, Energy & Utilities. The strongest sectors in the fourth quarter of 2003, such as Technology and Industrials, retreated in the first quarter. Style-wise, Value and Small Capitalization companies performed the best, while Growth and Large Capitalization companies lagged. With the economy continuing to expand at above average rates and companies in the Fund reporting strong earnings growth, the portfolio should display above average performance in the coming months. Fund Manager: Elliott Perny, CFA ~ - - . 1997 1998 1999 2000 2001 2002 2003 2003 First Quarter 2.6% 15.4% 5.6% 0.2% -4.8% 2.4% -2.2% 1.3% 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% 1.3% SR F 'ndex ,:5 _t _ 2t~ ~ ~. ~' ~ ~~, 1 7 q° _ ~ 2~ 1 ~ . 2~3 Lipper Large Cap Growth 28.1% 25.7% 28.0% -10.9% -18.0% -24.2% 27 0% 1 2% $60, 000 $50,000 $40, 000 $30,000 $20, 000 $10,000 $0 ~~~~~~ m m m~ 8 0 0 o g Fund S&P 500 MPT Statistics /Other Measurements 3 Year Alpha Beta R-Squared Sharpe Ratio Std. Deviation Fund 1.09 0.67 74.95 -0.28 13.89 S&P 500 Index ~) UO t.00 r .~~~;~ -0.35 1~i.U~ ~~ ~::~ City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 22 r r r~ rr r ^r r rr r ar r~ r r r r rr Period Ending I SunTrust Retirement High Grade Relative Value Fund March 31, 2004 Value BIerW Growth Cusip: 990001182 The Fund seeks long-term capital Cash: 1 .8°% U S Stocks: 98 2 / Large . . . ° appreciation with a secondary goal of NAV: $11.40 current income by using a value- Medium Assets (mil): $75.2 oriented investment strategy focused on large well-established companies smau in the top three quality rating Investment Category categories of major credit rating agencies, including Value Line, Large Value - Moody's or Standard & Poor's. .. Securitv %Epuity Securitv %Epuity - Conoco Phillips 2.0% ChevronTexaco 1.8% 10.1 Consumer Discretionary 15.2 Exxon Mobil 1.9% General Electric 1 7% e.o % Berkshire Hath. B 1.9% Bank of America . 1.6% Consumer Staples 2.s°'° Prudential Financial 1.8% Rockwell Automa tion 1.6% s.a % Energy 11.0% American Electric 1.8% Amer Intl Group 1.6% zs.2% Fnancials ' • • • - HeaRhcare 102 % 37.0°~ 3.8 Barra Industrials 14.4 % Characteristic Fund Value g_o% Dividend Yield (Current) 1 9% 2 0°-o Information Technobgy 10.0 % . . s.2 EPS Growth (5 yr.) 7.0% -1.0°~ NLaterials s.sr Market Capitalization ($bil) 61.1 B 64.5 B 3.5 4.5°0 Price-to-Book 2 6X 2x 2 Telecom Services . . 6.1 P/E (12 months trailing) 17.4x 16.5x 4_g% ^ Fund Utilities Return on Equity 16.2% r 3 u" 5 6~'° ^ Barra Value Index -. - - . Annualized Three One Inception Months Year 6/30/02 Fund 2.4% 35.2% 7.8% Barra Value Index 3.4`-~ 44.1°~, 10.~'~ ~ ~: :~ w, City of Winter Springs General Employees' Pension Plan TRLISCO CAPITAL MANAGEMENT ~ 23 Period Ending SunTrust Retirement High Grade Relative Value Fund - March 31, 2004 continued 2002 2003 2004 Equities showed signs of First Quarter N/A -4.1% 2.4% consolidation during the first Second Quarter N/A 13.5% quarter as the market digested Third Quarter -17.4% 2.1% the gains of 2003. Economic and Fourth Quarter 6.5% 14.1% profit recoveries remain on track but investors are increasingly Fund -12.1 % 26.7% 2.4% wondering if the best is "here". Barra Value -12.6°% 31.8°io 3.4°i° We believe the environment for equities remains supportive and economic and profit trends should prove strong enough to help ~ ~, ~ ~ ~ ~ ~ ~ ~ ~ ~ , , investors recognize that "here" does not mean "over" for the market. We remain optimistic $13,000 that this earnings driven market has not been fully exploited and $12,000 ---- --~ maintain a slight pro-cyclical tilt. $11,000 For the quarter, value $10,000 _ _ -%~~ benchmarks proved challenging ~~ with the Barra Value Index $9,000 ~ -- , ~ ~~~ / gaining 3.4% as compared to $8,000 2.4% for the Fund. $7,000 ------ Jun Sept Dec Mar Jun Sept Dec March Fund Manager: SunTrust High Grade Relative Value S&P/Barra 500 Value Charles B. Arrington, CFA -. City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 24 .~ 1. ~ r 1. r . ~^. r rN ~ .r ~ rr ~ ~ .~ Ir Period Ending I SunTrust Retirement Mid-Cap Equity Fund March 31, 2004 Value Blend Growth ~ar~e Medium Small Investment Cateaorv Mid-Cap Blend Security OGE Energy Corp. Wtlatch Corp. Webster Fnancial Ashland Inc. Rrst Industrial Realty Trust NAV: Assets (mil): The Fund seeks long-term capital Cash: $25.00 growth through investment in a Stocks: $38 37 0.0% 100.0% . dlverslfled portfolio of stocks of domestic corporations with a market capitalization between $1 billion and $10 billion and must be ~5 5i«~ listed on a major exchange or ~~~~ NASDAQ. `~" o~. E uit Security Equity 2.0% May Dept. Stores 1.6% 1.9°/ Marathon Oil Corp. 1.6°/ 1.7°/ Rtney Bowes Inc. 1.6% 1.7°/ Comercia Inc. 1.6% 1.6% Rockwell Collins Corp. 1.5°/ Characteristic Fund Russell Mid-Ca Dividend Yield (Current) 1.7% 1.4% Market Capitalization ($bil) 6.1 6.3 Price-to-Book 2.5x 2.5x P/E (12 mo trailing) 20.2x 19.1x Price-to-Sales 1.1 x 1.1 x Consumer Discretionary '° 19.0 3.6 Consumer Staples 4.2 5.3 % Energy 4.0 Financials 22'4 % 22.0 Health Care 1 1 .2 10.7 Industrials 11.5 % 9.1 Information Technology 17.6/ 7.4 % Materials 4.9 % 5.3 % Telecom Services ,2% ^ Fund 1.2°6 Utilities 4.9% ^ Russell Midca Index P 7.1 Annualized Three One Three Five Seven Inception Months Year Years Years Years 12/1996 Fund 3.8% 40.1 % 2.0% 10.5% 14.2% 13.5% Russell Mid-Cap Index 5.1 °;0 50.8°~~ ca ?"~ ~~ ~"'~, 11.4°~0 10.6°'~ Lipper Mid Cap Core Funds 4.5% 47.8% 8.3% 10.0% 11.2% N/A City of Winter Springs Gen eral Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 25 Period Ending I SunTrust Retirement Mid-Cap Equity Fund -continued March 31, 2004 The Russell Mid Cap Core was up 5.1% in Q1. Sectors with the highest Q1 returns were: Energy +7.9%, Financials +7.8%, and Healthcare 7.0%. Sectors with the lowest returns were Industrials +0.7%, Materials +1.7%, and Information Technology +1.7%. While lower Beta stocks outperformed higher Beta stocks, the performance gap between low quality and high quality stocks continued in Q1. YTD, lower quality C&D rated stocks returned 5.5% while higher quality A+ rated stocks returned 2.5%. Investors are currently paying a premium (P/E 73.1x) for risky, low quality stocks versus higher quality stocks (P/E 20.7x) as well as versus the Russell Midcap (P/E 20.2x). 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 2004 First Quarter -1.2°/ 13.8% -0.6% 21.5% -11.7% -5.5% -4.9% 3.8% Second Duarter 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% 3.8% ~3u~.5F;U ^~i i ii, Irl~lt'x -a'T !lj.l' 1 ~ -.... -~ lr'.. -.1R 2-. lri i'- _, 1'. Lipper Mid Cap Core Funds 22.2% 7.8% 28.2% 6.3% -4.9% -17.4% 36.1% 4.5% $35, 000 $30, 000 $2s,ooo $20, o00 $1 s,ooo $10, o00 $5, 000 $o Deo-ss Fund ~°°-°~ Russell Midcap Index • - - - 3Year Alpha Beta R-S uare Sharpe Ratio Std. Deviation Fund 0.01 0.67 0.56 0.29 15.81 Russell Mid-Cap Index 0-OG 1 OG UO 0 4i t~i.t~5 City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT ~ 26 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 rr ~ r~ I~ I~ r ~ ~ ~ ~ r ~ rr r r ~ ~ I~ Period Ending ~ STI Classic Small Cap Growth Stock Fund March 31, 2004 More current investment performance return information may be obtained by calling 1-800-874-4770, option 5, or visiting the STI Classic Funds website at www..cticlassrcf r~itds.cnn~. Value Blend Growth Ticker: SSCTX The fund seeks Ion term Cash: 0.8% g Large Expense Ratio: 1.20% U.S. Stocks: 99.2% capital appreciation by Medium NAV: $21 28 investing in the stocks of . companies with market Small Assets (mil): $821.0 capitalization between $50 million and 2 billion at the X55'°`"= Investment Cate ory q~ ~~~° time of purchase. Small Growth .. - .. - Securitv % Equity Securitv % Equity Protein Design Labs 1.1 % Sierra Health Svcs .g% Consumer Discretionary ~ Jos. A. Bank Clothier 1.0% Possis Corp .8% Consumer Staples R&G Financial 1.0% Ultimate Software .8% Gevity HR 1.0% Infocrossing .8% Energy Webex Com. .9% Penn Ntl Gaming .8% Rnancials • • • H Rh ea care S&P 600 Industrials Characteristic Fund Sm. Cap Grth Dividend Yield (Current) 0.2% 0.5°io EPS Growth (5 yr est.) 20.0% 17.1 °io Information Technology Market Capitalization ($bil) 0.9 1.2 Materials Price-to-Book 2.8x 3.6x P/E (12 months trailing) 21.9x 22.8x Telecom Services Return on Equity 12.2% 14.5°~~ U[iuties - ~ -. - - - Annualized Three One Three Four Five Inception Months Year Years Years Years 10/08/1998 Fund 8.1 % 68.2% 10.5% 3.8% 12.9% 17.1 S&P 600 ~ma!! Cap Gr owth Index 5.7~~~, 50.5°~~, 11 .~ '; 3.0"x, y.~~'-~ 15.0~'~ Lipper Small Cap Growth Classification 4.0% 56.3% 4.8% -7.1 % 6.5% 13.5% 26.4 City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT I 27 rr ~ r ~ rr .~ rs ~. ~ ..~ rr ~ rr ~ . ~ ~ ~ ~ Period Ending C T I March 31, 2004 V More curre-zt investment performance return information znay be obtained by calling 1-800-874-4770, option 5, or visiting the STI Classic Funds website at wx~ w. sticln.csic, f'rtaclr. cony. lassie Small Cap Growth Stock Fund -continued Small cap stocks continued their 1998 1999 2000 2001 2002 2003 2004 dominance during the first quarter of First Quarter N/A -11.4% 16.4% -10.6% 1.1% -6.4% 8.1% 2004 as the S&P 600 and Russell Second Quarter N/A 20.8% -0.1% 16.0% -10.2% 24.2% 2000 indices posted returns of 6.22% Third Quarter N/A -5.2% 0.3% -22.8% -19.9% 9 7% and 6.26% versus the 1.69% return Fourth Quarter 46.3% 18.8% -4.1% 23.9% 6.2% 14.2°i° of the S&P 500. The Russell 2000 Small Cap value index returned 6.92% versus the Russell 2000 Small Cap Growth return of 5.58%. All sectors contributed positive returns with Energy the standout. Other strong sectors included Healthcare and Consumer Discretionary. The Small Cap Growth Fund posted an 8.08% return for the quarter, while the S&P 600 Barra Growth returned 5.72%. The Lipper Small Cap Growth Average for the quarter was 3.96%. The Small Cap Growth Fund was ranked in the 8th percentile of the Lipper peer group at quarters end. Fund Manager: Mark Garfinkel, CFA Fund 0.0% 20.6% 11.8% -0.8% -22.7% 45.6% 8.1% S&P 60Q Small Cap Cron+n ~n~Jex ~ ;'_ 'a Ft~ ~~ 6~._ -1.2°~. -1~ ~~, 3; '~°_ 5 , Lipper Small Cap Growth Classification 5.4% 63.4% -6.2% -11.3% -29.7% 44.4% 4.0% $30, 000 $25, 000 $20, o00 $1 s,ooo $10, o00 $5, 000 $o -}- Oct- sa Apr- Oct- Apr- Oct- Apr- Oct- Apr- Oct- Apr- Oct- Apr- 99 99 00 00 01 01 02 02 03 03 04 Fund S&P 600 Srrtiall Cap Grow th Index Fund S&P 600 Small Cap Growth Index City of Winter Springs General Employees' Pension Plan 3 Year Sharpe Std. Alpha Beta R-Squared Ratio Deviation -0.2 1.2 1.0 0.4 6.4 iii ii t0 ii5 5 TRUSCO CAPITAL MANAGEMENT 12s rri rr ~ r r r r r r >~ rr rw r r r r r~ r~ r Period Ending I STI Classic Small Cap Value Fund March 31, 2004 More current inveshnent perforznance return information znay be obtained by calling l -800-874-4770, option 5, or visiting the STI Classic Funds website at w' K~ k•. sticlrr.csicf 'ands. cont. Value Blend Growth Large Medium smau Investment Category Small Value Ticker: SCETX Expense Ratio: 1.24% NAV: $17.66 Assets (mil): $694.19 Securitv %Equity Securitv %Equity Barra Inc. 4.0% Brink's Co. 2.4% Autodesk Inc. 3.4% Embraer-Empresa 1.9% Cooper Cos. 3.1 % Mentor Corp. 1.7% Reynolds & Reynolds 3.0% StanCorp Financial 1.7% Harris Corp. 2.9% Cummins Inc. 1.7% The fund seeks long-term Cash: 0.3% capital growth and income by U.S. Stocks: 80.6% investing in the stocks of Non-U.S. Stocks 19.1% companies with a market capitalization between $50 million and $2 billion. Consumr Discretionary 19.8°0 1sa o Consumer Staples 4^1 Energy Fnancials Healthcare Russell Characteristic Fund 2000 Value Industrials Dividend Yield (Current) 1.4% 1.5°% Information Technobgy EPS Growth (5 yr est.) 13.6% 11.2% Market Capitalization ($bil) 1.7 0.9 Materials Price-to-Book 2.3x 1.7x P/E (12 months trailing) 19.9x 0 16.9x of Telecom Services 31.3% ^ Fund Return on Equity 12.4 /° 5.1 ~ utaihe5 ~ s zoo ^ Russell 2000 Value Index -. - - Annualized Three One Three Five Seven Inception Months Year Year Year Year 8/31/1994 Fund 5.7% 54.8% 17.8% 18.0% 11.7% 15.6% Russell 2000 Value Index ~~ 0~. -+ -,~' ; 16.0°~ , r;_ 1 ° ~_ ~ 3.0' ~~ 3.8''~ Lipper Small Cap Value Index 6.0% 65.9% 16.7% 16.6% 12.8% 13.1% City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT ~ 29 ~ ~ r r rl ~ ~ ~ ~ s~ s ~ r ~ r ~ ~ r Period Ending March 31,2004 STI Classic Small Cap Value Fund -continued More current investment performance return information may be obtained by calling I -800-874-4770, option 5, or visiting the STI Classic Funds website at www.strclassicfund.ccona. The STI Classic Small Cap Value Fund returned 5.7% for the quarter versus 6.9% for the Russell 2000 Value Index. Higher quality companies were the top performers for the quarter. 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 that the market is refocusing on fundamentally strong, profitable companies. This can be seen in the quarter as value outperformed growth early in 2004. 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 1997 1998 1999 2000 2001 2002 2003 2004 First Quarter 4.8% 9.7% -13.3% -4.1% 5.5% 9.7% -6.4% 5.7% Second Quarter 15.0% -8.9% 19.8% 5.9% 8.9% -1.8% 17.1% Third Quarter 12.5% -22.0% -8.1% 6.7% -8.1% -12.6% 7.9% Fourth Quarter -2.1% 11.0% 1.9% 9.0% 14.9% 4.3% 15.9% Fund 32.6% -13.5% -2.7% 18.0% 21.2% -1.7% 37.1% 5.7% Russell 2000 Value Index ?1 c2'. -6 5°~ 1 2? 8'°~ 14 i)", 11 4°~, ~6 a°-, 6 9°~~ Lipper Small Cap Value Index 28.8% -6.7% 1.9% 16.1% 17.2% -11.2% 47.5% 6.0% 545.000 $40000 $35.000 $30,000 $25.000 $2°.~ $, 5.000 $,°.°oo $5.000 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Fund Russell 2000 Value - - - 3 Year Alpha Beta R-Squared Sharpe Std. Deviation Fund 5.41 0.74 89.50 1.12 14.26 Russell 2000 Value Index 0.00 1.00 100.00 0.77 18.35 City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 30 r r r r~ r r rr ~r rr rr r r r r r r rr r r Period Ending sTl Classic International Equity Index Fund nn~.~h ~~ ~nn~ More currezzt in vestmezzt performance return information may be obtained by callizzg I -800-874-4770, option 5, or visiting the STI Clnssir Funds website at w ww. sticln.c.cic/i~ndc. com. Value Blend Growth Ticker: SIEIX The Fund seeks to provide Cash: 1.2% urge Expense Ratio: 1.06% diversification and capital Non-U.S. Stocks: 98.8% appreciation by investing in U.S. Stocks: 0.0% Medium NAV: $11.43 securities of companies small Assets (mil): $348.03 headquartered or based in foreign countries to replicate U. S. Stocks Non-U. S. Stocks ° °eo 98 e~o Investment Category the Morgan Stanley EAFE Foreign Stock GDP Index. °ash 2°-~ Security %Equity Security %Equity 14.0 0 Toyota Nbtor Corp. 1.8 /o Deutsche Bank AG o Con 1.2 /° sumer Discretionary to o % Siemens AG 1.7% EON AG 1.2% s.s% Total S.A. 1.5% Telefonica S.A. 1 1% Consumer Staples 6.6% BVI S.p.A. 1.4% DaimerChrysler AG 1.0% Energy 6.7% Deutsche Telekom AG 1.3% SAP AG 0.9% s.~% Flnancials zs.s % zs.s r e e e e _ Fieatthcare 6.0 MSCI s.o % I i l d "' % Characteristic Fund EAFE GDP n ustr a s ~,.~ r Dividend Yield (Current) 2.0% 2.0°io s.a% EPS Growth (5 yr est.) 11.6% 11.6` Inf ormation Technology 84% Market Capitalization ($bil) 35.0 35.0 Materials 7 0 % ~.o Price-to-Book 2.Ox 2.Ox a.s% P/E (12 months trailing) 18.6x 18.6x Telecom Services a.s% ^ Fund Return on Equity 9.8% 9.8% Utilities s' % ^ MSCI EAFE GDP Weighted s.t -. - - Annualized Three One Three Five Seven Inception Months Year Years Years Years 6/01/1994 Fund 4.8% 60.3% 2.3% 0.0% 5.3% 5.3% MSCI EAFE GDP Weighted 4.8°~ 60.1°~ 2.0°° -0.2°~ 3 9°~ 4.4°~ Lipper International Funds Objective 4.5% 53.6% 2.5% „~~- 1.8% 3.8% N/A City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 31 r r r r r r irr r Ir r r r r ar ~r r r rr r Period Ending STI Classic International Equity Index Fund -continued March 31, 2004 More current inveshnettt performance return information may be obtaitzed by calling 1-800-874-4770, option 5, or visiting the STI Classic Funds website at www.sticlassic%urtdc.cum. The MSCI EAFE GDP was up 4.8% for the 1 S' quarter of 2004, continuing a strong run for International equity markets. The strongest sectors were Information Technology, Industrials, and Consumer Staples. The weaker sectors were Telecommunications, Energy and Materials. Japan was a stand out, returning 15% during the quarter. On average the Asian markets led European markets. Higher growth issues continue to be favored at the expense of equities with lower valuations. Currencies continue to be volatile but in a trend of a weakening US dollar. Dollar weakness continues to be a boost for US based international investors due to the positive impact of translation grains. Trust shares of the International Equity Index Fund matched the benchmark's 4.8% gain. Fund Manager: Chad Deakins, CFA 1997 1998 1999 2000 2001 2002 2003 2004 First Quarter 0.5% 17.6% 1.9% -0.6% -12.2% 0.9% -8.2% 4.8% Second Quarter 11.8% 4.8% 4.3% -4.3% -1.4% -1.5% 20.1% Third Quarter 2.6% -13.0% 5.7% -8.5% -15.5% -20.5% 8.9% Fourth Quarter -5.5% 21.3% 16.4% -4.7% 4.5% 5.7% 17.0% Fund 9.0% 30.0% 30.7% - 17.1% -23.5% -16.5% 40.5% 4.8% MSCI EAFE GDP 4NFighted 4 4`; 25.1°_ ~~~ .~ 1'~ 4' '3.3=- 1;_;?°= 40.0°~ 4 ~°~; Lipper Intemational Funds 7.3% 12.7% 37.8% - 14.7% -19.3% -16.7% 34.7% 4.5% $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 Alpha Beta R-Squared Sharpe Ratio Std. Deviation Fund 0.02 0.99 1.00 0.02 17.49 MSCI EAFE Gi~P Wcight~~~1 ri n~~ t pan ~ Ot~ ~ ,, Lipper Intemational Funds Objective 0.27 0.88 0.74 WA 17.07 t ;, _ . ~~ .~ ~~ City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT s2 r~ . rr r r r Ir ~r r r r ~r r r r r Ir r ~ Period Ending ~ SunTrust Retirement High Grade Bond Fund March 31, 2004 short Int. Lon The fund seeks to provide a Cash: 0.8% NAV: $31.81 high level of total return Bonds: 99.2% High Assets (mil): $268.62 through current income and Medium capital appreciation by ~~5 investing in domestic corporate ~z°° Low investment grade bonds rated Investment Categorv A or higher by major credit Intermediate-Term Bond rating agencies and U.S. oe5i ,- Government securities. Sector Fund ML "A" G%C Corporate Bond 32.0% 29.6°0 Agency 12.0% O-3 Years 21.8°0 Mortgages 15.4% 0.0°0 US Treasury 36.1 % 48.6°0 3-5 Years ABS 3.7% 0.0°0 Cash 0.8% 0.0°0 5-7 Years 34.3 Characteristic Fund ML "A" G/C ~-10 Years Average Rating AAA AAA Average Coupon 4.8% 5.3~~ 10-20 Years Current Yeld 4.5% 4.6°° '~~ Yeld-to-Maturity 3.2% 3.0°0 20+ Years Average Maturity 7.44 7 71 Effective Duration 5.09 - ~ -. - - Annualized Three One Three Five Ten Inception Months Year Years Years Years 9/1/1989 Fund 2.9% 5.0% 7.7% 7.2% 7.6% 8.3% Merrill Lynch G/C A Rated and Above 2.9°0 4.9% 7.6% 7.4°0 7.5°0 8.1°~a City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT ( 33 r~ r Ir rr r r rr >.r rr r r rr r r r r r rr r PeriodEnding~ SunTrust Retirement High Grade Bond Fund March 31, 2004 Interest rates declined during the quarter as slow jobs growth, geopolitical risk, and substantial buying by Asian central banks put downward pressure on Treasury yields. Intermediate yields declined more that shorter and longer maturities and the yield curve flattened somewhat. Corporates widened slightly and mortgage performance in March was unimpressive after five months of outperformance. Neutral duration and overweights in corporate and mortgage holdings allowed the fund to perform well against the benchmark index and portfolios with more bearish positioning. Looking forward solid economic growth should lead to gradually rising interest rates and a flatter yield curve. Defensive characteristics and incremental yield from both the mortgage and corporate sectors should enhance returns over the course of the year. Fund Manager: Earl Denney, CFA 1998 1999 2000 2001 2002 2003 2004 First quarter 1.7% -0.4% 2.3% 3.2% -0.5% 1.6% 2.9% Second Quarter 2.7% -1.0% 0.7% 0.2% 4.2% 2.5% Third quarter 5.2% 0.9% 2.5% 5.2% 5.7% -0.4% Fourth Quarter 0.2% -0.5% 4.9% -0.1 % 1.5% -0.1 Fund 10.0% -1.1% 10.7% 8.6% 11.4% 3.6% 2.9% Merrill Lynch G/C A R ated 9.7°0 -2.2°0 12.4°0 8.2°U 11.6°-0 3.2°~ 2.9°~ $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 ~~ Q~ City of Winter Springs General Employees' eG ~G P~' ~G eG eCi eG eG eG ~G ~G GG eG eC+ eG 0 ~ 0 Q Q Q Q ~ Q Q Q Q Q 0 Fund ML A Rtd G/C x~ ;ate ~. ''` Pension Plan TRUSCO CAPITAL MANAGEMENT 34 Period Ending SunTrust Retirement Intermediate High Quality Bond Fund March 31, 2004 Short In[. Lon NAV: The fund seeks to provide a Cash: 3.6% $10 37 High . high level of total return Bonds: 96.4% Assets (mil): $112.54 through current income and Medium capital appreciation by Low Bonds investing in domestic corporate ss.a~o investment grade bonds rated Investment Category A or higher by major credit Intermediate-Term Bond ratin a encies and U.S. cast, 9 9 3.s~,o Government securities. ~ - - ~ Sector Fund Leh Aqq Int A+ Corporate Bond 17.9% ' S 5°~ Agency 20.1 % 1 3.2"o O-3 Vears 39.5 Mortgages 40.9% 48.4°- 2s.s% US Treasury 14.4% 20.9°~ ABS 3.1 % 2.0°.-~ 3-5 Year~a 39.5 Cash 3.6% 0.0°r I ~ ?_ 9. 1 •. - 5-7 Years Characteristic Fund A+ Average Rating AAA ; Average Coupon 4.5% 5-0°0 ~-,o Years Current Yeld 4.3% 3.6°~ Yeld-to-Maturity 3.1% 3.6°~ Average Maturity 3.9 5.0 10-20 Years Effective Duration 3.3 3.1 25.1 ~ Fund ~ Leh Agg Int A or Better Three Rates moved lower in the first quarter with the ten year Treasury ending the quarter below 4%. That was 4lbpts lower then the start of the year. The curve flatted as 0-tyr. Months rates remained unchanged as 2-t0yr. yields fell. Corporate bonds continued to out- Fund 2.2% perform. High quality corporate bonds added an additional SObpts of return on top of Treasuries. The funds performance was helped by owning corporate bonds, but hurt by Lehman Aggregate Intermediate A or Better'" 2 2°o the overall shorter duration. With yields atfour-decade lows and the economic expansion underway, we believe the next significant move in rates is up. We also don't think that significant move is going to happen anytime soon. The economy continues to grow with little employment pick up. Fund Manager Rick Nelson - .~~~~.- ~- _. ..,_ City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 35 ~ ~ ~ 1• ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Period Ending I FUnd Attl'IbUtIOCI SUCY1CYlaf'~/ -Appreciated more than 15% March 31, 2004 APPLE COMPUTER INC COM $ 2,790,922 $ 3,147,456 26.53 L-3 COMMUNICATION HOLDING $ 3,774,960 $ 3,889.992 16.00 BOSTON SCIENTIFIC CORP S 2,573,200 S 2.894,554 15.29 SunTrust Hi h Grade E u- Income Fun d HARRIS CORP DEL $ 299.805 $ 217,845 27.71 MOTOROLA ING GOM S 338.800 $ 396,000 25.98 BANK ONE CORP COM $ 501,490 $ 327,120 20.13 MAY DEPT STORES CO COM $ 326,491 $ 307,762 19.61 BECTON DICKINSON & CO COM $ 366,146 S - 18.19 PEPSICO INC COM S 303.030 S 328.485 15.83 SunTrust Hi h Grade Relative Value Fun d C R BARD INC COM $ 1.137.500 S 1.171,680 20.45 MAY DEPT STORES CO COM $ 872.100 $ 1.106,560 19.78 TARGET CORP COM $ 844,800 S 1,126,000 17.47 PEPSICO INC COM S 699,300 S 969,300 15.92 BURLINGTON RES INC COM S 996,840 $ 1.208,970 15.19 SunTrust Retirement Mid Ca Fund SYMANTEC CORP COM $ 123.510 $ 336,138 34.20 THERASENSE INC $ 134,802 $ 180,093 33.60 EON LABS INC $ 173,230 $ 356,866 3166 MONSANTO CO NEW $ 260,459 $ 331,864 27.86 HARRIS CORP DEL $ 249,711 $ 318,538 27.82 COUNTRYWIDE FINL CORP $ 174,910 $ 221,145 26.72 APPLE COMPUTER INC COM $ 76,291 $ 96,533 26.53 INTERNATIONAL GAME TECHNO $ 217,056 $ 273,357 26.22 VARIAN MEDICAL SYSTEMS IN $ 415,291 $ 518,723 24.91 DADE BEHRING HLDGS INC $ 408,866 $ 508,851 24.45 AMERADA HESS CORP COM $ 450.882 $ 553,574 23.34 AVAYA INC $ 257,558 $ 316,076 22.72 DAVITA INC $ 189,930 $ 232,543 22.44 BIG 5 SPORTING GOODS CORP $ 173,885 $ 209,492 20.48 LEGG MASON INC COM $ 136,609 $ 164,221 20.40 ONYX PHARMACEUTICALS INC $ - $ 97,581 19.97 MAY DEPT STORES CO COM $ 514,539 $ 612,066 19.78 NETWORK ASSOCIATES INC CO $ 63,619 $ 76,140 19.68 LINCOLN NATL CORP IND COM $ 461,833 $ 541,341 18.09 POTLATCH CORP COM $ 622,035 $ 729,018 17.63 AON CORP COM $ 154,892 $ 180,578 17.21 FIRST INDUSTRIAL REALTY T $ 527,175 $ 616,990 17.04 PACIFICARE HEALTH SYS $ 119,652 $ 140,007 17.01 LEXMARK INTL INC NEW $ 115,601 $ 135,240 16.99 ZALE CORP COM $ 225.568 $ 260,972 15.70 QUEST SOFTWARE INC $ 118.002 $ 135.869 15.14 SunTrust Hi h Grade Bond Fund NO SECURITIES APPRECIATED MORE THAN 15°6 - - - SunTrust Hi h Grade Intermediate Bond Fund NO SECURITIES APPRECIATED N10RE THAN 15`~a - - - HYPERCOM CORP COM $ 217,532 $ 362,858 66.81 CACHE INC COM $ 222,881 $ 351.281 57.61 JOS A BANK CLOTHIERS INC $ 312,210 $ 471,120 56.70 ULTIMATE SOFTWARE GROUP I $ 289.410 $ 380.800 55.07 MONOLITHIC SYSTEM TECHNOL $ 223,163 $ - 54.69 FREMONT GEN CORP COM $ - $ 268,882 53.85 GOODY'S FAMILY CLOTHING I $ 275,184 $ 256,860 52.67 W EBEX COMMUNICATIONS INC $ 302,100 $ 445.950 47.62 HARVEST NAT RES INC $ 341,285 $ 350,640 46.83 POSSIS CORP COM $ 282,425 $ 402,259 42.43 INFOUSA INC $ 148.941 $ 157,650 41.84 SCHNITZER STEEL INDS INC- $ - $ 195,520 37.65 HYPERION SOLUTIONS CORP C $ 286,330 $ 290,150 37.52 VERINT SYS INC $ 254,928 $ 401,700 36.97 SANDERSON FARMS INC COM $ 317,161 $ 220,380 36.86 PROTEIN DESIGN LABS INC C $ 384,850 $ 512,130 33.07 DEL LABS INC COM $ 298,875 $ 182,600 32.80 SIERRA HEALTH SVCS INC CO $ 192,150 $ 254,800 32.60 AEROPOSTALE INC $ 216,618 $ 326,340 32.24 GEVITY HR INC $ 313,564 $ 446,760 31.51 HEADWATERS INC $ 292,650 $ 384,300 31.32 COPART INC COM $ 330,340 $ 432,427 30.90 VANS INC COM $ 251,020 $ 384,800 29.71 BEBE STORES INC $ 135,148 $ 335,400 29.05 OMI CORP NEW $ 312.550 $ 263,120 28.11 FISHER SCIENTIFIC INTL IN $ 248,220 $ - 27.77 TAKE-TWO INTERACTIVE SOFT $ 175.802 $ 165.555 27.65 ENDO PHARMACEUTICALS HLDG $ 290,400 $ 366,300 26.14 ACTIVISION INC NEW $ - $ 379,680 25.48 INFOCROSSING INC $ - $ 257,450 24.90 PENN NATIONAL GAMING INC $ 314,432 $ 391,272 24.44 CORRECTIONS CORP OF AMERI $ 268,119 $ 391,600 23.48 CONEXANT SYSTEMS INC $ 121,765 $ 245,200 23.34 SYMMETRICOM INC COM $ 259,168 $ 319,332 23.21 MARTEN TRANS LTD $ 275,010 $ 363,128 22.98 GENTIVA HEALTH SERVICES I $ 257,856 $ 15,490 22.55 MAVERICK TUBE CORP COM $ 186,725 $ 365.025 22.34 GENERAL MARITIME CORP $ - $ 176,050 22.13 ULTRA PETROLEUM CORP COM $ 226,504 $ 276,092 21.89 CASUAL MALE RETAIL GROUP $ - $ 124,080 21.52 CONN ETICS CORP COM $ 245,160 $ 352,320 21.26 DENBURY RESOURCES INC $ 172,484 $ 209,064 21.21 ROGERS CORP COM $ 180,892 $ 357,579 20.97 W ESTCORP INC COM $ 292,400 $ 352,560 20.93 NORTHWEST BANCORP INC PA $ 60,221 $ 101,800 19.92 T-HO INC COM $ 228.285 $ 232,645 19.63 STANDARD PAC CORP NEW COM $ - $ 360,000 19.28 AMERICAN MEDICAL SECURITY $ 313,880 $ 373,940 19.13 PREMCOR INC $ 247,000 $ 294,215 19.12 RAYOVAC CORP COM $ - $ 386,100 19.10 MPS GROUP INC $ 141,185 $ 167,912 18.93 PERFORMANCE TECHNOLOGIES $ 159.600 $ 189,392 18.67 PALOMAR MEDICAL TECHNOLOG $ - $ 180,400 17.58 US XPRESS ENTERPRISES INC $ 230,300 $ 270,156 17.31 DUIKSILVER INC COM $ - $ 371,450 16.76 UNIFIRST CORP MASS COM $ 139,889 $ 162,722 16.48 SALIX PHARMACEUTICALS LTD $ - $ 362,750 15.77 City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 3s Period Ending Fund Attribution Summa~/ De reciated more than 15% March 31, 2004 J INTEL CORP COM $ 5,474,140 $ 4,063,680 -15.01 PEOPLESOFT INC COM S - S 1,603.083 -16.85 VERITAS SOFTWARE CORP COM S - S 1.972503 -26.96 SunTrust Hi h Grade E u- Income Fu nd NO SECURITIES DEPRECIATED MORE THAN 15''~ - - - SunTrust Hi h Grade Relative Value Fu nd INTEL CORP COM S 929.450 S 768.800 -15.61 SunTrust Retirement Mid Ca Fund INTUIT INC COM $ 406,493 $ 343,205 -15.57 HUMANA INC COM $ 279,913 $ 232,995 -16.76 SIEBEL SYSTEMS INC COM $ 216,178 $ 179,061 -17.17 NATIONAL PROCESSING INC C $ 254,340 $ 205,200 -19.32 AMKOR TECHNOLOGY INC $ 88,886 $ 513,659 -19.35 SCHOLASTIC CORP COM $ 275,724 $ 220,725 -19.95 ELECTRONIC DATA SYS CORP $ 154,847 $ 122,099 -20.54 LAM RESH CORP COM $ 268,090 $ 208,496 -22.23 NOVELLUS SYS INC COM $ 394,429 $ 297,065 -24.68 QUALITY DISTR INC FLA $ 192,080 $ - -25.30 VERITAS SOFTWARE CORP COM S 345,397 S 251.070 -27.31 NETFLIX.COM INC S 293,138 $ 365,766 -37.61 SunTrust Retirement Small Ca Fund CELLSTAR CORP COM NEW S S 168.000 -16.03 COMPUTER NETWORK TECHNOLO $ 325.040 S 184,460 -16.11 STANDARD MICROSYSTEMS COR $ - $ 213,840 -16.75 ROFIN-SINAR TECHNOLOGIES $ - $ 306,116 -17.06 EXPRESSJET HOLDINGS INC $ 225,000 $ 166,600 -17.07 P A M TRANSPORTATION SVCS $ 213,860 $ 171,600 -19.76 ANTEON INTL CORP $ 259,560 $ 323,568 -19.86 FEDDERS CORP NEW COM $ 266,400 $ 211,270 -20.27 ALBANY INTL CORP NEW CL A $ 305,100 $ 242,010 -20.38 TRADESTATION GROUP INC $ 240,992 $ 221,100 -24.38 MAXTOR CORP $ 244,200 $ 122,250 -26.58 PER-SE TECHNOLOGIES INC $ 290,719 $ 212,800 -26.80 NETWORK EQUIP TECHNOLOGIE $ - $ 199,600 -26.91 OSTEOTECH INC COM $ 264,000 S - -27.91 NEOWARE SYS INC S 274,800 S - -27.94 DOT HILL SYSTEMS CORP S 272,700 S 180.720 -33.73 SunTrust Hi h Grade Bond Fund NO SECURITIES DEPRECIATED MORE THAN 15'a - - - SunTrust Hi h Grade Intermediate Bo nd F und NO SECURI71E5 DEPRECIATED MORE THAN 15°0 - - City of Winter Springs General Employees' Pension Plan ~, -~TRUSCO CAPITAL MANAGEMENT 37