HomeMy WebLinkAbout2005 04 26 Attached Report Given to Board Members During MeetingDate: April 26, 2005
THE ATTACHED REPORT WAS GIVEN
TO BOARD MEMBERS DURING THE
MEETING.
~ I~ ~ ! ~ ~ ~ ~ Imo' ~ i tip ~7 ~ ~ ~ f~ ~1' I~
Tlzusco
CAPITAL
MANAGEMENT
Prepared Exclusively For:
City of Winter Springs
General Employees'
Pension Plan
Investment Review
First Quarter 2005
Molly Halcom
Investment Manager
407-237-4372
molly.halcom @truscocapital.com
Dianne Garcia
Relationship Manager
407-237-4513
dianne. garcia @ suntrust.com
The Hurt Building - A[lanta, GA
Period Ending Table of Contents
March 31, 2005
Economic Overview /Market Snapshot
Performance & Portfolio Composition
Fund Fact Sheets
Fund Attribution Summary
Appendix
Please refer to appendix for full disclosure
City of Winter Springs General Employees' Pension Plan
Section I
Section II
Section III
Section IV
Section V
TRUSCO CAPITAL MANAGEMENT I 1
Period Ending Market Snapshot: March 31, 2005
March 31, 2005
++ ' = ~ 1180.59
1
76 -1.8
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+ + + ~ 403.56 -1.4 0.1 10.5 0.1 13.2
e ° .++ - 548.29 -1.9 -4.9 2.4 -4.9 -1.1
269.91 -1.2 -0.1 11.9 -0.1
254.01 -1.0 -0.7 11.5 -0.7
711.12 -1.5 -1.7 12.0 -1.7
212.94 -3.3 -1.7 12.0 -1.7 13.4
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Please refer to appendix for full disclosure
City of Winter Springs General Employees' Pension Plan
TRUSCO CAPITAL MANAGEMENT 12
r~ sat ,w^r ^^r ~ wr~ r ~ +~ r r ~ r ~ r rr aye ~
Period Ending Q 1 2005 Investment Overview
March 31, 2005
Stocks struggled in
QI despite stronger
than expected
economic activity.
A renewed rise in oil
prices and more
hawkish Fed
comments pushed
most equity sectors
lower. Energy stocks
dominated in QI and
were up 47°Io from a
year ago.
Bond yields rose
daring the quarter,
credit spreads
widened, and the
Lehman Aggregate
Bond Index,fell
0.5%.
Please refer to
appendix for full
disclosure.
• Despite a firm economic backdrop, both the equity and bond markets struggled in the first quarter following
the post-election rally at the end of 2004. The S&P 500 fell 2.1 % on a total return basis after rising 9.2% in the fourth
quarter, and Lehman Aggregate Bond Index fell 0.5% following a 1.0% gain in the previous quarter. The trailing
price/earnings ratio for the S&P 500 eased to 17.6x, and yields on the 10-year Treasury note and the 10-year A-rated
corporate bond closed the quarter at 4.5% and 5.3%, respectively.
• First quarter economic strength was due to better than expected consumer spending and double-digit growth in
capital spending. However, several "headwinds" acted as restraints including a renewed rise in oil prices and
higher interest rates. Headline inflation moved higher during the period, in part due to higher energy costs, but also to
improved pricing power in some industries. These developments prompted two more quarter-point Fed rate hikes and a
shift toward more "hawkish", anti-inflation policy language. The fed funds rate, 2 3/4% on March 31, has been raised
seven times for a total of 1 3/a%.
• Further Fed tightening caused the Treasury yield curve to shift higher and flatten further in the first quarter, but
the key development was a sharp rise in long bond yields following Greenspan's "conundrum" remarks. Moreover,
selective credit concerns (notably GM) caused quality spreads to widen somewhat from relatively narrow levels during
the quarter. The high yield and credit sectors were particularly weak in the first quarter, while TIPS outperformed.
• In the equity markets, energy was the dominant sector, increasing 17.4% in the quarter and 47% over the past year.
Utilities, a relatively small sector in the S&P 500, also improved. Technology (-7.3%), finance (-6.4%), and consumer
discretionary stocks (-5.7%) were weak. Mid-caps, international, and the value style outperformed for the quarter.
• We remain positive on the outlook for the economy and corporate profits, but the rate of growth in both is
likely to slow closer to historical averages, due to rising headwinds and more difficult comparisons,
respectively. In particular, economic growth may drop temporarily below average over the near term as a result of
these headwinds. Core inflation will likely trend moderately higher, and support the Fed's plan to raise interest rates
gradually in the months ahead. The dollar will likely remain under downward pressure.
• We continue to recommend a modest overweight position in stocks within current asset allocation ranges.
However, we recognize that some of the factors that have favored equities (steep yield curve, low yields, and easy profit
comparisons) are changing and not as favorable. We will continue to be very price sensitive in entry and exit points and
emphasize companies with consistent growth. We will likely view any significant market pullback as an opportunity to
build equity positions, if energy prices and bond yields moderate.
• In fixed-income portfolios, we anticipate moderately higher yields and a further flattening of the yield curve,
though much of the move has already occurred. In this environment we will maintain a neutral duration maturity
structure and an overweight in Treasury inflation-indexed securities (TIPS). We will maintain an underweight position in
corporate bonds and mortgages.
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT
3
Period Ending Economy: Moderate Growth & Inflation, Rates Up
March 31, 2005
T{re job market is
improving despite
t{ze Marc/r shortfall,
providing more
sustainable srtppo-•t
for co-tsrurter
spending. Howeve-•,
rising interest rates,
high energy prices,
and a weak dollar
are expected to limit
discretionary
purchases. Output
and CAPEX retrain
f<rnt. We look for
3~h% growth over the
next 12 months,
though nem•-term
weakness is a likely
possibility. Core
inflation should rise
moderately. The
dollar is likely to
remain relatively
weak, mtd additional
Fed rate hikes are
expected.
i
•._
-.....
Neutral Neutral/ Neutral/ Cyclical job gains expected to offset
Fading Fading diminishing fiscal and monetary stimulus,
possible possible sustaining but not accelerating consumer
demand. High energy prices, rising rates, and
weak dollar likely to temper strength after
better than expected Q1.
High Positive Positive Above-average profit growth, strong cash
positions, improving demand, and higher
(from inventories, along with possible profits
Neutral) repatriation should continue to support
CAPEX. Business confidence improved.
Neutral Neutral Neutral / Deficit reduction a priority in post-election
fading economy. Defense spending could
(from High) possible experience selective cuts.
Low Positive Positive Record trade deficit likely to narrow. Exports
are improving. China policy a key focus
following January import surge.
At Core Moderately Period of declining inflation over. Rising
inflection inflation higher commodity and energy prices and a lower
point somewhat dollar are putting upward pressure on
~:'` ~~ ~ ` higher inflation. Pricing power improving. Benefits
costs up, but wages relatively restrained.
Rising Restrictive Restrictive Seven Fed rate hikes (6/30, 8/10, 9/21, 11 /10,
b toward 12/14, 2/2/05, and 3/22). Additional rate hikes
neutral expected. "Measured" pace in question.
Stimulative Less Becoming Tax cut impact fading. Focus turning to
Stimulative somewhat budget balance post-election.
Restrictive
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 4
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Period Ending
March 31,2005 Consumer Spending Remained Healthy in Q1...
Corzsrrmer
spending
rernaine~l, firm in
the first quarter,
helped by stronger
job growth and
hourly wage gains
despite high oil
prices.
Consumer Spending Surprised to the Upside in D1
Retail Sales: YOY% (Line) 3-mo. mov. avg, ann. (Bar)
12.5
10.0
7.5
5.0
2.5
o. o
-2.5 ~
a~ at as a4 atl atl a/ atl as vu u7 U'L U3 04 O;
Job Growth Remained Firm in Q1
Nonfarm Jobs: YOY% (Line) 3-mo. mov. avg (Bar)
"1
0
_,
-2
ai at as a4 as ao a/ atl as uu ul Oz 03 04 0:
30.0
22.5
• Consumer spending in Q1 was stronger than
15'0 expected, especially following the healthy pace
in the fourth quarter. The chart left shows
~.5
nominal retail sales rose at roughly a 71/2%
°.° nominal pace in the first quarter, nearly matching
the year-over-year peak growth rates in the
-~.5 1990s.
-15.0
400
• Consumer spending was sustained in the early
20° quarters of the current expansion by falling
mortgage rates and federal tax cuts. Now that
these two sources of stimulus have ended, job
° growth and a gradual rise in hourly earnings
support consumption. However, this job creation
_200 is unlikely to accelerate spending from the
present pace, given the rising headwinds facing
the consumer.
-aoo
~ .~
~; --
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 5
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Period Ending
March 31,2005 ...Despite Higher Energy Prices and No Stimulus
Higher Gas Prices Constrain Discretionary Spending
Gasoline Sales % Total Sales (Bar) WTI S/Barrel (Line)
The importance of
job growth in
sustaining
consumer
strengNt was
underscored by
the higher oil
prices attd an end
to tax cuts.
• Consumers continued to spend in the first
quarter despite higher oil prices, but the
increase did not go unnoticed. Demand for
energy is fairly inflexible (inelastic) over short
periods, so consumers were forced to spend
a greater percentage on driving as shown in
the chart at right. A key aspect of the current
price rise, compared with previous episodes
however, is that availability of oil and gas has
not been an issue. In the past, lack of
availability had a significant negative impact
on confidence.
60
so
ao
30
20
10
Tax Cuts and Rebates Support Ending
Personal Income (YOY%-Blue) Disposable Income (YOY%-Olive)
• Job growth is key to generating increased
consumer income, now that the tax cuts and
rebates have ended. The chart (lower right)
highlights how fiscal stimulus temporarily
increased disposable income. Now pre-tax
and after-tax income growth has converged.
Jobs are a much more powerful source of
income creation than fiscal stimulus. (The
spike in income at the end of 2004 was the
Microsoft dividend!)
10
8
6~
10
e
5
4
2
91 92 83 94 85 86 97 88 99 00 01 02 03 04 05
.....ate,..
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT s
94 95 98 97 98 99 00 01 02 03 04 05
l~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 1~ ~ ~
Period Ending Business Activity Remained Firm in Q1...
March 31, 2005
Production and Business Activity Firm in Q7
ISM Index (Bar) Industrial Production (YOY%-Line)
Business output
conti~zued to
expand in the first
quarter and view
orders trended
higher.
6
4
0
a~ ac as aq as ao ar ae as UU Ul U2 l13 04 05
Capital Spending Pace Remained Strong in D1
New NonDefense Capital Goods Orders less Aircraft (YOY % )
30
zo
,o
0
-, o
-20
-30
65
60
• Overall business activity was also healthy in
55 the first quarter. The ISM Manufacturing
Survey (shaded area in the chart top left)
5o eased from the peak levels of 2004, but
remained at expansionary levels comparable
45
to those in the 1990s. Overall output also rose
40 on a year over year basis.
35
30
• High levels of cash from strong corporate
20 profits growth and special corporate tax
incentives helped core capital spending
10 (defined here as nondefense capital goods
o excluding aircraft) maintain adouble-digit
growth rate in the first quarter. Strong capital
_,o spending is likely to be important if
productivity growth is to remain historically
-20 high.
-30
83 94 85 96 87 99 99 00 01 02 03 04 05
- 'r
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT ~
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Period Ending Fired Income Markets Summary
March 31, 2005
r r ~Ir
• The Lehman Aggregate Bond Index fell 0.48% in the first quarter on a total return basis after
Bond yields rose in adding 0.95% in the fourth quarter. Stronger than expected first quarter growth, higher oil prices,
the first quarter, and hawkish comments from Fed officials contributed to the upward pressure on yields.
and the Lehman
Aggregate Bond • The yield on the 10-year Treasury note rose as high as 4.64% before closing at 4.50% on March
31
Yields were still below the 4
87% hi
h of l
t J
ll
b
t
b
th
11 %
lti
l
3
t
hit i
litdex fell 0.5%
following a 1.0°Io .
.
g
as
une,
we
ove
u
a
e
ma
.
u
e
ow
n
June 2003. Short- and intermediate-term yields rose most during the quarter in response to two
more Fed rate hikes, but the weakest total return performance came in the 5-year and 10-year
galls 111 Q4. maturities. The yield spread between 2-year and 10-year notes narrowed to 71 basis points.
The yield curve • An important development in the fixed-income markets during the first quarter was the
f7atteited dire to two announcement of credit downgrades or negative credit watches on several high-profile companies
store Ted rate including General Motors and AIG. This pushed quality spreads higher from relatively narrow
hikes
and credit levels and caused both the credit and high yield sectors to underperform the rest of the fixed-
, income market.
spreads widened
somewhat from
historically low
• Higher quality and inflation protection (TIPS) outperformed in the quarter.
levels.
• We believe that the secular decline in yields that began in 1981 is over, but a sharp rise from this
We favor a neutral point is unlikely over the near-term, given the Fed's stated "measured" policy approach, our
expectations that economic growth will moderate from the first quarter pace, and the potential risks
maturity structure, a sharp rise could pose to the housing and credit markets. We are emphasizing:
an overweight
position: iii TIPS, • A neutral maturity structure with no barbell now that yield curves are not at extremes.
and underweight An underweight position in both corporate bonds and mortgage-backed securities,
positions i~t emphasizing bonds of companies with safer, more reliable income streams such as utilities,
cable, and entertainment.
corporates and
mortgages. A continued overweight position in TIPS to benefit from an expected further rise in inflation.
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT
8
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Period Ending I Rate Hikes F I atte n Curve /Spreads Off Lows
March 31, 2005
Curve Flattened on Fed Rate Hikes
6
5
4
3
2
1
- 3/31 /2005
-12/31 /2004
- 3/31 /2004
3 Nb Ei Nb "L Yr 5 Yr 1U Yr 3U Yr
^ 3-Nbs. 0.57 0.54 -0.43 -1.54 -1.20 2.05
^ 6 Nbs. 1.03
^ 1-Yr. 1.63 0.92
1.50 -0.44 -1.64
-0.71 -2.24 -0.91
-0.96 4.23
5.09
TYPaSlrY\' Retarrns Source: Lehman [3rotlrers
6
4
2
0
-2
-4
0
0 5 10 15 20 25 30
Tre~u.cnrl~ Yield Lune Sotu~re: f~~mtSel
"Conundrum" Hurt 5-10 Yr. Maturities
Credit Spreads Off Lows
200
150
100
50 I ~
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
/0-Yr...A.._/luled (~or>>. rs. 7~reusurr Source: !ti/errtll Lrne{r
Credit /High Yield Lagged in Q1
8
6 ~'
4
2
o ~r . r .-
~ ~
-2
-4
Agg G/Cr I G/C Tr Agy Cred ABS ABS HiYd Mun
^ 3-Nbs. -0.47 -0.67 -0.88 -0.43 -0.41 -1.05 -0.34 -0.12 -1.61 -0.34
^ 6 Nbs. 0.48 0.13 -0.45 0.00 0.21 0.21 0.02 1.14 2.89 0.66
^ 1-Yr. 1.16 0.41 -0.34 0.04 0.19 0.84 0.34 2.60 6.84 2.23
Aggregate & Sector Renu-ns Source: Lelrnuar Brodrerr
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT s
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Period Ending
March 31, 2005 Equity Markets Struggled in Q1
The equity
markets straggled • Despite a firm economic backdrop of continued job growth, healthy consumer spending and
double-digit growth in capital goods orders, the equity markets struggled in the first quarter
in the first gcrarter following the post-election rally at the end of 2004. The S&P 500 fell 2.1 % on a total return basis
following the after rising 9.2% fourth quarter.
9.2% rally in last
year's fourth • Energy was by far the dominant sector, increasing 17.4% in the quarter and 47% over the past
year. Utilities, a relatively small sector in the S&P 500, also improved. Stocks outside these
quarter. sectors were generally weak, with declines in technology (-7.3%), finance (-6.4%), and consumer
discretionary stocks (-5.7%). For the market as a whole, stocks with low P Es, strong relative cash
Energy stocks flows, and higher quality tended to outperform the market.
dorrrirrated the • Valuations eased in the first quarter, but were moderate relative to performance over the past 20
market with a years.
17.4% Q1 return.
Perforrrrarrce • While market expectations for earnings growth this year have improved (due mostly to higher
earnings at energy companies) we expect year-over-year growth in S&P 500 operating profits to
outside the energy slow sequentially in the coming quarters, finishing the year near the 7% long-term average. We
sector was 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
generally weak. growth.
Stocks could • The more defensive market favored mid-cap stocks over both large- and small-caps in the first
remain vulnerable quarter. The small-cap rally is relatively extended, and the rise in bond yields and declining dollar
has historically been associated with large-cap outperformance. The strength in the energy sector
if long-terra yields and weakness in tech generally helped the value style outperform growth during the quarter.
and oil prices International stocks continued to outperform in the first quarter.
corrtirrrre to rise. • The expansion in the economy is expected to support further growth in corporate profits, though
We look for• valuations could remain under downward pressure if long-term yields and oil prices move
relative orrt_ significantly higher. Market gains, while likely, will tend to be sporadic and volatile as the market
performance in 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
large-cap and timing sensitive.
higher quality
companies.
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT ~ o
r r r r r +~ rr r +~r ~r r rl~ ~ r r r r r llll~
Period Ending Stock Market Struggled in Q1
March 31, 2005
Energy Dominated in a Weak Market
50.0
40.0
30.0
20.0
10.0
o.o r ~ ~ ~- ~ ~ ~
-10.0
-20.0
Disc Stpl Engy Fn Hth Ind Tech Mat Tel Util
^ 3-Mos. -5.7 0.7 17.6 -6.4 -0.6 -1.6 -7.3 1.8 -7.8 5.4
^ 6 Mos. 7.1 8.6 23.1 1.0 4.6 8.2 5.2 10.5 -0.1 18.3
^ 1-Yr. 5.5 3.1 47.1 -1.0 1.6 17.3 -2.5 17.3 5.4 24.6
Seclor Pc~rfornuutcc S&P 500 Sourrc~: F•ctrtSet
Corporate Profits Growth Slower in ~05
40%
30%
20%
10%
0%
-10%
-20%
-30°/
Valuations Reasonable, Not Cheap
35
30
25
20
15
10
5'
75 80 85 90 95 00 05
la~ilict & l~~ru<<al P/GRalin Source: 1•itctSel
Mid-caps Outperformed in Q1
15.0
10.0
5.0
0.0
_~ n
3-Mos.
^ S&P 100 -2.3
^ S&P 500 -2.1
° ^ MidCap -0.4
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 ^ SmlCap -2.1
S&P Op. Earnings IYOYc7) -Olive i.r est. Source: Trusco Caltuul Cupitnlialion Performance
<._-~
6 Mos
5.0
6.9
11.7
10.7
1-Y r.
1.9
6.7
10.4
13.1
Source: S&P
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT ~ 1 ~
rr rr r r r r ~r rr ~r r r r r rr rr r rl~ r lllllr
Period Ending Asset AI location Update & Su m mary
March 31, 2005
S&Y 500: 1,181
10- Yr. Note: 4.50
• Firm economic reports helped the S&P 500 rally to a 3 ~/z year high on March 7 before easing back below the
12/31/04 close. Treasury bond yields rose sharply, due in part to Greenspan's "conundrum" over persistent low
long-term yields. The 10-year Treasury yield moved up over 4.6% to the highest level since last July.
• S&P 500 lagged the Lehman Aggregate Bond Index by 1.6% year to date.
• S&P 500 outperformed the Russell 2000 by 3.2%YTD.
• International (MSCI EAFE) outperformed the S&P 500 2.0% YTD.
• Russell 1000 Value was 4.2% ahead of Growth in D1, but Barra Growth outperformed Barra Value by 0.5%.
• Lehman High Yield lagged the Aggregate YTD by 1.1%.
• TIPS outperformed the Aggregate by 15 basis points in D1.
• Stock/Bond Indicators: Higher bond yields hampered stock valuations, but overall indicators changed only
marginally. While a further rise in bond yields and oil prices pose anear-term risk for equities, we retain our
moderate overweight position given the favorable prospects for moderate economic expansion and continued,
though slower, earnings growth.
• Large-Cap/Small-Cap Indicators: The small-cap outperformance is extended, and we believe it is vulnerable to a
reversion in the current environment. A further drop in the equity risk premium shifted the Valuation indicators
toward Large-cap in the latest reading. Our indicators on balance lean toward Large-cap and we retain our
overweight position.
• GrowthNalue Indicators: Value outperformance is also extended. The relatively sharp rise in bond yields helped
tilt the Economy indicators toward Growth. However, the indictors are mixed overall and we are neutral.
• International: The dollar remained relatively weak in 01 as a continuing large trade deficit mingled with rumors that
some foreign central banks may begin to diversify out of dollars. We continue to overweight International stocks.
• Fixed-Income: Infixed income portfolios, we have removed the barbell maturity structure and are neutral duration.
We remain overweight in TIPS, but have an underweight position in corporates and mortgages.
• The economic outlook remains favorable and recent consumer-related reports have been stronger than expected.
However, we believe growth will slow closer to the historical average, and core inflation will move moderately
higher. Risks are increasingly important in this environment, particularly with the current low volatility. Fed
comments, oil price moves, budget battles, the trade deficit, profit repatriation, pension reform, etc. all have the
possibility of influencing the markets over the short-term. While a further rise in bond yields, mortgage rates, and oil
prices would be detrimental to equity valuations, we would add to equity positions on weakness due to the
persistent strength in the economy.
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 12
~ ~ ~ r ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ r r I~ r
Period Ending Asset Allocation: Overweight LC Stocks & Foreign
March 31, 2005
Stock Outperformance Narrow
These graphs
track the rolling
12-month and
36-month relative
perforiramice of
key i~~:dexes in
our asset
allocation
decision-making
process. We are
nlal~ntallll)lg a
moderate
overweight i~t
stocks, giveiT the
current stage of
the economic
cycle. We also
favor large-caps
and foreign
equities.
50
40
30
20
10
0
-10
-20
-30
-40
-50
80 82 84 86 88 90 92 94 96 98 00 02 04
- S&P 500 - LB Agg. 12 Mo. - S&P 500 - LB Agg. 36 Mo.
S&P 500 nncl Lehntnn Aggre~ute Bonel /ncle~_r Soiu-r-~: lbhotsort
Growth Underperformance Extended
80 82 84 86 88 90 92 94 96 98 00 02 04
- R.Growth - R.Value 12 Mo. - R.Growth - R.Value 36 Mo.
Rtrs.u-(/ Gro++7h cutcl Russell Vcrlue. Sourc'e~: /bbotsurr
40
30
20
10
0
-10
-20
-30
-40
-50
Small-Cap Run Vulnerable
40
30
20
10
0
-10
-20
-30
-40
80 82 84 86 88 90 92 94 96 98 00 02 04
- S&P 500 - R2000 12 Mo. - S&P 500 - R2000 36 Mo.
S&P 500 nucl Russell ?000 Snurre: /hbutson
Weaker $Dollar Helps Foreign Stocks
40
20
o ~
-20
-40
-60
-80
80 82 84 86 88 90 92 94 96 98 00 02 04
- S&P 500 -MSCI 12 Mo. - S&P 500 -MSCI 36 Mo.
S&P 500 crncl MSCI EAfY; htde_x Sow•re: /bbotsort
City of Winter Springs General Employees' Pension Plan TRUSCO CA['ITAL MANAGEMENT 13
r~ r r r r llr Ilr r rr .r r .r r rt^r r r r r
Period Ending Summary and O u t l o o k
March 31, 2005
Stocks a~zd bonds
struggled i~t Q1 amid
higher oil prices and
more hawkis)z Fed
commentary.
Our outlook for
growth in dze
economy and
corporate prof its
rentai~rs positive, brit
slowing is likel y in
both. We anticipate
higlte~° core
inflation, further
Fed rate increases,
and moderately
higlr~er bo~td yields.
We favor overweight
positions in stocks
generally, large-caps
and international
specifically. ha fixed-
income portfolios,
we favor quality and
inflation protection.
• Higher oil prices, rising bond yields, and tough inflation talk from the Fed took their toll on the stock
and bond markets in the first quarter, pushing the S&P 500 2.1 % lower and the Lehman Aggregate
Bond Index down 0.5% on a total return basis.
• Cyclical economic strength continued as better than expected consumer spending augmented
strong CAPEX. Job growth continued to trend higher on a year over year basis and the
unemployment rate fell to 5.2% from the 6.3% cyclical peak. However, headline inflation moved
higher and pricing power seemed to improve, prompting two more quarter-point Fed rate hikes and
a shift toward more "hawkish", anti-inflation policy language.
• In equity markets, performance outside the energy sector was generally weak. Mid-cap, value, and
international stocks outperformed. Outperformance of high quality stocks returned. In fixed-income
markets, the Fed raised rates twice, but the fed funds rate remained under the generally recognized
"neutral range of 3-5%. The sharp rise in bond yields was accompanied by selected high-profile
credit downgrades. The high yield and credit sectors were particularly weak in the first quarter,
while TIPS outperformed.
• We remain positive on our outlook for the economy and corporate profits, but the rate of growth in
both is likely to slow closer to historical averages due to rising headwinds and more difficult
comparisons, respectively. Capital spending is expected to continue growing faster than consumer
spending. Headline inflation may ease if oil prices retreat from the recent spike, but core inflation
will likely trend moderately higher, supporting the Fed's plan to raise interest rates gradually in the
months ahead. The dollar will likely remain under downward pressure. Bond yields are likely to rise
moderately higher.
• We continue to recommend a modest overweight position in stocks within current asset allocation
ranges. However, we recognize that some of the factors that have favored equities (steep yield
curve, low yields, and easy profit comparisons) are changing and not as favorable. We will continue
to be very price sensitive in entry and exit points and emphasize companies with consistent growth.
We will likely view any significant market pullback as an opportunity to build equity positions, if
energy prices and bond yields moderate.
• In fixed-income portfolios, we anticipate moderately higher yields and a further flattening of the yield
curve, though much of the move has already occurred. We also see credit spreads as vulnerable
given their relatively low level. In this environment we favor a neutral duration maturity structure and
an overweight in Treasury inflation-indexed securities (TIPS). We will also maintain an underweight
position in corporate bonds and mortgages.
a4.;~>.
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT
rr
14
~. -
~ (9/30/2004) $ 8,942,442
ied Income $ 589
$ 8,943,031
$ 631,336
$ (91,751)
$ 525,609
)ividends $ 179,485
ncome $ 557
Income $1
$ 0,187,121
1,145
• ~~~~~ __
SCO CAPITAL MANAGEMENT ~ 15
Period Ending ~ Performance Comparisons
March 31, 2005
Fiscal Year Inception
to Date Trailing Trailing Trailing Trailing to Date
quarter 6 Months 12 Months* 36 Months' 60 Months' 120 Months' 136 Months'
Total Equity -1.14% 10.20% 10.23% 4.57% 2.74% 11.34% 10.93%
SunTrust Retirement High Grade Growth Fund -3.60% 4.03% 1.46% -0.66% -0.11% 12.05% 11.36%
Russell 1000 Growth Index -4.09% 4.71% 1.16% -0.69% -11.28% 8.15% 8.43%
S & P 500 Barra Growth Index -1.86% 6.49% 4.13% 0.27% -8.16% 10.19% 10.21
S & P 500 Index -2.15% 6.88% 6.69% 2.75% -3.16% 10.79% 10.61
SunTrust Retirement High Grade Relative Value** 1.68% 10.97% 13.90% 5.20% 2.15% 10.64% 10.18%
Russell 1000 Value Index 0.09% 10.48% 13.17% 7.16% 5.19% 12.81 °0 12.13%
S & P 500 Barra Value Index -2.43% 7.26% 9.24% 5.14% 1.93% 10.93% 10.58%
S & P 500 Index -2.15% 6.88% 6.69% 2.75% -3.16% 10.79% 10.61
SunTrust Retirement Small Cap Growth Fund'** -5.16% 10.01 % 7.51 % 9.19% 4.62% - -
Russe112000 Growth Index -6.83% 7.23% 0.87% 4.01% -6.60% -- --
S & P Barra 600 Growth Index -1.73% 12.01 ~b 13.41 % 10.39% 5.04°io -- --
STI Classic Small Cap Value Fund -1.88% 11.90% 16.48% 14.75% 19.85% 15.61 % -
Russel12000 Value Index -3.98% 8.70% 9.799b 11.48% 15.42% 14.28% 12.99%
STI Classic International Equity Index Fund -1.00% 15.20% 14.39% 11.72% -2.13% 6.72% -
MSCI SAFE Index -0.16% 15.14% 15.06°'0 11.63% -1.19% 5.38% 6.25%
SunTrust Retirement Mid Cap Equity Fund 1.58% 14.80% 15.54% 4.27% 0.00% - -
Russell Mid Cap Index -0.25% 13.37% 14.05% 10.53% 5.49% 13.34% 12.78%
S & P Mid Cap 400/ndex -0.40% 11,71% 10.43% 8.02% 6.87% 15.14% 14.12%
Total Fixed Income -0.12% 0.79% 0.90% 6.21% 7.02% 7.18% 6.49%
SunTrust Retirement High Grade Intermediate**** -0.30% 0.56% 1.18% -- - - -
Lehman Intermediate Aggregate Bond Index -0.56% 0.21 % 0.88°i° 5.34°0 6.80°ro -- --
Lehman Intermediate A+ GovUCredit Bond Index -0.75% -0.42% -0.44°i 5.13°0 6.57°6 6.52% 5.99%
SunTrust Retirement High Grade Bond Fund -0.12% 0.85% 1.06% 6.43% 7.12% 7.25% 6.56%
Lehman Govt Credit Bond Index -0.67% 0.13% 0.40% 6.52 %° 7.29% 7.21 % 6.50
Lehman Aggregate Bond Index -0.48% 0.47% 1.15% 5.99% 7.14% 7.14% 6.51
' Return i.cu7uluulied.
** - btceplinn 6/_;0/2002 . Lun,>;er term res ults are linked to the ST! Classic GroK711 ul(d /I(rn7ne F((rl(! to sltntr resulGc prior to in('eptinn.
** - In('el7l(()A /0/20/2003. LUII~QPI' tPl'In I'P.S(dLS ^/'e IUlked /O t11P STI C/a.S.CI(' S171[(ll CUl7 Gl"011'(/1 F7111(I t0 .S/(ON' I'e.Sldt.t I71'IUT t0 /n('Pph071.
**** - /r(ceptiun 10/20/200.;.
Pleu.ce reji~r to uppc ndis Jiu dull disclu.cure
City of Winter Springs General Employees' Pension Plan TRLlSCO CAPITAL MANAGEMENT ~ s
i. . i. . . . i. i . . ^~ ^~ . . i. ~ r ~
Period Ending Portfolio Composition
March 31, 2005
Total Cash
Equivalents
1.5%
Total Fixed
Income
28.1
Total Equities
70.5%
SunTrust Retirement High Grade Growth Fund $ 2,569,383.79 25.2%
SunTrust Retirement High Grade Relative Value Fund $ 2,346,565.20 23.0%
STI Classic International Equity Index Fund $ 1,253,781.19 12.3%
SunTrust Retirement Mid Cap Equity Fund $ 406,604.29 4.0%
SunTrust Retirement Small Cap Growth Fund $ 302,128.95 3.0%
STI Classic Small Cap Value Fund $ 300,548.86 3.0%
Total Equities $ 7,179,012.28 70.5%
SunTrust Retirement High Grade Bond Fund $ 1,839,605.62 18.1
SunTrust Retirement High Grade Intermediate Bond Fund $ 1,019,183.34 10.0%
Total Fixed Income $ 2,858,788.96 28.1
SunTrust Retirement Reserve Fund $ 149,319.41 1.5%
Total Cash Equivalents $ 149,319.41 1.5%
Please refer to appendix for full disclosure
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 17
Period Ending I SunTrust Retirement High Grade Growth Fund
March 31, 2005
Please refer to
appendix for full
disclosure.
- ~- .. ..
The Fund seeks capital appreciation by Cash: 0
5%
Value Blend Growth investing primarily in large, well-
NAV: $54.07
U.S. Stocks: .
°
99
5 /°
~arye established domestic corporations. The
Assets (mil): $56.7 Fund is designed to comply with
Non-U.S. Stocks: .
0.0%
Medium guidelines that are based principally on
Florida laws governing the investment
smau of municipal retirement plans for fire,
police and general government
Investment Category employees. ° ~s,°G`s
~~h
Large Growth 0.540
rvo~.~s ~,«~~
o~~
.. -
Security Equity Security Equity
Exxon Mobil Corp. 3.1% Cisco Systems Inc. 2.3% Consumer Discretionary 16.0%
Microsoft Corp. 2.8%
General Electric Co.
2.3%
6 11.5%
3%
American Express Co. 2.5% Chubb Corp. 2.3% Consumer Staples .
10.3%
Goldman Sachs Group 2.4%
Texas Instruments Inc
2.2%
Ener
9Y 4.3
$ 80
Walgreen Co. 2.4% EMC Corp. 2.2% Financials 21.6%
1 s.6 %
•. -
Healthcare
112 %
13.0
Characteristics Fund S&P 500 Index
-- --- - Industrials 13.2%
5 Yr Dividend Growth
12
0% 3
1 ° ~ 11.9
.
.
Intormation Technology 2s.,
Market Capitalization ($bil)
70.7 90.8 15 1 ~
Price-to-Book
2.8x 2~3x
Materials 2 ,
3.3 %
P/E (12 mo fwd) 16.9x 15
8k Telecom SerHC es 3 1 %
. ^ Fund
EPS Growth (5 yr est) 14.9 5 6 utilities ^ S&P 500 Index
3 2 ~
ROE 20.1 th ~:~
-. - - -
Annualized
Three One Three Fi~,e Ten Inception
Months Year Year Year Year 04/01/1990
Fund -3.6% 1.5% -0.7% -0.1 % 12.1 % 11.9%
S&P 500 11.1d<x ?.2°r rJ"~, ? 8°, ~?'., 10.8"-~ ? 1.0":,
Lipper Large Cap Growth Index -4.6% 1.3% -1.4% -12.0% 7.4% 8.8%
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT ~ 8
~ ~ l~ ~ ~ l~ r Ir ~ ~ >ti tir ~ ~~ ~ ~ ~ y ~
Period Ending I SunTrust Retirement High Grade Growth Fund
March 31, 2005
Stock market investors focused on
negative factors in the first quarter,
including rising interest rates, sharply
higher oil prices and signs of growth
rates slowing in the economy. As a
result stock returns were negative, with
the S&P 500 down 2.2% and the Fund
down 3.6%. The best performing
sectors were Energy, Utilities, and
Materials which were underweighted in
the portfolio. The worst sectors were
Telecommunications, Information
Technology, and Financials, the latter
two over-weighted during the quarter.
We project little earnings growth
potential from the winning sectors and
good earnings projections for the
lagging sectors. With the economy
i growing at or above its long term trend,
and commodity inflation expected to
ebb, we forecast that investors will
perceive large cap growth stocks as the
best place to be in 2005 because the
trend from the past few years of
favoring defensive value stocks and
small cap stocks has run its course and
a shift to our style will develop.
Please refer to
appendix for full
disclosure.
$0 ~
Apr-90 Apr-92 Apr-94 Apr-96 Apr-98 Apr-00 Apr-02 Apr-04
Fund -S&P 500
Fund Manager: - - ~ - -
Elliott Perny, CFA
3 Year
Alpha Beta R-Squared Sharpe Ratio Std. Deviation
Fund -0.22 0.69 76.09 -0.18 11.67
S&P 500 Index U.00 1.00 1UU.00 0.09 14.81
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT i 9
1998 1999 2000 2001 2002 2003 2004 2005
First Quarter 15.4% 5.6% 0.2% -4.8% 2.4% -2.2% 1.3% -3.6%
Second Quarter 5.7% 5.1 % 0.6% 5.8% -10.9% 9.6% 1.0%
Third Quarter -12.4% -7.7% 2.6% -13.6% -14.9% 2.0% -3.4%
Fourth Quarter 25.9% 14.8% -1.7% 12.3% 4.0% 10.4% 7.9%
Fund 34.7°'0 17.6°~0 1.6°~° -2.3°0 -19.3°i 20.9°'° 6.6°a -3.6°~b
a _ .~, i ~.i~~>: ~, 8 _ 21.1°, ~9.2°~ -11.0"„ -2?__1` ~ 2F3.7°~ 10.9°_ ?.'~'_
Lipper Large Cap Growth 25.7% 28.0% -10.9% -18.0% -24.2% 27.0% 7.5% -4.6%
$60,000 -,
$50,000
$40,000
$30,000
$20,000
$10,000
~~ ~ ~ l~i ~ ~~ ~ ~ ~ ~ ~ ~ ~ ~
Period Ending I SunTrust Retirement High Grade Relative Value Fund
March 31, 2005
.. - I
-
Securitv %Equity Securitv %EQUity
Exxon Mobil 2.2% Advance Auto 1.8% oonsumer Discretionary
1 os ~o
13.3%
WeIlPoint 2.1% Archer Daniels 1
8% 10.5%
. consumer staples
Kerr-McGee 1.9% ConocoPhillips 1.8% 2'7°'°
Citigroup 1.9%
American Electric
1.8%
~1Bfgy ,,., %
87,
General Electric 1.8% Pfizer 1.8% 23
9%
Flnancials .
37.1
Healthcare 11.6%
8.0
Barra
Industrials 12.1 %
Characteristic Fund Value 7.sr
Dividend Yield Current
( ) 1.9°~o
2.1 -~"c,
Inf orrration Technology e.s ~o
7 4
5 Year EPS Growth (Hist.) 15.3% 6.4°~~.
Market Capitalization ($bil)
69.4 B 58.4 B
Materials 4.2%
3 7 %
27r
Price-to-Book 3
2x 2
lJX Telecom Services
.
. 5.5
P/E (12 months trailing) 16.8x 15.2x 4.7, ^ Fund
Return on Equity
20.2% 13.7"o inames
57 ~° ^ Barra Value Index
e un see cs ong- erm cape a
Value Blend Growth appreciation with a secondary Cash: 2.6%
urge Cusip: 990001182 goal of current income by using a U.S. Stocks: 97.4%
NAV: $12.99 value-oriented investment
Medium Assets (mil): $49.7 strategy. The Fund is designed to
comply with guidelines that are
small based principally on Florida laws
governing the investment of
Investment Category municipal retirement plans for fire,
Large Value police and general government
- -. - - .
Annualized
Three One Two Inception
Months Year Years 6/30/02
Fund 1.7% 13.9% 24.1% 10.0%
Barra Value Index -2.4"; 9.2°;, 25.5`',_ 10.0'.-
S&P 500 -2.2% 6.7% 20.1% 8.5%
Please refer to appendix for full disclosure
City of Winter Springs General E mployees' Pension P lan TRUSCO CAPITAL MANAGEMENT
20
~ ~ ~ ~ ~ i ~ ~ ~ ~ ~ illi~ ~ ~ ~ i ~ >~ ri
Period Ending SunTrust Retirement High Grade Relative Value Fund-
March 31, 2005 continued
The stock market traded in a 2002 2003 2004 2005
seesaw pattern during the first First Quarter N/A -4.1 % 2.4% 1.7%
quarter before ending broadly Second Quarter N/A 13.5% 2.6%
lower. Belated economic Third Quarter -17.4% 2.1 % 0.1
euphoria turned into concerns Fourth Quarter 6.5% 14.1% 9.1%
that mounting headwinds might
potentially begin to weigh on the Fund -12.1 % 26.7% 14.7% 1.7°0
economic and market recoveries. Barra Value -12.6°,0 31.8% 15.7°% -2.4°°
Energy prices resumed their S&P 500 -10.3% 28.7% 10.9% -2.2%
upward march during the period,
propelling energy-related stocks
to one of the few bright spots, ~• ' "' ' " "
while the rest of the market
struggled. The Fund registered a
modestly positive return for the $7a,ooo
quarter, making for favorable $is,ooo
/
comparative results. Our 2005 $12,000 f
outlook is unchanged: returns are $1 i,ooo ^
more likely to finish in the plus $io,ooo
column albeit below the levels $s,ooo ~~
achieved in 2003 and 2004. The $s,ooo
Fund continues to transition $7,000 - - - --
towards discounted sustainab
le Jun Saa, °e~ Mar Jun Saa, ~~ March June Sea, Dec March
s
earningS grOWth and~Or SpeCI l IC SunTrusl Retirement High Grade Relative Value S&P/Barra 500 Value
opportunities where valuation has
become overly-compressed.
Fund Manager:
Charles B. Arrington, CFA
Please refer to appendix for full disclosure `-';~ ,.
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 21
^r rr rr ~ +~ ~ r ~ r tr ~ ~^r rs ~r A ar ~ is r^r
Period Ending SunTrust Retirement Small Cap Growth Stock Fund
March 31, 2005
Please refer to
appendix for full
disclosure.
• - ~- .. ..
Value Blend Growth The Fund seeks long-term capital Cash: 2.3%
large NAV: $12.35 appreciation by investing in domestic U.S. Stocks: 97.7%
Assets (mil): $41.3 corporations with a market capitalization
Medium between $50 million and $2 billion. The
U S Slacks
small Fund is designed to comply with guidelines
that are based principally on Florida laws
governing the investment of municipal
Investment Cateoory retirement plans for fire, police and general -ash
Small Growth government employees. z3~~
.. - -
Securitv % Equity Securitv % Epuity ,4
Jos A Bank Clothiers 1.0% Genlyte Group 0.9%
Consumer Discretionary .0%
zo4~
Navi ant Consultin 1.0% S mmetricom 0,9%
g 9 Y
Consumer Staples 3.4%
Western Digital 1.0% Gevity HR 0.9% 3.4
United Therapeutics 1.0% Copart 0.8%
Energy 3.0%
s.3 %
Ultimate Software Grp. 0.9% Protein Design Labs 0.8% Fi s. 9~5
nancials %
• e e e
Healthcare ,7.a %
17.5
Characteristic Fund S&P 600 SCG Industrials 20.1 %
Dividend Yield (Current) 0.3% 0.7% ,s.3 %
EPS Growth (3 yr est.) 20.0% 16.5%
Information Technology zs.o %
,s.7oo
Market Capitalization ($bil) 1.0 1.5
fvtaterials 4.3
5.1 %
Price-to-Book 2.6X 3.5x Telecom services o.o % ^ Fund
P/E (12 months trailing) 18.6x 20.3x o.4%
^ S&P 600 Small Cap Growth Index
Return on Equity 14.7% 24.9% ~"'i"~S o.o%
,.4~,0
Three Twelve Small Cap Growth stocks began 2005 on a down note in the first quarter, as the S&P
Ince
tion
p
600 Barra Growth and Russell 2000 Growth fell 1.9% and 6.9%, respectively. Small
Months Months 10/20/2003 cap stocks gave up some of the strong gains pasted in 4QOa given concerns over
rising oil prices and the sustainability of economic growth. The Small Cap Growth
o, o~
and -5.2 ,0 7.5 ,0 o Fund was not immune to these fears, posting a negative 5.2% return for the quarter.
15.7 !o
S&P 60G Slll~l C3~ Gn~~tvth lr'~d)X -1 7'~ 13
-3- The Fund's performance edged out its peers, exceeding the -5.4 % return of the Lipper
1t3
3°
. .
~, Small Growth category. Poor stock selection and an overweight in the Technology
Lipper Small Cap Growth Classification -5.4% 1.1% 7.1% sector, coupled with an underweight in Energy were the most significant detractors
from performance in the quarter.
Fund Manager:
Mark Gartinkel, CFA
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 22
^IS ^r ~ ~ ~ s rs ... ~r .~.~ ~ rr rr ~ ~ rr .~ ~ r^r
Period Ending I STI Classic Small Cap Value Fund
March 31, 2005
Please refer to
appendix for full
disclosure.
. ~ - .. ..
Value Blend Growth
Ticker:
SCETX
The fund seeks long-term Cash: 0.0%
Large
Expense Ratio:
1.24% capital growth and income by U.S. Stocks: 78.4%
Non-U
S
Stocks 21
6%
investing in the stocks of .
.
.
Medium NAV: $19.86 companies with a market
_
Small Assets (mil): $726.9 capitalization between $50 _,
million and $2 billion. ~
Investment Category e
Small Value ~ •
Top Ten Holdings Industry Concentration
Security % Equity Security % Equity
0 o Consumer Discretionary 2, -9~°
I Reynolds & Reynolds 3.2 /o Brink's Co. 2.2 /0 14.0,,0
i Harris Corp. 3.2°/d CBRL Group Inc. 2.1% consumer staples 4.4
Cooper Cos. 3.0% Peabody Energy 2.1 % 3.2"°
3.3°.0
CHC Helicopter Corp. 2.3% StanCorp Financial 1.9% Energy
6.9
Fair Isaac Corp. 2.3% Airgas Inc. 1.9% 1 financials 15J
31 .9%
e • • • - Healthcare t3.5~-°
4S°°
R u s se I I Industrials 22.0%
Characteristic
Fund
2000 Value 1 5 O%
,2.,~0
Dividend Yield (Current)
1.5°%
2.4°-0 Information Technology
78°"
EPS Growth (5 yr est.) 13.2% 11.3°,/o Materials
e.s o ~~ ~
Market Capitalization ($bil) 1.9 1.1 Telecom Services ° O''
Price-to-Book
2.1x
1.7x ,,o
P/E (12 months trailing)
17.1 x
16.2x
Utilities ,.o 0
s ~°~
^ Fund
Return on Equity 13.2°0 8.6"_, ^ Russell 2000 Value Index
- -. - - -
Annualized
Three One Three Five Ten Inception
Months Year Year Year Year 8/31/1994
Fund -1.9% 16.5% 14.8% 19.9% 15.6% 15.7%
Russell Z0~)0 Value Indf~x -4.0°~ ~i R°< 115°~ 15.4°~ 14.3°0 13.4°0
Lipper Small Cap Value Index -1.7% 11.9% 12.9% 15.3% 13.7% 13.0%
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 23
Period Ending
March 31,2005 STI Classic Small Cap Value Fund -continued
Please refer to
appendix for full
disclosure.
The STI Classic Small Cap Value
Fund returned -1.9% for the
quarter versus -4.0% for the
Russell 2000 Value Index.
Higher quality companies
continued to be top performers
for the first quarter of 2005.
Superior selection of securities
assisted the Fund in
outperforming the benchmark.
Outperformance was most
evident in the Financials and
Information Technology sectors.
The market is re-evaluating
equities due to the impact of
higher commodity prices and
interest rates. These risks may
cause fears of economic
deceleration. Strict adherence to
quality and lower risk companies
benefits Fund performance over
longer time periods. This is
driven by a bottoms-up, dividend
paying investment process which
prefers quality stocks over high
risk, unprofitable companies.
Fund Manager:
Brett Barner, CFA
1998 1999 2000 2001 2002 2003 2004 2005
First Quarter 9.7% -13.3% -4.1 % 5.5% 9.7% -6.4% 5.7% -1.9%
Second Quarter -8.9% 19.8% 5.9% 8.9% -1.8% 17.1% 3.9%
Third Quarter -22.0% -8.1% 6.7% -8.1% -12.6% 7.9% 0.2%
Fourth Quarter 11.0% 1.9% 9.0% 14.9% 4.3% 15.9% 14.1%
Fund -13.5% -2.7% 18.0% 21.2% -1.7°% 37.1 °-b 25.5°% -1.9°~0
N~,~~~~s ~~~~~,u vai~~F i~,d~~x 6 ti~, -7 5~-, ~z_8°~ ~4 0°._ , i 4~~. a6 ~° ?2 ~=. -4 0°.
Lipper Small Cap Value Index -6.7% 1.9% 16.1% 17.2% -11.2% 47.5% 20.7% -1.7%
_~~
50.5.OtD
5x00]0
53D 000
sn am
52<1.000
S 15.000 '
5,0
45000
~~
~p95 `.Bp96 ~p9] Sp.SB ~'[+ St4~Lb 'Lp of 3q~02 3+p0J ~,D4
Fund Russell 2000 Value
5 Year
Alpha Beta R-Squared Sharpe Std. De~nation
Fund 0.56 0.79 85.39 1.23 14.03
Russell 2000 Value Index i) 00 i_i)iJ t0i~ 00 0.78 16.43
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 2a
~Ir ~ ~ ~ ~ r ~ ~ ~ ~ ~ r ~ r ~ r. f s ~
Period Ending SunTrust Retirement Mid-Cap Equity Fund
March 31, 2005
Value Blend Growth
Large
Medium
Small
Investment Cateoorv
Mid-Cap Blend
Please refer to
appendix for full
disclosure.
NAV:
Assets (mil):
$28 gg The Fund seeks long-term capital growth Cash:
by investing in domestic corporations with Stocks:
$23 65
0.0%
100.0%
' a market capitalization between $1 billion
and $10 billion. The Fund is designed to
comply with guidelines that are based
principally on Florida laws governing the us slaks
investment of municipal retirement plans ,ooao
for fire, police and general government ~a~,
employees. °"'
Security Equity Security Equity
Reynolds American Inc. 2.1 % Marathon Oil Corp. 1.8%
Ashland Inc. 2.1% Yum! Brands Inc. 1.8%
Rockw ell Collins Corp. 2.1% Textron Inc. 1.8%
Monsanto Co. 2.0% CIGNA Corp. 1.6%
Amerada Hess Corp. 1.8% Lincoln National Corp. 1.6%
Characteristic
Dividend Yield (Current)
EPS Growth (5 Yr. Est.)
Market Capitalization ($bil)
Price-to-Book
P/E (12 mo trailing)
Price-to-Sales
Fund Russell Mid-Can
1.3% 1.4%
12.4% 12.8%
9.0 7.7
2.5x 2.5x
15.6x 18.4x
1.1x 1.2x
Consumer Discretionary 20.°%
17.9
3.9~
Consumer Staples
4.8
9.0
Energy
~.o %
Fnancials 16.2 %
19.3
Health Care 11 .3 %
11.0%
Industrials 11 .6 %
1 0.6
Information Technology 14'9 %
14.0
Materials 5.3
s.s %
Telecom Services 1 ° % ^ Fund
1.2
Utilities s.8% ^ Russell Midcap Index
~.~
Annualized
Three One Three Five Seven Inception
Months Year Years Years Years 12/1996
Fund 1.6% 15.5% 4.3°'° 0.0% 9.9°6 13.7%
Russell Mid-Cap Index -0.3°~~ 1 ~t 1 `°~ 1U ~" `~ 5"~~ 7 8"~ 11 .C1"~~.
Lipper Mid Cap Core Funds Avg -1 .2% 9.5% 7.2% 3.4% 8.1 % 12.1
.~;.: I
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 25
Period Ending I SunTrust Retirement Mid-Cap Equity Fund -continued
March 31, 2005
Manager's Quarterly Perspective
The Russell Mid Cap Index was down
0.6% for the 1St quarter of 2005. The
best performing sectors were Energy
up 23.1%, followed by Utilities up
4.6% and Materials up 3.5%. The
worst performing sectors were
Telecommunication Services -2.2%,
Financials -6.2% and Information
Technology -7.5%. The Fund had
positive stock selection in all sectors
except Utilities. Stocks with lower P/E
multiples generally outperformed
stocks with higher multiples during the
quarter. Larger Cap Mid Cap stocks
generally outperformed Smaller Mid
Cap stocks. Some of the best
performing stocks in the Index were
Valero Energy +61.6%, Accredo
Health +60.2% and United Defense
Industries +56% for the quarter. The
Fund was up 1% outperforming the
index by 1.6%.
Fund Manager:
Chad Deakins. CFA
~ - -
1998 1999 2000 2001 2002 2003 2004 2005
First Quarter 13.8% -0.6% 21.5% -11.7% -5.5% -4.9% 3.8% 1.6%
Second Quarter -1.3% 19.1% -1.5% 16.5% -13.4% 14.1% 0.5%
Third Quarter -17.9% -3.1% 6.0% -21.0% -15.3% 4..5% 0.2%
Fourth Quarter 25.9% 35.8% -11.6% 24.5% 0.5% 13.2% 13.0%
Fund 16.0% 55.94% 12.2% 1.2% -30.4°/ 28.4% 18.0% 1.6°0
I . .cal ri I i ~.~jU ~~'~i=k 1 ' f _ 'i t --`) Y;"., ~~ n .~i:. 4;. ~r) ~~°.
Lipper Mid Cap Core Funds Avg 7.8% 28.2% 6.3% -4.9% -17.4% 36.1% 15.5% -1.2%
~ ~~~ •. ~~
$35, 000
$30, 000
$2s, o00
$20, o00
$i s, o00
$10, o00
$5, 000
$0
Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04
Please refer to
appendix for full
disclosure.
Fund Russell Midcap Index
~ - - -
3 Year
Alpha Beta R-S uared Sharpe Ratio Std. Deviation
Fund -0.67 0.91 0.87 0.04 14.95
Russell Mid-Cap Index G ~~ 1.00 1-00 ~i Eit_; 15.15
Lipper Mid Cap Core Funds -0.2 0.96 0.91 0.13 14.64
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 2s
~r r ~r ~ i ~ ~- ~ ~!^~ r ~ ~ r r ~ s sr w ~
Period Ending SunTrust Retirement High Grade Bond Fund
March 31, 2005
Short Int. Lon
High
Medium
Low
Investment Cateoorv
Please refer to
appendix for full
disclosure.
Intermediate-Term Bond
Unit Value: $32.15 The fund seeks to provide a
Assets (mil): $226.62 high level of total return
through current income and
capital appreciation by
investing in domestic corporate
investment grade bonds rated
A or higher by major credit
rating agencies and U.S.
Government securities.
Sector Fund ML G/C A+
US Treasury 75.6°% 50.1°i°
TIPS 9.4% 0.0%
Agency/Gov Related 0.0% 25.1
Mortgages 1.9% 0.0%
Corporate Bond 1 1 .1 % 24.8%
Cash 2.0°0
•. e • -
Characteristic Fund _~_+~_ ~~ ~-,._:
Average Rating TSY AAA
Average Coupon 4.1 % 5.1
Current Yeld 3.9% 4.9
Yeld-to-Maturity 4.2% 4.5
Average Maturity 6.9 7.2
Effective Duration 4.7 4.9
0-1 Year
1-3 Years
3-5 Years
5-7 Years
7-10 Years 0.9 io
10 + Years
Cash: 2.0%
Bonds: 98.0%
Bonds
98.0°b
Cash
z o~,o
20.6
13.6
' 13.8%
113.7%
12.9
36.3
^ Fund
^ ML GJC A+
Annualized
Three One Three Five Ten Inception
Months Year Years Years Years 9/1989
Fund -0.1 % 1.1 % 6.4% 7.1 % 7.3% 8.0%
Merrill Lynch G/C A Rated and Above Index -0.5% 0.3% 6.1% 7.0°i° 7.1°0 7.6°io
~ •
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 27
~^r r r r ~ err r~ ~• rr rl~ r r~ r r ~s r~ rr r r
Period Ending SunTrust Retirement High Grade Bond Fund
March 31, 2005
Please refer to
appendix for full
disclosure.
Defensive strategies implemented in late
2004 and early 2005 produced excellent
relative performance in the first quarter of
2005, which was 40 basis points above the
Merrill Lynch Index.
Higher interest rates and wider spreads
weighed on the fixed income markets in the
quarter and led to negative returns for most
sectors of the market. Very rich valuations
drove us to a significant underweight in the
high quality credit sectors which contributed
positively to relative performance.
The FED is clearly committed to its current
course of action of pushing short term rates
higher in a measured fashion. With the
yield curve having flattened significantly in
2004, we took action to limit our exposure
to shifts in the curve.
Treasury Inflation Protected Securities
(TIPS) are one of the few market sectors
where we still see value and they remain a
core holding. Corporates remain at
historically rich levels and we will maintain
our underweight until we see more
attractive values in the spread sectors.
With spreads as tight as they are, the
foregone coupon income is minimal while
providing a more compelling near-term
risk/reward profile.
Fund Managers:
John Talty, CFA
Perry Troisi
1999 2000 2001 2002 2003 2004 2005
First Quarter -0.4% 2.3% 3.2% -0.5% 1.6% 2.9% -0.1%
Second Quarter -1.0% 0.7% 0.2% 4.2% 2.5% -3.0%
Third quarter 0.9% 2.5% 5.2% 5.7% -0.4% 3.3%
Fourth Quarter -0.5% 4.9% -0.1 % 1.5% -0.1 % 1.0%
Fund -1.1 °~b 10.7% 8.6% 11.4% 3.6% 4.1 % -0.1
Merrill Lynch G/C A+ Index -2.2°0 12.4°%° 8.2°0 11 .6°io 3.2°i° 3.8°~ -0.5°ro
$35, 000
$30,000
$25,000
$20,000
$15, 000
$10, 000
$5,000
Aug-89 Aug-92 Aug-95 Aug-98 Aug-01 Aug-04
Fund ML G/C A+
u
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 2a
~ ~ ~ ~ ~ r ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
Period Ending I SunTrust Retirement High Grade Intermediate Bond Fund
March 31, 2005
Shod Int. Long Unit Value: $10.49 The fund seeks to provide a Cash: 1.6%
high level of total return through Bonds: 98.4%
High Assets (mil): $179.68 current income and capital
Medium appreciation by investing in Bonds
domestic corporate investment 98.4°%
L°"' grade bonds rated A or higher
Investment Category by major credit rating agencies,
Intermediate-Term Bond mortgages and U.S. ~ s o
Government Securities.
Sector Fund Leh Aqq Int A+
Treasury 43.5°ro 23.6°%
TIPS 9.4% 0.0°i°
Agency/Gov Related 0.0% 16.0°%
Mortgages 38.4% 48.9°io
Corporate Bond 7.1 % 11.5%
Cash 1.6°
'• . .
Characteristic Fund , _
Average Rating TSY AAAiAA1
Average Coupon 4.7% 4.9%
Current Yield 4.6% 4.9%
Yield-to-Maturity 4.6% 4.7%
Average Maturity (Years) 6.0 5.2
Effective Duration (Years) 3.6 3.5
Please refer to
appendix for full
disclosure.
Fund
Lehman Aggregate Intermediate A or Better Index
0-1 Year
1-3 Years
3-5 Years
5-7 Years
7-10 Years
Three
Months
-0.3%
-0.5,;
,.~~
r,;
~ 1'
City of Winter Springs General Employees' Pension Plan
13.3
44.9
^ Fund
^ Lehman Agg Int A+
Annualized
One Inception
Year 11/2003
1.2% 2.9%
0.9°~0 3.0%
TRUSCO CAPITAL MANAGEMENT ~ 29
Period Ending I SunTrust Retirement High Grade Intermediate Bond Fund
March 31, 2005
Please refer to
appendix for full
disclosure.
Defensive strategies implemented in
late 2004 and early 2005 produced
solid relative performance in the first
quarter of 2005.
Higher interest rates and wider spreads
weighed on the fixed income markets
in the quarter and led to negative
returns for most sectors of the market.
Very rich valuations drove us to an
underweight in the mortgage and high
quality credit sectors which contributed
positively to relative performance.
The FED is clearly committed to its
current course of action of pushing
short term rates higher in a measured
fashion. With the yield curve having
flattened significantly in 2004, we took
action to limit our exposure to shifts in
the curve.
Treasury Inflation Protected Securities
(TIPS) are one of the few market
sectors where we still see value and
they remain a core holding. Mortgages
and corporates remain at historically
rich levels and we will maintain our
underweight until we see more
attractive values in these sectors.
With spreads as tight as they are, the
foregone coupon income is minimal
while providing a more compelling
near-term risk/reward profile.
Fund Managers:
John Talty, CFA
Perry Troisi
2001 2002 2003 2004 2005
First Quarter N/A N/A N/A 2.2% -0.3%
Second Quarter N/A N/A N/A -1.7%
Third Quarter N/A N/A N/A 2.4%
Fourth Quarter N/A N/A N/A 0.9%
Fund
Lehman Aggregate Inter. A N/A
+ Index 8.7°~ N/A
9.6 %0 N/A
3.3°% 3.7% -0.3%
3.6°0 -0.5%
$11,000
$10,500
$10,000
$9,500 ~--
Oct-03
Jan-04 Apr-04 Jul-04 Oct-04 Jan-05
Fund Lehman Agg Int A+
~ti
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 30
Period Ending I FUCId Attt'IbUtlOn SUI'Y1CYlal'y -Appreciated more than 15%
March 31, 2005
SunTrust Retirement Hi h Grade
E uit F
und ~:
•_~
PENNEY J C INC S 1,058,184.00 S 683.786.40 25.71
ANADARKO PETE CORP $ 564,819.15 $ 703,544.50 17.71
EXXON MOBIL CORP $ 1,761,242.34 $ 1,709,864.40 16.80
WALGREEN CO S 1,078.312.11 S 1.323.405.06 15.91
SunTrust Retirement Hi h Grade Relative Value Fund
KERB MCGEE CORP S 618,353.00 $ 934,633.56 36.38
MAY DEPT STORES CO $ 546,840.00 $ - 26.66
CONOCOPHILLIPS $ 647,664.97 $ 867,788.48 24.79
SUNGARD DATA SYS INC S 592,323.64 $ - 19.40
ANADARKO PETE CORP $ 570,328.00 $ 738,474.40 17.71
EXXON MOBIL CORP $ 886,798.00 $ 1,058,436.40 16.81
OUESTAR CORP $ 698,152.00 $ 607,016.25 16.70
ADVANCED AUTO PTS INC $ 706,742.40 S 879.646.20 15,50
BURLINGTON RES INC $ 538.678.00 S 674,943,60 15,30
SunTrust Retirement Small Ca F und
BEBE STORES INC $ 141,645.00 $ 115,430.00 25.93
MAGNUM HUNTER RES INC $ 206,400.00 $ 201,375.00 24.88
T-HO INC $ 119,288.00 $ 109,746.00 22.67
GENESIS HEALTHCARE CORP $ 157,635.00 $ 210,161.00 22.44
MISSION RESOURCES CORP $ 116,800.00 $ 120,360.00 21.23
CASUAL MALE RETAIL GROUP $ 101,915.00 $ 186,263.00 19.08
UNIT CORP $ 252,186.00 $ 180,680.00 18.22
WESTERN DIGITAL CORP $ 346,880.00 $ 408,000.00 17.62
GREENBRIER COS INC $ - $ 260,720.00 17.40
MIPS TECHNOLOGIES INC $ 131,438.40 $ 153,456.00 16.75
TRANSACTION SYS ARCHITECT $ 136,965.00 $ 159,735.00 16.62
BUILDING MATERIAL HLDG CO $ 114,870.00 $ 164,576.00 16.43
GOTTSCHALKS INC $ 54,068.98 $ 134,550.00 16.42
HOLOGIC INC S 164,820.00 $ 207,187.50 16.04
SIERRA HEALTH SVCS INC $ 137,775.00 $ 185,136.00 15.84
Please refer to appendix for full disclosure
City of Winter Springs General Employees' Pension Plan
~.
SunTrust Retirement Hi h Grade E ui In come Fund ,
KERB MCGEE CORP S 83,795.50 S - 33.30
MAY DEPT STORES CO $ 136,944.40 $ 165,701.52 26.43
MARATHON OIL CORP $ 99,666.50 $ 220,524.00 25.65
UNOCAL CORP S 101,614.00 S - 22.73
EXXON MOBIL CORP S 251,532.82 S 450,397.20 16.80
SunTrust Retirement Mid Ca Fund
APPLE COMPUTER INC S 254,637.60 S 240,560.91 93.21
VALERO ENERGY CORP NEW $ 169,705.20 $ 348,472.12 61.58
AUTODESK INC $ 90,093.30 $ 184,273,92 60.99
UNOCAL CORP $ 87,258.32 $ 106,785.39 43.13
WESTERN WIRELESS CORP $ 48,725.90 $ 80,285.40 29.56
COVENTRY HEALTH CARE INC $ 201,916.32 $ 328,911.78 28.37
AMERICAN EAGLE OUTFITTERS $ 124,296.90 $ 198,162.30 25.76
PENNEY J C INC $ 91,038.60 $ 145,168.32 25.71
PACIFIC SUNWEAR OF CALIF $ 84,498.96 $ 105,036.92 25.70
MARATHON OIL CORP $ 382,117.60 $ 438,889.68 25.56
ABERCROMBIE & FITCH CO $ 275,127.00 $ 254,946.96 22.10
SUNGARD DATA SYS INC $ 77,822.51 $ 123,475.50 21.78
ARCH COAL INC $ 76,223.54 $ 120,341.98 21.30
ROCKWELL COLLINS $ 401,578.08 $ 499,171.51 20.93
AEROPOSTALE INC $ - $ 101,918.00 1922
MEDCO HEALTH SOLUTIONS IN $ 156,748.80 $ 184,350.83 19.16
AMERADA HESS CORP $ 391,222.62 $ 442,084.95 17.15
MONSANTO CO NEW S 467,453.25 S 490,587.00 16.42
ASHLAND INC $ 341,639.76 S 501,234.63 16.08
SunTrust Retirement Hi h Grade B ond Fun d
NO SECURITIES APPRECIATED MORE THAN 15°~ - -
SunTrust Retirement Hi h Grade In termedi ate Bond Fun d
NO SECURITIES APPRECIATED MORE THAN 15°io - -
TRUSCO CAPITAL MANAGEMENT ~ 31
~ciated more than 15%
Small C
ap Eq
ui Fund -_~
S 77.200.00 S 113.523.40 -31.48
iERS H $ 144,072.00 $ 43,476.00 -27.07
$ 127,260.00 $ 153,945.00 -23.02
$ 178,450.00 $ 103.584.00 -41.95
$ - $ 77,280.00 -16.84
$ 92,249.08 $ 114,318.00 -21.00
$ 185,280.00 $ 148.614.00 -22.35
INC $ 160,636.00 $ 136.388.00 -15.09
GALS I $ 203.700.00 $ - -54.23
$ 265,707.00 $ 215,397.00 -16.93
$ 209,328.00 $ 116,816.00 -44.19
$ 153,525.00 $ 77,910.00 -16.63
$ 115, 680.00 $ 101, 780.00 -24.59
NC $ 239,430.00 $ 160.705.60 -15.47
$ 329.800.00 $ - -20.45
$ 395,370.00 $ 315.560.00 -20.19
S COR $ 343,850.00 $ 286,810.00 -16.59
$ 109,760.00 $ 26.150.25 -24.11
$ 289,940.00 $ 250,591.00 -24.67
$ 223,488.00 $ 90,000.00 -21.88
$ 3,324.00 $ 2,720.00 -18.17
$ 241,939.50 $ 185.130.00 -23.48
$ 245,732.00 $ 78,329.00 -20.74
$ 337, 500.00 $ 267.625.00 -20.70
$ 298, 771.00 $ - -23.67
$ 177,600.00 $ - -18.46
$ 63, 735.00 $ 94,176.00 -17.91
$ 344,810.00 $ 255,915.00 -34.78
$ 238,257.00 $ 186.852.00 -21.58
S CO $ 273,780.00 $ - -19.91
~LOGIE $ 137,480.00 $ 78,820.00 -42.67
IES I $ 88,080.00 $ 72,129.15 -17.44
$ 143.321.75 $ 114,010.00 -37.80
' $ 182,182.00 $ 149,072.00 -18.17
OS IN $ 281,384.00 $ 157,168.00 -19.19
$ 1,199.52 $ 79,245.00 -38.34
_OGIES $ 209,491.80 $ 150,023.16 -28.39
$ 195,160.00 $ - -21.97
$ 134,600.00 $ 83,700.00 -37.91
$ 223,000.00 $ 121,500.00 -45.52
IC $ 433,860.00 $ 335.790.00 -22.60
31ES $ 445,725.00 $ 298,902.00 -24.29
$ 139,910.00 $ 172,026.00 -38.88
IOLOG $ 68,425.00 $ - -20.30
NC $ 149,088.30 $ 76,644.50 -32.66
$ - $ 146,160.00 -27.78
S INC $ 173.628.00 $ 138.840.00 -20.04
31ES $ 224,055.80 $ 155,756.16 -33.02
S INC $ 160,306.80 $ 124,654.53 -53.14
S INC $ 146,500.00 $ 68,670.00 -44.20
$ 112,455.55 $ - -33.21
VCES $ 111,682.00 $ 90,248.55 -17.83
i INC $ 81,600.00 $ 66,120.00 -18.97
SCO CAPITAL MANAGEMENT 32
Period Ending Important Diselosu re Information
March 31, 2005
INVESTMENT PERFORMANCE
Past performance is not indicative of future results. Performance data related to accounts managed by Trusco represents returns gross of investment
management fees. See Trusco's Form ADV, Nart II for a description of investment advisory tees. The performance information reported herein may
be for a variety of products which have different methods of presenting performance data, i.e. net of fees, gross of fees, or a combination of these.
This information should not be evaluated independent of or without reference to the investment advisory agreement that more specifically addresses
applicable investment advisory fees.
Fees have a compounding effect on cumulative results. For example, assume the account achieves a 10% annual return prior to the deduction of fees
each year for a period of ten years. If an annual fee of 0.5% of assets under management were charged each of the ten years, the resulting annual
average return net of fees would be reduced to 9.48~/~.
YIELD INFORMATION
Yield information more closely retlects the current earnings of the Fund than the total return.
In the absence of current fee waivers the yield would be reduced.
A SEC Yield relates aggregate net earnings of a fund to its aggregate net assets. In any given period a Lund may distribute more or less than its actual
income.
SECTOR WEIGHTINGS AND PORTFOLIO CHARACTERISTICS
The sector weightings and portfolio characteristics are presented as of the date shown in the left-hand corner of this presentation, and may change
without notice. A complete list of sector weightings and individual security positions for any specific period are available upon request.
FORECASTING
Forecasting is based on current economic and market information, which may be revised at any time
REPRESENTATIVE CLIENT LIST
The list is intended simply to indicate a broad cross section of Trusco Capital Management, Inc. clients in the public and private sectors. The selection
of clients for the list is not based on performance criteria. This list should not be construed as an endorsement or approval by the listed clients of
Trusco Capital Management. Inc. or of the advisory services provided
ECONOMIC AND MARKET REVIEW
This perspective was prepared for clients and prospective clients of Trusco Capital Management, Inc. Neither Trusco nor any affiliations make any
representation or warranties as to the accuracy or merit of this analysis for individual use Comments and projections are based on information
available at the time of writing and believed to be accurate, are for informational purposes only, and may not be relied upon for future investing.
Investors are advised to consult with their investment professional about their specific circumstances before making any investment decisions.
FINANCIAL TERMS
Total Return -All performance calculations are total returns. Total return is comprised of dividend and interest income, realized and unrealized gains
and losses.
Estimated Annual Income - An estimate of the dividends and interest to be received over the next twelve months based on current asset allocation and
information.
.~ .-
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 33
~ r ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
Period Ending Important Mutual Fund Diselosu re Information
March 31, 2005
INVESTMENT PERFORMANCE
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or
higher. Total return figures include change in share price, reinvestment of dividends and capital gains. Returns are shown net of fees. The investment
return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. For
performance data current to the most recent month end, please visit our website at www.sticlassicfunds.com. In the absence of current fee waivers the
total return would be reduced. All returns greater than 12 months have been annualized
YIELD INFORMATION
Yield information more closely reflects the current earnings of the Fund than the total return.
In the absence of current fee waivers the yield would be reduced.
A SEC Yield relates aggregate net earnings of a fund to its aggregate net assets. In any given period a fund may distribute more or less than its actual
income.
GENERAL DISCLOSURE
An investor should consider the fund's investment objectives, risks, and charges and expenses carefully before investing or sending money. This and
other important information about the STI Classic Funds can be found in the fund's prospectus. To obtain a prospectus, please call I-800-428-6970,
option 1, or by visiting www.stidassicfunds.com. Please read the prospectus carefully before investing. Mutual fund investing involves risk,
including possible loss of principal.
STI Classic Funds are advised by Trusco Capital Management. Inc., which receives a fee for its services, and are distributed by BISYS Fund Services,
LP, which is not affiliated with Trusco Capital Management. Inc.
Investments in the STI Classic Funds are not insured by the FDIC or any other Federal agency nor are they guaranteed by any bank, and may lose
value.
INVESTMENT CONCERNS
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade t7xed income
securities. The net asset value per share of equity mutual funds will fluctuate as the value of the securities in the portfolio changes.
MPT STATISTICS/OTHER MEASUREMENTS
Alpha -Alpha is defined as the difference between the average realized return of a portfolio manager with private information and the expected return
of the passive strategy based upon public information only with equal systematic risk.
Beta - A measure of an investment's volatility, relative to an appropriate asset class.
R-Squared -Statistical measure of how well a regression line approximates real data points; an r-squared of 1.0 (100/0) indicates a perlect fit. r-
squared measures how well the Capital Asset Pricing Model predicts the actual performance of an investment or portfolio.
Sharpe Ratio -The Sharpe Ratio (also known as Reward-to-Volatility-Ratio) indicates the excess return per unit of risk associated with the excess
return. The higher the Sharpe Ratio, the better the performance.
Standard Deviation - A statistical measurement of dispersion about an average, which, for a mutual fund, depicts how widely the returns varied over
a certain period of time.
HIGH GRADE MUTUAL FUNDS
The Fund does not invest in limited partnerships, real estate (including REITs), private placements, Rule 144A securities and certain other non-
publicly traded, thinly traded or restricted securities.
City of Winter Springs General Employees' Pension Plan TRUSCO CAPITAL MANAGEMENT 34