HomeMy WebLinkAbout2004 10 26 Attachment Given to Board Member During Meeting by Blake MytonDate: October 26, 2004
ATTACHMENT GIVEN TO BOARD
MEMBERS DURING MEETING BY
BLAKE MYTON
New A-Rated Funds
QusinessWeek rates mutual funds based on their risk-adjusted returns over alive-year period. Funds get an overall rating (A to F) based on how they compare
with all other equity funds. The following have earned A ratings since we last published the list in January Those that are also rated A in their categories are
noted by the double asterisk ("). Additional funds with A category ratings are at BusinessWeek Online,
Fund/Symbol Category Average Fund/Symbol Category Average
An nual Total Annual Total
Return (%)• Retu rn (%)'
ABN AMRO Mid Cap N"/CHTTX Mid-cap Blend 14.8 Morgan Stanley Instl.U.S. Real EstateA/MSUSX Real Estate 13.6
ABN AMRO Real Estate N/ARFCX Real Estate 13.6 Munder Healthcare B/MFHBX Health 170
AllianceBemsteinRenl Estate Invst. AdvJARSYX Real Estate 13.1 Munder Small-Cap Value Y/MCVYX Small•cap Value 14.3
Ariel/ARGFX Small-cap Value 13.1 One Group Small Cap Value I/PSOPX Small cap Value 15.2
Berwyn/BERWX Small-cap Value 13.2 PBHG REIT Advisor/PBRAX Real Estate 13.4
Brazos Real Estate Securities Y/BJRSX Real Estate 13.1 PIMCO RCM Global Healthcare D/DGHCX Health 14.9
Burnham Financial Services A**/BURKX Financial 25.5 Principal Real Estate Securities A/PRRAX Real Estate 14.7
Columbia Real Estate Equity UCREEX Real Estate 13.2 Royce Pennsylvania Mutual Inv.1PENNX Small-cap Value 14.2
EatonVar-ceAsianSmallCompaniesA/EVASX DnrersrfiedPacitic/Asia 19.1 Royce Premier/RYPRX Small•capValue 14.1
EaionVanceWldwd. HealihSciences A/ETHSX Health 174 Royce Total Return Inv./RYTRX Srnall-cap Value 13.2
Excelsior Real Estate/UMREX Real Estate 13.2 SAFECO Small-Ca Value Inv./SFSCX Small•ca Value 14.8
Forward Uniplan Real Estate InvestmenVFFREX Real Estate 13.2 STI Classic Small Cap Value Equity VSTCEX Smal!-cap Value 13.5
Franklin Biotechnology Discovery A/FBDIX Health 15.1 Schroder Capital USOpportunities Inv./SCUIX Small cap Growth 13.5
Gabelli Westwood Realty AAA/WESRX Real Estate 13J Sentinel Small Company A/SAGWX Srnall-cap Blend 14.9
GoldrrranSachsGrawthOpporbn~esA'/GC~Q4X Mid•cap Growth 14.4 Smith Barney Security & Growth A"/SAFEX Domestic Hybrid 13.7
Goldman Sachs Real Estate Sec. AlGREAX Real Estate 14.2 Smith Barney Small Cap Value A/SBVAX Small-cap Value 14.2
Harris Insight Small Cap Value N/HSVAX Small•cap Value 14.2 Stratton Small-Cap Value/STSCX Small•cap Value 13.5
iShares MSCt Austria Index/EWO Europe 14.4 T Rowe Prlce Mid•Cap Yalue/TRMCX Mid-cap Value 13.5
Ivy European Opportunities A'*/IEOAX Europe 20.9 TAMARACK Microcap Value S/TMVSX Small•cap Value 14.3
Jennison Health Sciences B/PHLBX Health 16.6 Third Avenue Small-Cap Value/TASCX Small-cap Value 13.9
lord Abbett Small•CapValue A/LRSCX Small•cap Value 15.0 Vanguard REIT IndexNGSIX Real Estate 13.9
Mainstay Small Cap Value B/MSPBX Small-cap Value 13.7 Wells Fargo 5ma11 Cap Opporhrnities I/NVSOX Small-cap Growth 13.8
Morgan Stanley lr-sfl.Intl.SmallCapA'*/MSISX Foreign 13.1
reyes,l!v~r•,M4A)/LSY.w-i:rrrXl C:;t ~'r rwrt^YVrt ..a.. . ea k,! r .. a. ry . Oala:' arYtarcl .9. :. ..
Au;,ust 2, 20i;-: ' BusinesstNeek 91
RECEE~ED
JUL 2 9 2004
CITY OF~a c TOE EgtoRINGS
~ ~ ~ r^r ~ ^~ Ise ~w ~^ I~ ~ r ~ ~ ~ ~ ~ ~ ~
TRUSCO
CAPITAL
MANAGEMENT
Prepared Exclusively For:
City of Winter Springs
General Employees'
Pension Plan
Investment Review
Second Quarter 2004
Blake Myton
Investment Manager
407-237-5816
blake.myton @ truscocapital.com
Dianne Garcia
Relationship Manager
407-237-4513
dianne. garcia @ suntrust.com
RECEIVED
JUL 2 9 2004
CITY OF 1MNTER SPRING8
Finance Director
The Hart Building -Atlanta, GA
~ ~ ~ ~ ~ ~ ~ ~ l~ ~ ~ ~' ~ ~ ~ ~ ~ ~
Table of Contents
Economic Overview /Market Snapshot
Section I
Trusco-Seix Merger ...............................Section II
Performance & Portfolio Composition . .
Fund Fact Sheets
Fund Attribution Summary
City of Winter Springs General Employees' Pension Plan
Section III
.Section IV
Section V
TRUSCO CAPITAL MANAGEMENT ~
~ ~ ~ ~~ ~ ~ ~ r ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
Market Snapshot: Q2 was a "Transition" Quarter
Stocks outpaced
bonds in the
second quarter
despite a
moderate rise i~z
the S&P 500, as
stronger jobs
growth pushed
bo~~zd yields
higher. The Fed
raised interest
rates on Jute 30.
s~~,,,-~~~:
City of Winter Springs General Employees" Pension Plan TRUSCO CA['ITAL MANAGEMENT j 2
~ ~ l~ ~ ~ ~ ~ 1i ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
Investment Overview
• In the second quarter, economic growth transitioned from "vulnerable" to "sustainable", prompting a
Fed rate hike. The financial markets also took on a more cyclical tone, with stocks up modestly (S&P
500 up 1.7% on a total return basis) and bonds falling (Lehman Aggregate Bond Index down 2.4%).
The trailing price/earnings ratio for the S&P 500 slipped to 19.3X, and yields on the 10-year Treasury note
and the 10-year A-rated corporate bond were 4.6% and 5.5%, respectively.
• Accelerating job growth highlighted generally firm economic statistics and helped persuade the
Federal Reserve to begin raising short-term interest rates for the first time in four years. However,
there was some softening in job growth in June. "Headline" inflation accelerated in the second quarter,
propelled mostly by higher energy and commodity prices.
• Treasury yields rose on evidence of faster job creation, continuing inflation pressure, and the Fed's
policy shift toward higher rates. The yield curved steepened during the quarter, though yields rose in all
maturities. The High Yield and Mortgage sectors showed relative outperformance in the down market.
• Evidence of more sustainable growth and improving profit forecasts was partially countered by a tighter Fed
policy in the second quarter, leaving equity aggregate indexes only modestly higher. Cyclically sensitive
stocks recovered after lagging in the first quarter, and the energy sector continued to move higher.
Large-cap stocks (S&P 500) outperformed Small-caps (Russell 2000) in the second quarter, following
a long period of underperformance, and the Growth style outperformed Value in the quarter.
• We remain positive on our outlook for the economy and corporate profits, but the rate of growth in
both is likely to slow due to lower levels of stimulus and more difficult comparisons, respectively.
Core inflation will likely trend moderately higher and support the Fed's hope to raise interest rates gradually in
the months ahead.
• We continue to recommend a modest overweight position in stocks within current asset allocation
ranges, due to the relative attractiveness of stocks versus bonds. However, we recognize that many of the
factors favoring equities that drove the 45% market rebound between March 2003 and March 2004 (low
rates, steep yield curve, accommodative Fed policy, and easy profit comparisons) are changing and
not as favorable. 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 are moving up after reaching secular lows. However, given the
current steep yield curve and our expectations of only gradual Fed rate hikes, we are maintaining a
neutral duration on bond portfolios with defensive characteristics, emphasizing a barbell structure,
quality corporate bonds, and securities that perform well in a rising inflation environment (TIPS).
_,=
..,~ry~° _
City of Winter Springs General Employees' Pension Plan TRLISCO CAPITAL MANAGEMENT ~ 3
~ ii ~ ~ ~ ~ ~ ~ ~ ~ ~ r! # >~ ~ ~ ~ ~ ~
Economic Summary: Fed Policy Shift
The economy is - -..
. • _ _ _
_
expanding along a
broad front. High Neutral Neutral/
• Cyclical job gains kicking in following long
Fading delay and are expected to offset diminishing
Etnploymettt and possible fiscal and monetary stimulus, sustaining
industrial output consumer demand. However, further cyclical
gains have been acceleration unlikely.
impressive, a~td ~ - Neutral Positive Positive New order growth being funded by strong
profits estimates profits. Business confidence improved.
are rising for both Inventory investment increasing. Production
2004 attd 2005. gains are broadly based.
• - - High Positive Neutral Higher defense spending enhanced by
election-year politics. Stress at state and local
However, the level easing. Post-election cuts are likely.
worries of deflation Low Positive Positive Record trade deficit likely to narrow. Exports
artd vulnerability are improving.
have been replaced Low At Inflection Somewhat Period of low/benign inflation ending.
with traditional Point Higher Stimulative fiscal and monetary policies, rising
worries of higher commodity and energy prices, and a lower
inflation and dollar, are putting upward pressure on
interest rates. The inflation. Wage inflation not yet evident.
fiscal and Global vs. local likely to affect pricing power.
monetary stimulus - At an Restrictive Restrictive Fed policy has turned more restrictive. Fed
that tempered the ' • inflection raised rates on June 30 and expected to
recession will turn point continue rate hikes at "measured" pace.
more restrictive. Stimulative Less Becoming Tax cut impact fading. Focus turning to
• Stimulative somewhat budget balance after election.
Restrictive
,~~ ~- ,.
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT
4
Job Growth Acceleration Points to Sustainability
Job Growth Picked Up Broadly in Q2...
The key economic
news in the
second quarter
was a sharp
acceleration in
job creation. This
news relieved
fears that the
expansion was not
sustainable, and it
provided a timely
replaeernent for
the fading
stimulus from tax
cuts and mortgage
refinancing.
400
300
200
100
0
-100
-200
-300
-400
90
80
70
60
50
40
30
20
10
91 92 93 94 95 96 97 98 99 00 01 02 03 04
Nonfarm Pa~~roll IOlirel cYc `7r ronyuuties adding jobs Soturc~: BI_S
...Helping Confidence and Income
9%
8%
7%
6%
5%
4%
3%
2%
1%
91 92 93 94 95 96 97 98 99 00 01 02 03 04
Confidence & Total Personal In~onie .SOIfrCP.S': Con. Board & RCA
160
140
120
100
80
60
40
20
0
•The sustainability of the current economic
expansion was of ongoing concern to investors
and policy makers until job growth accelerated
significantly in the second quarter. The average
monthly increase in nonfarm payrolls in the
second quarter was reminiscent of the 1990s,
and the diffusion index over the past quarter
showed a majority of companies adding to
payrolls.
• Increased job growth provides a direct boost to
total personal income, and coincidentally, to
consumer confidence. Up until recently, gains in
disposable income were due largely to tax
rebates and home mortgage refinancing.
~ ~~ _ .
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 5
~ ~ ~ ~ ~ ! ~ ~ ~ i!~ a1 ~ ~ ~ ~ ~ ~ ~ ~
Retail Sales Pace Slowed in Q2
Job Creation Stimulus Trumps Gas Drag...
Job growth and
wage gains easily
offset the current
drag from higher
ezzergy costs.
However, an
extezzded period of
low interest rates
and multiple tax
cuts has come to
an end, which
could slow the
growth in
consumer
spezzding.
• Increased employment was an important
boost to the consumer in the second quarter,
but considerable attention was given to the
sharp increase in the cost of oil and the
record nominal price of gasoline. The table
shows that increased energy costs are a drag
on consumer spending, but that drag is more
than offset by higher job growth and even
modest hourly wage gains.
• Consumer spending slowed in the second
quarter, despite the increase in jobs and
confidence. Higher gas prices and adverse
weather may have been a factor in what we
see as a temporary sales slump. However,
while the Q2 drop is not a trend, consumer
spending has been at a cyclical high for some
time due to lower interest rates and fiscal
stimulus. More moderate growth in
consumption is likely going forward, which
could slow the pace of growth closer to its
long-term average.
~ Retail Sales (3-M o. A nn. °%)
Gas Sales (YOY%)
01 02 03 04
Total & Cns StcNion Sales
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
Source: Census
~`~~v_t
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 6
Typical impact of changes on income. annual rates
Pretax income Disposable income
°.FO of
S billion $ billion
income
Oil: +$10 per barrel -35 -35 -0.4
Payrolls: +200,000 per month for one year 95 71 0.8
Average hourly eammgs: +1.0% per year 50 38 0.4
Note: Disposable income totaled S8.5 tnklion (annual rate; in the f rst quaver of 2004.
Source: Bureau of Economic Analysis. Bureau of Labor Statistics. and I;BS estimate
...but Future Acceleration will be Difficult
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
r~r r ~ r ~r ,~ ~ ~ ~ ~ +~ ~ r i ~ ~ r Ir ^^~I
10%
5%
o°i°
-5%
-10°/
New Order & Production Up...
15°~
Orders and output
are trending
higher.
Inventories
remain lean, but
are no longer a
"well" of
untapped cost
savings.
Business Orders & Production are Strong...
~ Ind. Rod. (3-Nb. Ann. %)
Durable Orders (YOY%)
30%
20%
10%
o°i°
-10%
° -20%
93 94 95 96 97 98 99 00 01 02 03 04
lndustriul Prod. and Uurnble Urdcrs Sutures: (RI3 c~ Census.
...and Inventories are Still Lean
° 1.55
1.50
1.45
1.40
1.35
1.30
° 1.25
93 94 95 96 97 98 99 00 01 02 03 04
~Yluir. Ini~ento~~• Grox•th & bn~. Sales Ratio So~nre: Census
10 i°
8°i°
6%
4%
2%
o°~°
-2%
-4%
-6%
-8%
-10°/
• While monthly data can be statistically
"noisy," businesses have enjoyed a strong
upward trend in new orders, and production
has increased. Business surveys are
consistently positive.
• Forecasts calling for increased business
inventory investment have been premature so
far. Businesses have remained reluctant to
increase stocks on hand, keeping the
inventory/sales ratio at record low levels.
However, in a sign of a stronger environment,
businesses have stopped cutting inventories.
Future inventory investment could still be a
source of temporary economic growth.
zi e' ~ _
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT ~
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ r~ ~ ~ ~ ~ ~
Profits, Cash Flow, and CAPEX Higher
•Year-over-year growth in corporate
operating profits (as measured through
corporate tax receipts) has been very
strong. Cash flow has also been growing
rapidly.
Companies are
izzcreasing profits
and cash flow,
promoting new
investment.
• Increased profitability typically creates a
demand and provides funding for new
investment. Increased equipment
investment began over a year ago and was
concentrated in technology-related
industries. More recently, the aversion to
investment in new structures has eased,
which may lead to areas of additional
investment.
Profits & Cash Flow Up Sharply
°
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
Corr. Pro%rts X Cush f~7ou' Sours'e: BEA
Equip. Spend. Up /Structures not a Drag
20°/
35 /°
30%
25%
20%
15%
1 o°i°
5%
o°r°
-5%
-10%
-15%
°
15%
10%
5%
o°r°
-5%
-10%
-15%
-2o°i°
-25%
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
ln~~ernnent in F.c/uipntent & SU•trc~tures Source: 6EA
f.~..
~~'~ .
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 8
"Headline" Inflation Moved Up in Q2...
Part of the
transition in the
second quarter
was a renewed
concern about
rising inflation.
• "Headline" inflation, as measured by the
Consumer Price Index, increased to 3.3%
on ayear-over-year basis through June.
Higher energy and food prices were cited
as primary factors for the increase.
However, the Core Personal Consumption
Deflator, a favorite inflation measure of
Fed Chairman Alan Greenspan, was up
only 1.6%.
"Headline" Inflation Moved Up in Q2...
7°/
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
CP/ uncl Core Personal Consumption Deflator Source: BLS, BEA
...Spurred in Part by Low $ and High Oil
-~
°
s°i°
5%
4%
3%
2°r°
1%
o°r°
• Higher oil prices added to inflation in the
first half of the year, but rising import
prices excluding petroleum have also put
upward pressure on the cost of goods.
While the year-over-year increase in
import costs was only 2.4% in June, this
increase was a reversal from the 4%
annual decline in import prices in recent
years. The U.S. is no longer importing dis-
inflation.
45
40
35
30
25
20
15
10
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
Non-Oil /mport Price /nclea & WTI Oil Spot Soan-ces: BLS, WSJ
~,°
4%
2%
0%
-2%
-4%
-6%
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT s
rr r r r r +r .~ rl~ r~ r~ r r~ rr r~~
...but Productivity is High and Wages are Soft
Productivity Still High, ULC at Cycle Low
°
While Borne areas
of the economy
are experiencing
higher prices,
productivity is still
high and wage
gains are
reasonably
contained.
6 /°
5%
4%
3%
2%
10% I~h~~ ~ ~~~
o /° m~
-1% ~ Roductivity
-3% Unit Labor
(YOY%)
-4%
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
P~~oclurtirrh~ & Unil L~ihnr Cus7s Suture: BLS
Benefits Driving Labor Costs Higher
°-
°
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
F.CI - Wu,~c~s & Benefits So~ure: BLS
8 ~°
7%
s°r°
5%
4%
3%
2%
1 °i°
o°r
City of Winter Springs General Employees' Pension Plan
• Productivity gains have been central to the
recovery in corporate profitability and in
limiting inflation. Year-over-year productivity
remained high in the first quarter, though
smaller gains are expected going forward.
Unit labor costs, which fell dramatically in
2002, also appear to be stabilizing.
• Labor costs are a significant portion of
total company expense, so an increasing
trend is always worrisome. However, as
shown in the chart at left, the increase in
labor costs has been limited primarily to
benefits (health care costs) rather than wage
demands. This pattern could suggest that
inflation pressures may not be as
widespread as is popularly believed.
TRUSCO CAPITAL MANAGEMENT I ~o
I^r ~^. r r r r r ~Irr r Ir lll~ r r Ir r r r~r l~ r
Fed Decides on "Measured" Pace to Raise Rates
The Fed raised
short-term interest
rates on Ju~ze 20,
and suggested
that additional '/a
point increases
were likely in the
jnonths ahead.
The market has
already priced in
four more rate
hikes this year.
• The Federal Reserve increased the
benchmark policy fed funds rate to 1 Y4%
on June 30, the first increase in four years.
However, the Fed retained a balanced
assessment of the economy and inflation.
In its press release, the Fed stated that
"policy accommodation can be removed at
a pace that is likely to be measured."
• While the Fed plans to raise rates
gradually, investors have already priced in
as many as four more rate hikes this year.
However, as shown in the chart to the
right, market expectations are subject to
change. At the end of the first quarter, only
one rate hike was considered likely for all
of 2004. We believe additional increases in
the funds rate are likely this year, but we
will be wary of excessive market
pessimism.
Fed Raised Funds Rate to 1 '/4%...
6
Fed Funds
5
4
3
2
1
0
00 01 02 03 04
Source: FRB
...and More Rate Hikes are Expected
2.25%
2.oo°i°
1.75%
1.50%
1.25%
1.00%
0.75%
J F M A M 30- J 10- 21- O 10- 14-
Jun Aug Sep Nov Dec
Dates are FOMC Meetings
`:
City of Winter Springs General Employees' Pension Plan
- 7/2/2004 - 3/31 /2004
TRUSCO CAPITAL MANAGEMENT 111
rrr r r r r +rl. ~ ~ Ir rri r r ~ rr rs rr r r rr
Now the Market Focuses on Degree and Pace
Now that the Fed
has officially
changed direction
on monetary
policy, the new
issue is how far
and how fast will
rates rise.
"Neutral" policy
is the current
forecast, but the
inflation-adjusted
fuszds rate has
seldom been
neutral.
What is a "Neutral" Funds Rate?
6°6
5%
4%
3%
2°r°
1%
o°r°
Real Funds Rate (Avg.= 2.27%)
-1%
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
Fed Funds Rate lass Cncz~ PCF So~trc e: FRf3, f3EA
Money Supply Growth Not Excessive
14°/
~~
~v ~
~. ~
1 /-
M2 (YOY%) - - Nr3 (YOY%) ~
01 02 03 04
M2 & A13 Souire: FRB
City of Winter Springs General Employees' Pension Plan
°
12%
10%
8°i°
s°r°
4%
2°r°
• The Fed began raising short-term
rates in the second quarter, stating they
would remove the current
accommodation. This statement has
been interpreted as a move to a
"neutral" fed funds rate. Over the past
15 years, the funds rate averaged 2 1/a%
over the core inflation rate; over 31/2%
based on current statistics. However,
history shows that the funds rate has
seldom been "neutral."
• A major part of the debate on future
Fed policy is the degree of
accommodation that needs to be
removed. While money growth is no
longer a closely watched barometer of
Fed policy, the current growth in M2 and
M3 suggests that the economy can grow
at its long-term 3 1/2% average with only
2% inflation. Moderate money growth
may be part of the reason the Fed plans
to raise rates only gradually.
TRUSCO CAPITAL MANAGEMENT I 12
~ ~ Is . . +r .r• ~ ~ ~ ~ rr llr rll ~s ~ ~ III ~
Equity markets
moved modestly
higher in the
second quarter,
helped by
continued
economic strength
and improving
estimates of
corporate
earnings for 2004
and 2005. Fears
of higher interest
rates helped
compress
valuations.
Equity Markets Summary
• The S&P 500 rose 1.7% on a total return basis in the second quarter matching the first quarter
gain. While the index was up 3.4% through the first six months of the year, it remained below the
recent peak on February 11.
• The quarter was highlighted by stronger job creation confirming sustained economic growth
and by steadily rising estimates for S&P 500 operating profits. However, these positives were
significantly offset by higher bond yields and the decision by the Fed to begin raising
interest rates.
• Performance within the S&P 500 was more pro-cyclical and pro-commodity during the
quarter, as industrials and technology outperformed, along with energy and materials. More
defensive sectors such as consumer staples and utilities fell.
• Large-cap stocks outperformed Small-cap stocks in the second quarter, after trailing for
several years. However, the three-year outperformance of small-caps remained near an
extreme. In another reversal from the first quarter, the Growth style outperformed Value in the
quarter, and the S&P 500 outperformed the MSCI EAFE International Index.
• The combination of strong demand and firm profit margins has sustained the year-over-year
growth in S&P 500 operating profits well above the long-term average. Second quarter profits
should again be up over 20% versus the year-earlier period, but the pace of earnings growth is
expected to slow in the second half and into 2005. We also recognize that legal and regulatory
changes being discussed and implemented are causing companies to adopt new, more conservative
reporting practices which would also affect profits growth. We believe the cost of compliance with
many of these changes could be significant.
• The underperformance of equities versus bonds on a rolling three-year basis remains
historically significant, but the outperformance by stocks over the past twelve months has
been wide. The S&P 500 outperformed the Lehman Aggregate Bond Index by nearly 19% over the
past year, and after a 45% rally between March 2003 and the end of March 2004, has been
vulnerable to some profit-taking.
• The expansion in the economy is expected to support growth in profits and equity prices in
the coming quarters, though gains are likely to be restrained by the rise in bond yields.
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 CAPITAL MANAGEMENT
13
Stock Market Up Modestly Again in Q2
Market More Pro-Cyclical in Q2 Valuations Held Relatively Steady
40
30
20
10
0
-10
35
PE Oper. -For. PE
30
25
20 ,~.
Disc Stpl Engy Fin Hlth Ind Tech Mat Tel Util
^ 3-Mos. -0.3 0.5 7.6 -2.4 2.7 8.5 2.8 2.5
15
-1.0 -1.3
^ YTD 0.9 6.1 13.1 2.4 2.1 7.4 0.2 0.7 4.0 3.8
^ 1-Yr 181 160 31 8 193 56 290 254 31 9 70 11 5 10
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
Se etor Per fi~rnuured S&P 500 Soured: FactSet Trcrilin,t; e& Forircu-cl P/E IZcrtio Suurcd: /3useline
Earnings Estimates Continue to Rise Large-cap Outperformed Small in Q2
40%
30%
20%
10%
0%
-10%
-20%
-30°/
40
30
20
10
0
1 Mo. 3-Mos. 6 Mos
^ S&P 500 1.9 1.7 3.4
° ^ MidCap 2.3 1.0 6.1
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 ^ SmlCap 4.2 0.5 6.8
S&P Op. Ecu•uirtgs (YOYrI) -Olive is est. Soured: Trusdn Capita( Capitali,atinn Perlornurnce
.~
City of Winter Springs General Employees' Pension Plan
YTD 1-Yr.
3.4 19.1
6.1 28.0
6.8 33.4
Source: S& P/Rtrssdll
TRUSCO CAI'1TAL MANAGEMENT I 14
~ ~ ~ ~ ~ ~ ~ ~ r ~ ~ r ^~ ~ ~ ~ ~ ~ ~
Fixed Income Markets Summary
In the second
quarter, the bond
market
transitioned frozn
a low rate
environment to a
rising rate
environment,
cozzfirzning a
cyclical a~zd
secular rate
trough.
• Stronger job growth, elevated inflation concerns, and the Fed's decision to raise interest
rates for the first time in four years pushed bond yields higher and returns lower in the
second quarter. The Lehman Aggregate Bond Index fell 2.44% on a total return basis,
following a 2.65% rise in the first quarter. Treasury yields rose across all maturities during the
quarter, with the yield on the 10-year note closing the quarter at 4.62%.
• Expectations of further interest rate hikes by the Federal Reserve pushed short-term yields
up significantly, but lifted long-term yields even more. The spread between 3-month and 10-
yearyields increased to 326 basis points on June 30 from 289 basis points on March 31.
• Credit spreads widened somewhat during the quarter but remained relatively narrow, with
the spread between 10-year "A" rated corporate bonds and 10-year Treasury securities closing at
83 basis points, compared to a 100 basis point average during the past 14 years. While additional
declines in credit spreads are likely as the economy and credit availability continues to improve,
we do not look for a sharp drop.
• In the second quarter, Mortgage-backed and High Yield securities showed relative
outperformance in the down market. Despite the steepening yield curve, shorter maturities
outperformed longer-term maturities.
• Although we believe that the 20-year secular decline in yields is over, a sharp rise from this
Point is unlikely over the near-term given the Fed's stated policy approach to a "measured" rise
in short-term rates and some signs of economic moderation. As a result, we are maintaining
portfolio durations neutral relative to benchmarks, but have a more defensive portfolio
structure, emphasizing:
• Barbell maturity structure (shorter-term and longer-term securities) which will benefit from a flatter yield curve due
to rising short-term rates from the Fed.
• Corporate bonds that will add current income and be somewhat less vulnerable to higher rates.
• Sectors that perform well in rising inflation environments such as TIPS (Treasury Inflation-Indexed Securities)
increased demand.
City of Winter Springs General Employees' Pension Plan TRLISCO CA['ITAL MANAGEMENT ~ i 5
~ ~ ~ ~ lllilll~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
5.0
4.0
3.0
2.0
1.0
00
Yields Rose on Fed Rate Hike
60
Stronger growth
azzd inflation
fears push yields
higher. However,
broader economic
strength benefits
credit sensitive
bozzds and reduces
prepayment risks
on mortgage-
backed securities.
Stronger Growth /Rate Hike Hurt Bonds in Q2
/`f _-'
6/30/2004
- 3/31/2004
---12/31 /2003
6/30/2003
0 5 10 15 20 25 30
Treusur~• Yield Cur1'e Source: FactSc t
Yield Increases Hurt Long End in Q2
2
-2 r, ~~
'N
-4 -
-6
_~
- ~- n:~•.
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 1 s
200
Credit Spreads Relatively Stable
150
100
50 ' '
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
10-Yr. "A"-Rated Cora rs. Trensur_r Source: B9errillL~~nch
High Yield /Mortgages Led in Q2
15
10
5
I~
-5
3-Mo 6-Mo 2-Yr 5-Yr 10-Yr 30-Yr Agg G/Cr IG/C Tr Agy Cred ABS MBS HiYd Mun
^ 3-Mos. 0.23 0.14 -1.32 -3.48 -4.85 -6.17 ^ 3-Mos. -2.44 -3.17 -2.52 -3.16 -2.62 -3.42 -1.81 -1.13 -0.96 -2.01
^ YTD 0.47 0.43 -0.14 -0.48 -0.43 -0.82 ^YTD 0.15 -0.19 -0.10 -0.20 0.00 -0.26 0.46 0.77 1.36 -0.24
^ 1-Yr. 0.97 1.03 0.36 -1.63 -3.48 -5.64 ^ 1-Yr. 0.33 -0.71 -0.06 -1.64 -0.80 0.08 1.07 2.22 10.33 1.00
Trensta~~ Returns Source:Lehrnmt Brothers Aggregate & SectorRettu'rts Source:Lelnrurn Brodrers
~ 1. . . r 1. li• 1. ~ 1. 1. 1. ~ ^~ ~ ~ li• ll~ 11•
Summary of Investment Outlook and Strategy
The economic
expa~z~sion is
intact acid growth
is sustainable.
htf latio~t risks
are increasing
and Fed policy
has tur~zed rnore
restrictive.
Stocks remain
cyclically
attractive, though
opportunities to
enhance current
yield in bond
portfolios are still
available.
• The second quarter was one of transition for the economy and the financial markets. Broader
economic strength prompted the Fed to raise short-term rates for the first time in four years. The S&P 500
rose another 1.7% on a total return basis, but the Lehman Aggregate Bond Index lost 2.4%.
• The pace of economic growth likely moderated in the second quarter, but an acceleration in job
growth pointed to sustainability; amissing element thus far in the current expansion. "Headline"
inflation moved higher, punctuated by record high nominal gasoline prices. The Fed lifted the fed funds
rate to 1 '/4%, and suggested future rate hikes would be "measured" due to balanced risks in both
growth and inflation.
• The current expansion appears to be near the stage where additional strength will begin to strain
existing resources and push inflation higher, but a sharp acceleration is unlikely over the near
term. Fiscal policy is moderating and monetary accommodation is reversing, so that employment
increases will be the primary driver of new income gains. As a result, the future rate of growth will be
closer to the long-term average pace of 3 Y2%. The Fed has changed policy direction and additional
rate increases are extremely likely. However, the pace of future rate hikes may fall short of market
expectations.
• Corporate earnings estimates for the second quarter, 2004, and 2005 were revised higher during the past
several months. Top line sales growth and profit margins appear to be firm.
• Stocks remain cyclically attractive relative to bonds, given the onset of Fed tightening and risk of
higher inflation, and we recommend a moderate overweight position in equities within asset
allocation ranges. However, the equity markets could remain sluggish over the near term given the
sharp market rally since March 2003, declines in price/earnings ratios, and expectations of a cyclical peak
in year-over-year earnings growth. We believe that companies with stronger financial quality (high cash
flow, top line sales growth, low debt) will outperform in this climate. We will be very price sensitive in the
entry and exit strategies for individual stocks, and we will use any periods of market weakness to add
to equity positions, especially if interest rates dip.
• Infixed-income portfolios, we believe yields have reached a cyclical and secular low, particularly given the
Fed's recent shift to raising short-term rates. While yields will generally trend higher, we believe most of
the movement will be in short-term rates causing the yield curve to flatten from the current steep level. We
recommend a neutral relative duration with a barbell maturity structure, and emphasize quality
corporates as effective investments to enhance current yield in portfolios and securities that
perform well in rising inflation environments such as TIPS (Treasur Inflation-Indexed Securities.
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT
17
~ ~ ~ ~ ~ r ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
Trusco-Seix A Powerful Team
• Effective June 2004 Seix Investment Advisors became a division of
Trusco Capital Management. Seix is a major national investment
advisor specializing in fixed income management and will focus on
client mandates in (1) high yield, (2) core/investment grade and (3)
core plus.
• The acquisition adds significant investment resources
• Fixed Income CIO with 3l years of experience
• Investment grade team leader with 22 years of experience
• 5 Portfolio Managers specializing on specific market sectors
• 22 research analysts
• State-of-the-art proprietary trading and compliance system
• The similarity in the investment process of the two firms means that
future integration will be seamless and enable us to continue to
deliver an exceptional level of investment service to our clients.
• The consolidated resources will provide significantly more focus in
all aspects of the investment process.
• Portfolio management
• Research
• Trading
• Client service
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT ~ 1 s
r ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ r ~ ~ ~ S
Why Seix Investment Advisors
• Lower rate environment has driven demand for multi class i.e. core
plus fixed income managers
• High yield research and portfolio management are the key and scarce
capabilities in building a successful core plus manager
• While Trusco has core plus and high yield products, it would take years
to achieve critical mass
• Experienced investment professionals (avg. age 43) who are still highly
motivated to grow
• Trusco and Seix have similar investment philosophies and views on
business strategy
• Seix is a highly regarded, nationally recognized fixed income manager
• Seix is has proven to be successful in the institutional market with
consultants and brokerage wrap sponsors
• Cross sell Trusco products through Seix's relationships in the
consultant and wrap channels as well as directly to Seix clients
• There is little overlap between Seix and Trusco's product sets
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT ~ 19
~ ~ ~ r ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ r ~ ~ ~ ~
Trusco/Seix Style Similarities
• Conservative Investment Philosophy
• Bottom-up/Research Oriented Approach
• Controlled Duration Management
• Emphasis on Income
• Significant but Controlled Sector Weightings
• High Overall Quality Portfolio
• Highly Diversified
• Tactical Yield Curve Strategies
• Rigorous Sell Discipline
• Strong Risk Controls
• No Derivatives or Currency Risk
rn~.
,~~_~~ r._~._'`~::
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 20
Cornerstones of Core/High Grade Approach
• No Market Timing
• Income Tilt
• High Portfolio Quality/Small Positions
• No Derivatives
• Rigorous Sell Discipline
,~.~~- q.
f._
City of Winter Springs General Employees' Pension Plan TRUSCO CAl'1TAL MANAGEMENT 21
- .~ -
x/30/2003) $ 7,039,994.80
ncome $ 50.62
$
$ 7,040,045.42
716,446.60
$ (145,273.66)
$ 936,308.29
lends $ 26,453.88
Mme $ 303.77
$ 8,573,929.91
Mme $ 354.39
~ i~~ - :~ ~
SCO CAPITAL MANAGEMENT I 22
Period Ending I Performance Comparisons
June 30, 2004
Calendar Fiscal Inception
YTD YTD Trailing Trailing Trailing Trailing to Date
Quarter 6 Months 9 Months 12 Months' 36 Months' 60 Months" 120 Months' 127 Months`
~ ~- i
Total Equity
S& P5001ndex 1.36%
1.72% 4.98%
3.44% 19.13%
16.04% 24.12%
19.11% 0.95%
-0.70% 4.10%
-2.20% 11.68%
11.83% 10.86%
10.90
SunTrust Retirement High Grade Growth Fund 0.96% 2.28% 12.93% 15.22% -1.04% 1.00% 13.13% 12.16%
S & P 500 Barra GroHth Index 2.694b 2.72% 12.92% 16.0240 -1.09% -4.97% 11.92% 10.82°b
S & P 500 Index 1.724b 3.44% 16.04% 19.1140 -0.70% -2.20% 11.83% 10.90%
SunTrust Retirement High Grade Relative Value Fund " 2.59% 5.01 % 19.76% 22.33% 0.99% 0.49% 10.62% 9.85%
S & P 500 Barra Value Index 0.80% 4.17°% 19.23% 22.26°~ -0.57% 0.14% 11.26% 10.53%
Russell 1000 Value Index 0.88% 3.94% 18.68% 21.13% 2.96% 1.87% 12.68% 11.83°io
STI Classic International Equity Index Fund 0.18% 4.95% 22.81% 33.71% 2.85% -0.79% 5.24% N/A
MSCIEAFEIndex 0.22% 4.56% 22.41% 32.35°~0 3.89% 0.01°i° 4.03%0 5.32%
STI Classic Small Cap Growth Fund -0.61 % 7.40% 22.68% 34.63% 4.96% 8.58% N/A N/A
S & P Small Cap 600 Index 3.60% 10.05% 26.31 % 35.25°ib 9.35% 10.76% 13.64°i 12 19%
Russel12000 GroKth Index 0.09% 5.68°% 19.08% 31.5540 -0.22% -0.45% N/A N/A
STI Classic Small Cap Value Fund 3.94% 9.85% 27.33% 37.36% 16.01% 14.64% N/A N/A
Russell 2000 Value 0.85% 7.83% 25.47% 35.17% 12.154% 12.82% 13.91 % 13.06 ~b
SunTrust Retirement Mid Cap Equity Fund 0.46% 4.26% 18.05% 23.35% -2.88% 6.82% N/A N/A
S & P Mid Cap 400 Index 0.97% 6.08% 20.07% 27.98% 6.58% 9.04°i° 15.47% 14.23%
Russell Mid Cap Index 1.45°0 6.67°0 21.5740 29.3940 6.4240 6.51 °0 13.464a 12.5040
Total Fixed Income
Lehman Govt Credit Bond Index -2.73%
-3.17% -0.11%
-0.19% -0.28%
-0.21 % -0.70%
-0.72% 6.45%
6.74 % 6.77%
7.11 % 7.37%
7.43% 6.60%
6.61
SunTrust Retirement High Grade Bond Fund -2.97% -0.15% -0.22% -0.63% 6.57% 6.81% 7.40% 6.63%
Lehman Govt Credit Bond Index -3.17% -0.19°%° -0.21% -0.72°% 6.744i° 7.11% 7.43% 6.61
Lehman Aggregate Bond Index -2.44% 0.15°i° 0.47% 0.32°% 6.36% 6.95°% 7.39% 6.62%
SunTrust Retirement High Grade Intermediate"` -1.72% 0.42% N/A N/A N/A N/A N/A N/A
Lehman Intermediate A+ GovVCredit Bond Index -2.45'% -0.14% -0.28% -0.37°i° 6.02% 6.664a 6.83% 6.22%
"Return i.c unnunli; ed.
** - Lu~eptinn h/30/?002. Lnn,~er term re.ru6.c ore linked ro the STl Clu.csi~~ GruH7h and Inrunre Fund to .chmr results prior to inception.
k~;-_
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 23
Period Ending I -Portfolio Composition
June 30, 2004
Total Money
Market
Total Fixed
Income
23.1
Total Equities
74.3%
SunTrust Retirement High Grade Growth Fund $ 1,820,161.88
SunTrust Retirement High Grade Relative Value Fund $ 1,428,526.72
STI Classic International Equity Index Fund $ 839,907.77
SunTrust Retirement Small Cap Growth Fund $ 719,169.81
STI Classic Small Cap Value Fund $ 691,659.86
SunTrust Retirement Mid Cap Equity Fund $ 870,733.90
Total Equities $ 6,370,159.94
SunTrust Retirement High Grade Bond Fund $ 1,185,711.08
SunTrust Retirement High Grade Intermediate Bond Fund $ 791,626.23
SunTrust Retirement Reserve Fund
City of Winter Springs General Employees' Pension Plan
21.2%
16.7%
9.8%
8.4%
8.1
10.2%
74.3%
13.8%
9.2%
$ 226,432.66 2.6%
TRUSCO CAPITAL MANAGEMENT ~ 24
~~
June 30, 2004 SunTrust Retirement High Grade Growth Fund
Value Blend Growth
Large
Medium
Small
Investment Cateoorv
Large Growth
The fund seeks capital
NAV: $53.80 appreciation by investing primarily
Assets (mil): $64.03 in large, well established domestic
corporations in the top three
quality rating categories of major
credit rating agencies, including
Value Line, Moody's or Standard
& Poor's, and must be listed on a
major exchange or NASDAQ.
Security E uit Securit Equity
Microsoft Corp. 3.9% American Express Co. 2.4%
Exxon Mobil Corp. 3.2% Intel Corp. 2.1%
Johnson & Johnson 3.0% Procter & Gamble Co. 2.1%
Pfizer Inc. 3.0% Lowe's Cos. 2.0%
Biomet Inc. 2.5% Deere & Co. 2.0%
Characteristics Fund S&P 500 Index
Dividend Yield (Current) 1.0% 1.4°0
Market Capitalization ($bil) 82.4 89.9
Price-to-Book 3.4x 3.Ox
P/E (12 mo fwd) 19.9x 17.3x
EPS Growth (5 yr est) 14.2 12.4
ROE 17.5 16.2
Consumer Discretionary
Consumer Staples
Energy 4.6°0
6.6°6
Fi
i
l
nanc
s
a
Healthcare
I
i
l
d
t
n
r
us
a
s
f
h
l
I
T
no
n
ormation
ec
ogy
0.0
Materials
3.0°0
Telecom SerHCes 0.0
3.4
Utilities 0.0
2.7
Cash: 3.7%
U.S. Stocks: 96.3%
Non-U.S. Stocks: 0.0%
~ 1s.4%
0.9
r
11.1°0
~ 17.1
20.3
~2 2°0
13.3°%
19.5
11-5%
2,.7%
17.2
^ Fund
^ S&P 500 Index
Annualized
Three One Three Five Ten Inception
Months YTD Year Year Year Year 04/01/1990
Fund 1.0% 2.3% 15.2% -1.0% 1.0% 13.1 % 12.5%
S&P 500 Index 1.7°~~ 3.4`<, 19.1°~~ -~~ 7°~ -2.2_`'~ 11.8°0 11.2°~
Lipper Large Cap Growth Index 1.0% 2.2% 16.1 % -5.1 % -7.3% 8.6% 9.2%
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 25
~ ~ ~ ~ ~ ~t ~ ~~ ~ ~i ~ ~ ~ ~ r ~ ~ ~ ~
June 30, oio ~ SunTrust Retirement High Grade Growth Fund
The second quarter saw an unusual
combination of investment influences.
The economy remained strong which
normally drives prices higher, however
negative news from Iraq and a shift in
monetary policy to higher interest rates
rattled investor psychology. Overall, the
S&P 500 Index advanced 1.7% while
the Fund returned 1.0 %. The best
performing sectors were Industrials,
increasing 8.5%, and Energy up 7.6%.
Underperforming were Financials down
2.4%, Utilities losing 1.3%, and
Telecommunications down 1.0%.
Looking forward, economic growth
should temper while corporate profits
peak on a year over year basis.
Therefore, emphasis will shift from
companies with strong cyclical profit
recovery to ones with sustainable,
above average earnings growth.
Growth stocks should outperform value
stocks and large cap should do better
than small caps. Our portfolio should
benefit from these trends.
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% 1.0%
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% 2.3%
S&P 500lndex 3~_4"_, 23.8°~, ?7 1°-~ 92°~, -11 0°~ -?_?_1°, 28.7°-~ 34°„
Lipper Large Cap Growth 28.1% 25.7% 28.0% -10.9% -18.0% -24.2% 27.0% 2.2%
$60, 000
$50, 000
$40, 000
$30, 000
$20, 000
$10,000
Apr-90 Apr-92 Apr-94 Apr-96 Apr-98 Apr-00 Apr-02 Apr-04
Fund S&P 500
• - - - -
3 Year
Alpha Beta R-Squared Sharpe Ratio Std. Deviation
Fund -0.05 0.73 78.03 -0.20 13.43
S&P 500 Index 0.00 1.00 100.00 -0.14 16.27
.-_ ;~_
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 26
•r +~^~ r r w~ . ,^r r r ~ ~ r ~ ~ Ifs ~ ..~ ~ ~
Period Ending
June 30, 2004
SunTrust Retirement High Grade Relative Value Fund
. ~ - .. ..
Value Blend Growth Cusip: 990001182 The Fund seeks long-term capital Cash: 1.5%
Large appreciation with a secondary goal of U.S. Stocks: 98.5%
NAV: $11.69 current income by using a value-
Medium Assets (mil): $41.8 oriented investment strategy focused
on large well-established companies
Small
in the top three quality rating
Investment Category categories of major credit rating
agencies, including Value Line,
Large Value
- Moody's or Standard & Poor's.
..
Security %Equity
Securitv
%Equity -
Conoco Phillips 2.1 % Amer. Elec. Power 1.7%
9.6°~b
Consumer Discretionary
Exxon Mobil 2
0%
Rockwell Auto
1
7% 1 3.3
.
.
.
11 7 %
Chevron Texaco 1.8% General Electric 1.7%
Illinois Tool Works 1.8% Berkshire Hath. B 1.7%
Prudential Financial 1.8% Microsoft 1.7%
Characteristic
Dividend Yield (Current)
EPS Growth (5 yr.)
Market Capitalization ($bil)
Price-to-Book
P/E (12 months trailing)
Return on Equity
Fund
1.9%
13.8%
63.4 B
2.7x
18.4x
22.6%
Barra
Value
2.0°%
11.5°0
63.9 B
2.1x
15.9x
14.3%
Consumer Staples
Energy
Financials
Heakhcare
Industrials
Inf ornation Technology
tugterials
Telecom Services
Utilities
2.7°ib
~0.2%
11 .7°i6
9.6°~0
4.4°0
15.3 %
9.0°°
9.1 °~o
~ 7.2
3.7 %
3.5
3.3
~ 6.1%
~4.3
s.s%
^ Fund
^ Barra Value Index
36.5
- -. - - -
Annualized
Three Year One Inception
Months to Date Year 6/30/02
Fund 2.6% 5.0% 22.3% 8.2%
Barra Value Index 0.8°~ 4.2°~ 22.3°~ 9.6°~
§< ~ ~;:
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT j 27
r illllt^r r f~^r ~ llll~ a~+ . ,~ lii~ s lllllll~ ~ >~ ^r l~ ll. ~ >i
Period Ending SunTrust Retirement High Grade Relative Value Fund -
June 30, 2004 continued
During the second quarter,
investors confronted one of their
biggest demons: rising interest
rates and inflation. Global
economic pressures caused both
to move up from the abnormally
low levels of the past year.
Although bad for bonds and other
interest sensitive investments,
and initially negative for stocks,
the equity market worked through
the dynamic of strong corporate
profit growth juxtaposed against
rising rates and finished higher for
the quarter. Stylistically, growth
outperformed value, however,
cyclical areas like energy and
industrials performed best. The
Fund enjoyed another good
performance quarter on the
strength of its pro-cyclical
positioning, diversification, and
underweightings in the hard-hit
interest sensitive sectors. This
strategy remains in place heading
into Summer.
Fund Manager:
Charles B. Arrington, CFA
2002 2003 2004
First Quarter N/A -4.1 % 2.4%
Second Quarter N/A 13.5% 2.6%
Third Quarter -17.4% 2.1
Fourth Quarter 6.5% 14.1
Fund -12.1 % 26.7% 5.0%
Barra Value -12.6% 31.8°-0 4.2%
$13,000
$12,000
$11,000
$10,000
,,-
$9,000
$s,ooo
$7,000 - - - - - -
Jun Sept Dec Mar Jun Sept Dec March June
- SunTrust Retirement High Grade Relative Value S&PBarra 500 Value
~ J~'`..
,.~'~
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 28
~ .. r ~. ..~ ~. ~ rat r a• ~ r ~ ~ ~ ~ ~ ~ +~
June 30, oio STI Classic International Equity Index Fund
More current
iir vestment
performance return
information may be
obtained by callii:g
I -800-874-4770,
option 5, or visiting
the ST/ Classic
Funds website at
K' M N'..1 ~lC'~C1.1.17C''U 11 [t.1. C'ORI.
Value Blend Growth Ticker: SIEIX The Fund seeks to provide
Large
Expense Ratio:
1.06% diversification and capital
appreciation by investing in
Medium NAV: $11.45
securities of companies
smelt Assets (mil): $362.86 headquartered or based in
foreign countries to replicate
Investment Category the Morgan Stanley EAFE
Foreign Stock GDP Index.
.. -
Security %Equity
Security
°6Epuity -
Toyota Motor Corp. 1.7% EON AG 1.2%
Siemens AG 1.6% Deutsche Telekom 1.2%
Total S.A. 1.6% Deutsche Bank AG 1.1%
ENI S.p.A. 1.6% DaimerChrysler AG 1.1%
Telefonica S.A. 1.3°a BP PLC 0.9°b
•. -
MSCI
Characteristic Fund EAFE GDP
Dividend Yield (Current) 2.2% 2.2°io
EPS Growth (5 yr est.) 12.4% 12.4°0
Market Capitalization ($bil) 35.9 35.9
Price-to-Book 2.Ox 2.Ox
P/E (12 months trailing) 17.2x 17.2x
Return on Equity 12.5% 12.5%
Consumer Discretionary
Consumer Staples
Energy
Rnancials
Healthcare
Industrials
Information Technology
Materials
Telecom Services
Utilities
Three Year to
Months Date
Fund 0.2% 5.0%
MSCI EAFE GDP Weighted -0.7°.0 4.1°°
Lipper International Funds Objective -0.8% 3.6%
~:~.
City of Winter Springs General Employees' Pension Plan
s.1~a
6.1°0
_ 1os
10.6
. 7.7
7.7
s.7
6.7°%
. s.s%
s.s %
6.3°'0
6.3
^ Fund
^ MSCI EAFE GDP Weighted
Annualized
One Three Five Ten Inception
Year Years Years Years 6/01/1994
33.7% 2.9% -0.8% 5.2% 5.1
33.3°a 2.4°~ -1.0°~ 4.1°~ 4.2°0
28.6% 2.3% 0.4% 5.0% N/A
s.s%
6.5
7.3 %
7.3
1 a.o
1a.o%
zs2%
zs.z
TRUSCO CAPITAL MANAGEMENT 129
Cash: 2.5%
Non-U.S. Stocks: 97.5%
U.S. Stocks: 0.0%
U.S. Stocks Non-U.5 Stocks
°.0".e 97.5°.e
casn
2.50
June 30, o` 4 ~ STI Classic International Equity Index Fund -continued
More current
itt vesttn ent
performance return
itrformatiott Wray be
obtained by calling
1-8~~-87-1-=177,
option 5, or visiting
t{te STI Classic
Funds website at
N'N'N'sllC'~ILCSIC~II /1CtS.('0111.
The MSCI EAFE GDP was down 0.65%
for the quarter. The market fell over 8%
in May but recovered mostly before
quarter end. Small Cap stocks
dramatically outperformed Large Cap
names. Low beta stocks outperformed
higher beta names, and low P/E stocks
preformed better than higher P/E
stocks. From a sector standpoint,
Energy, Utilities, and Healthcare had
the best returns, Industrials,
Telecommunication Services, and
Information Technology had the worst
returns. Austria, Belgium, and Norway
were among the top performing
markets. Japan, Hong Kong, and
Finland were among the worst
performing markets. The Fund returned
0.17% modestly outpacing its
benchmark for the quarter.
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% 0.2%
Third Quarter 2.6% -13.0% 5.7% -8.5% -15.5% -20.5% 8.9%
Fourth QuaRer -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% 5.0%
MSCI FAFF GDP Weighted 4.4`~ 25.1°~ 29.5°_ -15.4°- -23-3°~- -17.3' 40.0= -1.1°~
Lipper Intemational Funds 7.3% 12.7% 37.8% -14.7% -19.3% -16.7% 34.7% 3.6%
$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 Jun-04
Fund MSCI EA FE GDP Weighted
3 Year
Alpha Beta R-Squared Sharpe Ratio Std. Deviation
Fund 0.03 0.99 1.00 0.07 16.69
MSCI EAFE GDP Weighted 0.00 1.00 1.OG Q05 16,69
Lipper Intemational Funds Objective 0.27 0.88 0.72 N/A 16.64
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT so
r .I r~ r r ,~ .~ ~~ r~ r~ r. r Ir
Period Ending SunTrust Retirement Mid-Cap Equity Fund
June 30, 2004
Value Blend Growth The Fund seeks long-term capital Cash: 0.0%
NAV: $25.12 growth through investment in a Stocks: 100.0%
`arse Assets (mil): $28.95 diversified portfolio of stocks of
Medium domestic corporations with a
market capitalization between $1
Small billion and $10 billion and must be ~,5 „a„~
Investment Category listed on a major exchange or ~~~`
Mid-Cap Blend NASDAGI.
.. -
Security Equity Security
Equity -
Consumer Discretionary 20 ~'~°
F~uitable Resources, Inc. 2.1% Anthem, Inc. 2.0% X7.4°~~
Ball Corp. 2.1°.o Nbnsanto Co. 1.9°/ Consumer Staples 2.6°~°
Biogen Idec. Inc. 2.1%
RJ Reynolds Tobacco
1.9°/ 5.0° o
5 0°0
UGI Corp. 2.0°/ Student Loan Corp. 1.9% Energy
s.o°,o
Cigna Corp. 2.0°o Ryland Group, Inc. 1.8%
Financials zt.s%
20.9
'• • • -
I-iealth Care 9.7°0
10.5°6
Characteristic Fund Rt.issell Mid -Cap Industrials ,0.7%
Dividend Yield (Current)
1.6% 1.5°'o to.7~o
16.3°'°
Information Technology
1 5.6
Market Capitalization ($bil) 6.7 6.1
Price-to-Book
2.2x 2.4x Materials 5.6°6
61°"°
P/E (12 mo trailing)
16.Ox 17.8x Telecom Services o.6~° ^ Fund
t 2°%
Price-to-Sales
0.9x 1.1 x Utilities 7.te,° ^ Russell Midcap Index
7 60,0
- -. - - .
Annualized
Three Year to One Three Five Seven Inception
Months Date Year Years Years Years 12/1996
Fund 0.5% 4.3% 23.4% -2.9% 6.8% 12.1 % 13.0%
Russell Mid-Cap Index 1 .5°~~ 6 7°~ 29 4°° 6 4°° 6.5°0 9.7°0 10.5°0
Lipper Mid Cap Core Funds 1.0% 5.6% 26.3% 5.2% 7.3% 9.5% N/A
'I City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 31
Period Ending I SunTrust Retirement Mid-Cap Equity Fund -continued
June 30, 2004
The Russell Mid Cap Core returned
0.1% in Q2. Sectors with the highest
Q2 returns were: Energy +10.9%,
Consumer Staples +8.5%, and
Industrials +7.3%. Companies in
these sectors experienced higher
input costs that were passed on to
their customers. The Sectors with the
lowest returns were Consumer
Discretionary -1.7%, Financials -1.5%,
and Information Technology -0.9%.
Consumer Discretionary companies
bore the burden of the price pass-
, throughs. Financials were weak in
response to concerns over higher
interest rates. Technology stocks
underperformed as investors became
concerned that the rapid EPS
increases in 2003 were
unsustainable. The last three cycles
of increasing interest rates,
decelerating profits and higher-quality
companies outperforming should help
improve the performance of the Fund.
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 Quarter 14.5% -1.3% 19.1% -1.5% 16.5°~b -13.4°/ 14.1°/ 0.5%
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% 4.3%
Russell Mid-Cap Index ?_9.0~ 10.1 It32~ t~-3": -5.6 _ -162 d0 1 - 6.7"',
Lipper Mid Cap Core Funds 22.2% 7.8% 28.2% 6.3% -4.9% -17.4% 36.1°/ 5.6%
$3s, 000
$30, 000
$2s, o00
$20, o00
$1 s, o00
$10, o00
$s, o00
$o
Dec-96
Fund
Russell Mid-Cap Index
_~,~
City of Winter Springs General Employees' Pension Plan
3 Year
Alpha Beta R-S uare Sharpe Ratio Std. De~nation
-0.75 1.01 0.89 -0.24 18.55
0.00 1.00 1.00 0.28 17.36
TRUSCO CAPITAL MANAGEMENT 32
Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03
Fund Russell Midcap Index
~ r r it rr rr r r r rr ~ r err ar rle +rti r ar rr
June 30, 2004 STI Classic Small Cap Value Fund
Value Blend Grow[h
Large
Medium
smau
InVBStment CateQON
Small Value
Ticker: SCETX The fund seeks long-term
Expense Ratio: 1.24% capital growth and income by
investing in the stocks of
NAV: $18.53 companies with a market
Assets (mil): $705.04 capitalization between $50
million and $2 billion.
Security %Equity Security %Equity
Autodesk Inc. 4.5% Mentor Corp. 2.0%
Cooper Cos. 3.6% Peabody Energy 1.9%
Harris Corp 3.1 % Cummins Inc. 1.8%
Brink's Co. 3.0% StanCorp Financial 1.8%
Reynolds & Reynolds 2.4% Hub International 1.8%
Characteristic
Dividend Yield (Current)
EPS Growth (5 yr est.)
Market Capitalization ($bil)
Price-to-Book
P/E (12 months trailing)
Return on Equity
Fund
1.4%
13.3%
1.9
2.2x
19.4x
13.3%
Fund
Russell 2000 Value Index
Lipper Small Cap Value Index
Russell
2000 Value
1.7%
10.4%
0.9
1.6x
16.4x
6.5°0
Consumer Discretionary
Consumer Staples 4.1
3.s°b
Energy 2.1°'a
s.2 %
Financials
Healthcare
Industrials
Information Technology
Materials
Telecom Services 0.0 %
1 .2%
o.o~o
utaaies
Three
Months YTD
3.9% 9.9%
0.9°° 7.8°~a
1.6% 7.7%
~~®
Cash: 2.5%
U.S. Stocks: 79.3%
Non-U.S. Stocks 18.2%
,,,,~
20.5
14.3°~°
is.s%
8.9°a
20.0
t a.o°.e
t s.s°o
9.4 :-°
~ tts%
8.1°°
32.9°6
^ Fund
s 2 i° ^ Russell 2000 Value Index
Annualized
One Three Five Seven Inception
Year Year Year Year 8/31/1994
37.4% 16.0% 14.7% 10.1 % 15.7%
35.2°° 12.2°° 12.8°° 10.9°~ 13.5°°
37.3% 12.7% 13.1 % 10.8% 12.9%
City of Winter Springs General Employees' Pension Plan TRLISCO CAPITAL MANAGEMENT 33
I~ ~ r III r ,~ I~ I~ r r ~ I~ ~ I~ >• I~ I~ I~ i~
Period Ending I STI Classic Small Cap Value Fund -continued
June 30, 2004
The STI Classic Small Cap
Value Fund returned 3.9% for
the quarter versus 0.9% for the
Russell 2000 Value Index.
Higher quality companies
continued to be top performers
for the second quarter of 2004.
Superior selection of securities
assisted the Fund in
outperforming the benchmark.
The Fund continues its strict
adherence to quality, lower risk
companies which we believe
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 through
the first half of 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% 3.9%
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 % 9.9%
Russell 2000 Value Index 31.8°-0 -6.5°0 -1.5°~ 22-8°~ 14.0°0 11 ~°; 46.0"~ 7-8°0
Lipper Small Cap Value Index 28.8% -6.7% 1.9% 16.1% 17.2% -11.2% 47.5% 7.7%
$45.000
$40.000
$35.000
$30,000
$25.000
$20.000
$, 5.000
$,O.OOa
$5.000
Seo-9
Fund Russell 2000 Value
3 Year
Alpha Beta R-Squared Sharpe Std. Deviation
Fund 6.42 0.74 90.48 1.00 14.49
Russell 2000 Value Index O.OU 1.00 100.00 0.57 1f3.67
-a~~r s „~.ers.
City of Winter Springs General Employees' Pension Plan TRLISCO CAPITAL MANAGEMENT 34
4 Seo-95 Seo-96 Seo-97 Seo-98 Seo-99 Seo-00 Seo-01 Se°-02 Seo-03
r rl r r I~ rr r r r rr w r r rr r r~ r rr r
June 30, oio ~ STI Classic Small Cap Growth Stock Fund
.'More current
investment
performance return
ittfOrl)tQtiO/t nt[ty be
obtained by calling
1-800-87-i-4770,
option 5, or visiting
the STI Classic
Funds website at
wtcir..cticla,ccicJ'unds.cunt.
Value Blend Growth
Large
Medium
Small
Investment Cateaorv
Small Growth
Ticker: SSCTX The fund seeks long-term
Expense Ratio: 1.20% capital appreciation by
investing in the stocks of
NAV: $21.15 companies with market
Assets (mil): $809.1 capitalization between $50
million and $2 billion at the
time of purchase
Securitv % Equity Securitv % Equity
Jos. A. Bank Clothier 1.0% Gevity HR 0.9%
Penn Ntl Gaming 1.0% Headwaters 0.9%
Navigant Consulting 0.9% Thor Industries 0.9%
Rogers 0.9% Bradley Pharm. 0.9%
Ditech Com. 0.9% Infocrossing 0.8%
Characteristic
Dividend Yield (Current)
EPS Growth (5 yr est.)
Market Capitalization ($bil)
Price-to-Book
P/E (12 months trailing)
Return on Equity
Fund S&P 600
Sm. Cap Grth
0.3% 0.5°0
19.7% 17.9%
0.9 1.3
2.6x 3.7x
21.Ox 23.Ox
13.4% 15.4%
Consumer Discretionary
Consumer Staples
Energy
Financials
Healthcare
Industrials
Inf orrrntion Tec hnobgy
Materials
Telecom Services
Utilities
2a.2 i
24.3
Annualized
Three Year- One Three Four Five Inception
Months to-Date Year Years Years Years 10/08/1998
Fund -0.6% 7.4% 34.6% 5.0% 3.6% 8.6% 16.2%
S&P 600 Small Cap Growth Index 4.5°0 10.5°~0 34.6°~0 8.4°,0 4.1°~0 8.5°,0 15.2°~0
Lipper Small Cap Growth Classification -0.6% 3.3% 27.1% -1.0% -6.3% 3.2% 12.5%
City of Winter Springs General Employees' Pen sion Plan TRUSCO CA['ITAL MANAGEMENT 35
Cash: 1.6%
U.S. Stocks: 98.4%
;,e ~o ;
r.~ ~ ~ ~^rr ~ ~Ir ~ rr r ~s r » ~ ~ ^r ^Ir a~ ~
Period Ending I STI Classic Small Cap Growth Stock Fund -continued
June 30, 2004
More current
in veshnent
performaizce retur~z
information may be
obtained by calli~ig
1-800-874-4770,
option 5, or visiting
the STI Classic
Funds website at
Vt'19N'.,CI(C~QS'S/CJIUI(~S.CO/11.
Small Cap stocks were mixed for the
quarter as the S&P 600 and Russell
2000 Indices returned 3.6% and
0.5%, respectively, versus the 1.7%
return of the S&P 500 Index. The
higher quality and value-oriented
composition of the S&P 600 versus
the Russell 2000 had a significant
impact on the performance between
the two indices. The Small Cap
Growth Fund posted a return of -
0.6%, trailing the S&P 600 Barra
Growth return of 4.5% but identical
with that of the Lipper Small Cap
Growth average. The bright spots of
positive stock selection in the
Consumer Staples and Materials
sectors were offset by the weak stock
selection in Technology, Healthcare,
and Consumer Discretionary, the
three largest sectors in the
benchmark.
Fund Manager:
Mark Garfinkel, CFA
1998 1999 2000 2001 2002 2003 2004
First Quarter N/A -11.4% 16.4°0 -10.6% 1.1% -6.4% 8.1%
Second Quarter N/A 20.8% -0.1 % 16.0% -10.2% 24.2% -0.6%
Third Quarter N/A -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% 7.4%
S&P 600 Small Cap Growth Index 2.3°~, 19.6°~, 0.6°r~ -1.2°° -15.4°„ 37.3°~~ 10.5°~
Lipper Small Cap Growth Classification 5.4% 63.4% -6.2% -11.3% -29.7% 44.4% 3.3%
yJ V,VVV
$25, 000
$20, o00
$15, 000
$10.000
$5, 000
$o
Oct- Apr- Oct- Apr- Oct- Apr- Oct- Apr- Oct- Apr- Oct- Apr-
98 99 99 00 00 01 01 02 02 03 03 04
Fund S&P 600 Small Cap Grow th Index
3 Year
Sharpe Std.
Alpha Beta R-Squared Ratio Deviation
Fund -0.3 1.2 0.9 0.2 6.2
S&P 600 Small Cap Gruwt}1 Index U-G 1.0 1.0 0.4 5.1
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 3s
r r w r r i r ~ r r ~I^~ r~ w r ,,r r r r
June 30, oio ~ SunTrust Retirement High Grade Bond Fund
Short Int. Lon
High
Medium
Low
Investment Cateoorv
NAV:
Assets (mil):
The fund seeks to provide a
$30.87 high level of total return
$197.62 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.
Cash: 0.1
Bonds: 99.9%
Bonds
9a~o
Cash
o. t ~o
Intermediate-Term Bond
Sector Fund
Corporate Bond 42.8%
Agency 15.9%
Mortgages 18.4%
US Treasury 18.1%
ABS 4.9%
Cash 0.1
Characteristic Fund
Average Rating AA1
Average Coupon 4.9%
Current Yeld 4.8%
Yeld-to-Maturity 4.2%
Average Maturity ' 8.0
Effective Duration ' 5.0
ML "A" CdC
29.5%
22.4%
0.0%
48.1
0.0%
0.0%
ML "A" CSC
AAA
5.3%
4.8%
4.0%
~ 7.5
5.0
0-3 Years
3-5 Years
5-7 Years
7-10 Years
10-20 Years
20+ Years
a1.s r
G/C
Annualized
Three Year- One Three Five Ten Inception
Months to-Date Year Years Years Years 9/1/1989
Fund -3.0% -0.2% -0.6% 6.6% 6.8% 7.4% 7.9%
Merrill Lynch G/C A Rated and Above -3.0°0 -0.2°0 -1.1°.0 6.5°0 7.0°0 7.3°0 7.8°-0
_.
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 37
Period Ending SunTrust Retirement High Grade Bond Fund - (continued)
June 30, 2004
Interest rates rose substantially and the
yield curve flattened meaningfully during
the second quarter as economic growth
finally led to job creation and some
increase in the inflation rate. The market
sold off in anticipation of the Fed tightening
that began at the end of the quarter with a
'/a% increase to 1 Yo%. For the period both
corporate and mortgage sector returns
were comparable to those of Treasuries
with the same duration. Continuing
economic growth and gradual Fed
tightening should maintain the trend
toward higher yields and a flatter yield
curve over time. Incremental yield from
both corporates and premium mortgages
should enhance total return.
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% -3.0%
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% -0.2%
Merrill Lynch G/C A Rated 9.7°~ -2.2°0 12.4°% 8.2°0 11.6,0 3.2°0 -0.2°i°
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
~~
0~
City of Winter Springs General Employees'
~G ~G ~Ci eG GG ~G GG GG eG eG eG eG GG eG eG
Q Q Q ~ Q Q ~ Q Q Q ~ ~ Q Q
Fund ML A Rtd G/C
~;,,,
Pension Plan TRUSCO CAPITAL MANAGEMENT
38
SunTrust Retirement Intermediate High Quality Bond Fund
Short Int. Lon
NAV:
Migh
Assets (mil)
Medium
Low
Investment Category
Intermediate-Term Bond
Sector Fund Leh Aqq Int A+
Corporate Bond 18.7% 14.6°.0
Agency 13.3% 13.2°0
Mortgages 32.0% 48.4°ro
US Treasury 25.0% 21.9°~b
ABS 1.9% 1.9°~0
Cash 9.1 % 0.0°~0
5-7 Years
asa%
Characteristic Fund Leh Agg Int A+ to.~%
7-10 Year-
A~rage Rating AAA AAA - - -- 32 ~°~°
Average Coupon
Current Yeld 4.5%
4.3% 5.6°0
0.9`0
4.9°° 10-20 Years
2.3°0
Yeld-to-Maturity 3.1% 4.5°0 ^Fund
Average Maturity 3.9 5.6 s.~°°
20+ Years ^ Leh Agg Int A or Better
Effective Duration 3.3 3.8 0.0°0
Three Year- Fixed income markets tied a difficult second quarter as yields rose
substantially due to a string of strong am ploym ant reports,
Months to-Date resurfacing inflatfon concern nd the first Fed tightening in four
years. On June 30, this FO MC bumped up the Federal Funds rata to
,t
ii Fund -1.7% ().4°/O ~ .25 % from Y .00°/ and changed their tone from being on hold for a
Lehman Aggregate Intermediate A or Better" -1
9°~ 0
3°o siderable period" to ra ~s~ng rates at a •'m easured pace." As a
esu
.
. lt, yields of mast fixed income secur;t;es rose during the
r
quarter. For exam pia, the two year U. S. Treasury note rose to
2.60 % from t .57% Expectations are for continued acononilc
growth, moderate inflation, and nsing short-term yields. Tha Fad is
ax patted to rasa rates to ram ova currant mon atary policy
av<_~.~n~rTi..>r l.iti~~n
Fund Mar~zagar-_ RicK Nalsort,
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 39
Cash: 9.1
Bonds: 90.9%
The fund seeks to provide a
$10.19 high level of total return
$180.31 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.
0-3 Years
3-5 Years
Period Endin
June 30, 2004 FUCId Attl'IbUtIOCI SUf'Yll'1'lal'~/ -Appreciated more than 15%
SunTrust Hi h Grade E uit Fund
AVON PRODS INC $ 2,344,383 $ 1,132,368 21.82
SOUTHWEST AIRLS CO $ 1.897.035 $ 812.976 18.04
BIOMET INC S 3.778.460 $ 1.658.412 15.85
SunTrust Hi h Grade E ui Incom e Fund
NORFOLK SOUTHERN CORP $ 302.633 $ 61.288 20.28
GENUINE PARTS CO $ 212.680 $ - 16.02
ROCKWELLAUTOMATIONINC $ - $ 63.542 15.39
SunTrust Hi h Grade Relati ve Valu e Fund
BOEING CO $ 616,050 $ 390.328 24.60
PRECISION CASTPARTS CORP $ 572,390 $ 372,986 24.24
ILLINOIS TOOL WKS INC $ 1,148,835 $ 744,106 21.19
NORFOLK SOUTHERN CORP $ 773,150 $ 491,681 20.20
MGIC INVT CORP W IS $ 963.450 $ 597,018 18.13
C R BARD INC $ 1.171.680 S 396.550 16.10
COMPUTER SCIENCES CORP $ 806.600 $ 492,158 15.13
SunTrust Retirement Mid Ca Fun d
NATIONAL PROCESSING INC $ 205,200 $ - 29.54
CHARTER ONE FINL INC $ 108.555 $ - 25.03
ARCH COAL INC $ - $ 107,575 23.60
AMERADA HESS CORP $ 553,574 $ 503,648 21.71
APPLE COMPUTER INC $ 96,533 $ 88,834 20.34
WESTERNWIRELESSCORP $ - $ 64,469 19.13
CORNING INC $ - $ 249,707 18.02
SEPRACOR INC $ - $ 232.231 17.62
IMCLONE SYS INC $ - $ 261,660 17.16
LUBRIZOLCORP $ 276,482 $ 251,213 17.12
ZIMMER HLDGS INC $ 339,388 $ - 16.97
STAPLES INC $ 217,246 $ 193,518 16.94
PMI GROUP INC $ 282,815 $ 255,027 16.57
RJ REYNOLDS TOBACCO HLDG $ 218,405 $ 533,285 16.53
EATON CORP $ 364,111 $ 321,758 15.70
COVENTRY HEALTH CARE INC $ 182,231 $ 157,703 15.52
SunTrust Hi h Grade Bond Fund
NO SECURITIES APPRECIATED MORE THAN 15°~ -
~>
-; z~~..
City of Winter Springs General Employees' Pension Plan
SENSYTECH INC $ 232,800 $ 441,180 49.61
SANDERSON FARMS INC $ 220.380 $ 268.100 46.20
GANDER MOUNTAIN CO $ - $ 366:880 43.31
DITECH COMMUNICATIONS COR $ 350,070 $ 466,800 40.01
HUNT J B TRANS SVCS INC $ 394,240 $ 397,374 37.11
VANS INC $ 384,800 $ - 36.76
KROLL INC $ 375,900 $ - 36.00
CABELAS INC $ - $ 377,300 32.08
BRIGGS & STRATTON CORP $ 337,350 $ 362,235 31.44
ROGERS CORP $ 357,579 $ 419,400 30.97
PER-SE TECHNOLOGIES INC $ 212,800 $ 276,260 29.82
METAL MGMT INC $ 256,760 $ - 29.13
TRANSACT TECHNOLOGIES INC $ 362,235 $ 268,770 29.00
COLDWATER CREEK INC $ - $ 73,322 26.34
CENTENE CORP DEL $ 140,714 $ - 25.88
II-VI INC $ 159,120 $ 168,630 25.25
ALBANY INTL CORP $ 242,010 $ 352,380 25.05
THOR INDS INC $ 295,460 $ 368,060 24.68
ULTRA PETROLEUM CORP $ 276,092 $ 343,436 24.39
DENBURY RESOURCES INC $ 209,064 $ 209,500 24.26
ITRON INC $ 167,490 $ 206,460 23.27
COPART INC $ 432,427 $ 507,300 22.87
SIERRA HEALTH SVCS INC $ 254,800 $ 312,900 22.80
POSSIS CORP $ 402,259 $ 307,350 21.40
PREMCOR INC $ 294,215 $ 300,000 21.08
TRIMBLE NAV LTD $ 137,880 $ 166,740 20.93
GUITAR CENTER INC $ 371,400 $ 333,525 19.74
VOLT INFORMATION SCIENCES $ - $ 141,795 19.26
LABOR READY INC $ - $ 263,500 19.11
ANSYS INC $ 238,440 $ 282,000 18.27
CAL DIVE INTL INC $ 304,440 $ 357,776 17.52
ENERGEN CORP $ 268,125 $ 311,935 16.79
SCHNITZER STEEL INDS INC $ 195,520 $ - 16.69
RELIANCE STEEL 8 ALUMINUM $ - $ 262,080 16.63
AXCAN PHARMA INC $ - $ 274,300 16.27
SONIC SOLUTIONS INC $ - $ 297,500 16.17
VENTANA MEDICAL SYS $ 245,760 $ 237,650 16.04
PENN NATIONAL GAMING INC $ 391,272 $ 451,520 15.40
NO SECURITIES APPRECIATED MORE THAN 15°-a - -
TRUSCO CAPITAL MANAGEMENT 140
Period Endin
June 30, 200 Und Attt'IbUtlOn SUI"1'll'Ylal"~/ -Depreciated more than 15%
SunTrust Hi h Grade E uit Fu nd
EMC CORP MASS
MAY DEPT STORES CO
CAREER EDUCATION CORP $
$
$ 3.216,043
1.939,938
1.645.605 $
$
$ 1,008,775
-
- -16.24
-16.67
-18.97
SunTrust Hi h Grade E u- In come Fun d
MAY DEPT STORES CO $ 307,762 $ 74,938 -20.06
SunTrust Hi h Grade Relati ve Value Fun d
MAY DEPT STORES CO $ 1,106.560 S 479.701 -20.19
SunTrust Retirement Mid Ca F und
E TRADE FINL CORP
LENNAR CORP
FIRST INDL RLTY TR INC
SANMINA-SCI CORP
LSI LOGIC CORP
MAY DEPT STORES CO
QUEST SOFTWARE INC
AMERITRADE HLDG CORP NEW
GRAFTECH INTL LTD
AMKOR TECHNOLOGY INC $
$
$
$
$
$
$
$
$
$ 203.855
378,210
616,990
332,194
167,093
612,066
135,869
212,828
338.767
513.659 $
$
$
$
$
$
$
$
$
$ 135,250
237.910
-
222,768
105,613
373,864
-
-
-
- -16.48
-17.00
-17.56
-17.57
-18.42
-19.79
-25.18
-28.40
-40.06
-44.76
SunTrust Hi h Grade Bond Fun d
NO SECURITIES DEPRECIATED MOR - - -
SunTrust Hi h Grade Interm edi ate Bond Fu nd
NO SECURITIES DEPRECIATED MOR - - -
ENDO PHARMACEUTICALS HLDG $ 366,300 $ - -15.12
BANK OF THE OZARKS INC $ 303,050 $ 139,920 -15.17
RADYNE COMSTREAM INC $ 256,358 $ 240,600 -15.58
PACER INTL INC TENN $ 264,240 $ 166,500 -15.99
TAKE-TWO INTERACTIVE SOFT $ 165,555 $ 91,920 -16.72
STANDARD MICROSYSTEMS COR $ 213,840 $ - -16.97
STANDARD PAC CORP $ 360,000 $ - -17.48
CHRISTOPHER & BANKS CORP $ 232,210 $ - -17.77
NETWORK EQUIP TECHNOLOGIE $ 199,600 $ 81,527 -18.24
WORLD ACCEP CORP S C $ 431,420 $ - -18.50
KOS PHARMACEUTICALS INC $ 285,180 $ 211,008 -19.07
SELECT MEDICAL CORP $ 317,300 $ 147,620 -19.51
PROTEIN DESIGN LABS INC $ 512,130 $ 405,766 -19.69
APPLERA CORP $ 232,160 $ 40,999 -20.68
TELECOMMUNICATION SYS INC $ 323,467 $ 261,280 -21.11
LIONBRIDGE TECHNOLOGIES I $ 321,090 $ 229,500 -21.38
FURNITURE BRANDS INTL INC $ 298,494 $ - -21.42
SM&A $ 275,250 $ 215,250 -21.80
CBRL GROUP INC $ 297,300 $ 231,375 -21.89
BOMBAY INC $ 157,000 $ 61,300 -21.91
WESTERN DIGITAL CORP $ 196,525 $ 151,550 -22.89
FEDDERS CORP $ 211,270 $ 15,042 -23.22
COMPUTER NETWORK TECHNOLO $ 184,460 $ 27,284 -25.31
ULTIMATE SOFTWARE GROUP I $ 380,800 $ 253,750 -25.37
SAFENET INC $ 281.550 $ 207,600 -26.27
C-COR.NETCORP $ 266,380 $ 267,540 -26.60
WEBEXCOMMUNICATIONS INC $ 445,950 $ 391,680 -26.81
CONCORDE CAREER COLLEGES $ 37,608 $ 49,678 -27.17
GOODY'S FAMILY CLOTHING I $ 256,860 $ 228,140 -27.19
SECURE COMPUTING CORP $ 200,736 $ 233,000 -28.62
CONEXANTSYS INC $ 245,200 $ 33,991 -29.36
CASUAL MALE RETAIL GROUP $ 124,080 $ 160,600 -29.40
CELLSTAR CORP $ 168,000 $ 117,920 -29.81
CAPTIVA SOFTWARE CORP DEL $ 360,100 $ 251,940 -30.04
GUILFORD PHARMACEUTICALS $ 254,800 $ 76,000 -34.75
CACHE INC $ 351,281 $ 96,880 -37.37
FREMONTGENCORP $ 268,882 $ 168,875 -42.05
PERFORMANCE TECHNOLOGIES $ 189,392 $ 122,330 -44.35
LEXAR MEDIA INC $ 281,520 $ 12,097 -59.66
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 41