Loading...
HomeMy WebLinkAboutDocumentation_Pension Public Safety_Tab 11_02/05/2007Village of Tequesta Public Safety Officers' Pension Fund December 37, 2006 ROCKW OOD CAPITAL ADVI SORS ' 1401 S. Brentwood Blvd. Suite 400 St. Louis, Missouri 63144 (888) 962-8336 (toll-free) (314) 962-1254 (fax) The Fed: Too Concerned About Inflation? 820 ROCICWOOD CAPITAL ADVISORS ~ r Tequesta Public Safety Officers' Pension Fund Fourth Quarter 2 006 Total Fund Portfolio Summary r .~ ~ ~ Change in Ma rket Value ' :-. .:.. Interest /Dividends $22,034 Contributions Net Disbursements $87,353 ($13,541) Net Realized & Unrealized (G/L) $95,467 ~~ Portfolio Summary Total Fu nd Performance Fused Income ~ ~ short-Term Funds Tequesta PS 3.6% 9.0% 6% Policy (60/40) 4.4% 11.1 % ' (Policy) 60% S&P 500 and 40% LBIN Equities 57% ROCgW00D CAPITAL ADVISORS 2 1 Tequesta Public Safely Officers' Pension Fund Equity -Fourth Quarter 2006 Market Environment A Year of Transition The cornerstone to the long-term success of Rockwood Capital's sub-adviser, Contravisory, has been the strength in identifying, reacting to, and capitalizing on changing themes in the equity marketplace. Over the years there have been many such theme (or leadership) changes. The speculation and subsequent collapse of energy in the late seventies and early eighties, and the highly speculative technology boom and bust of the late nineteen nineties are two of the more dramatic examples. For the past twelve months, our research has been pointing towards another, perhaps less dramatic, theme (or leadership) shift. As a result, the equity portfolio is being transitioned to benefit from this new environment. After several years of historic positive market breadth and out-performance by small/mid capitalization stocks, in 2006 we noticed breadth deterioration and relative price erosion in the small/mid-cap segment of the market. A comparison of the average market cap in the equity portfolio today versus January 2006 demonstrates our response to this changing dynamic. One year ago the average market cap was $9 billion. Today the average market cap in the equity portfolio exceeds $23 billion. In addition to changing market cap themes, we have also witnessed significant theme changes in sector and industry groups. Many of the once-dominant industry groups for the current decade are now lagging. In particular, many of the economically sensitive areas, such as Homebuilding, Energy Service, Commodities, and Industrial Cyclical, which performed so well during the prior five years, have shown significant deterioration over the past twelve months. In response, we have gradually reduced and/or eliminated exposure in each of these areas. So far, new leadership is emerging in traditionally more defensive areas such as Consumer Staples, Utilities, Pharmaceuticals and interest rate sensitive industry groups. In true opportunistic fashion, Contravisory has initiated, or increased, it's exposure in each of these emerging themes (predominantly through large cap issues). In particular, our current portfolio has significant exposure to Consumer Staples (Packaged Foods, Beverages, and Brewers), Consumer Discretionary (Restaurants, Department Stores), Financials (REITs, Investment Management, and Insurance) as well as Utilities (Electric and Natural Gas). Contravisory Research & Management Corp. is a registered investment adviser and equity sub-adviser to Rockwood Capital Advisors, LLC. ~ Performance 20°io ° 15% ~ ~ 14.6% 15.2% 12.2% 10% ROCRIV OOD CAPITAL ADVISORS 3 Equity Portfolio Fourth Quarter 2006 Characteristics Style Box Top Ten Holdings Sector Allocation 1. Ryanair Holdings Plc 3.2% HeaRh Care 7% 2. NYSE Group Inc. 3.1% Fnance Materials 24% r 6% ~ 3. Loews Corp. 3.0% Energy ' Ir 3% 4. Bayer AG 2.9% Producer 5. International Game 2.8% -Durables 5% 6. Simon Property Grp Inc. 2.8% Cons. Staples Technology 7. Precision Castparts 2.8% 18% 7% 8. Safeway Inc. 2.8% Utilities 9. Volvo 2.7% 8% ADFrs 10. Hewlett Packard Co. 2.7% Cons. Disc. g% ' 13% ' Five Best Imp act Five Worst Impact 1. NYSE Group Inc. +30.0% 1. Texas Instruments Inc. -13.3% 2. Ryanair Holdings Plc +28.8% 2. Brown Forman Dst 'b' -13.2% 3. Precision Castparts +24.0% 3. VCA Antech Inc. -10.7% 4. Volvo +15.3% 4. T. Rowe Price Group I -8.2% 5. PG&E Corp. +14.4% 5. Wendy's Intl Inc. -4.1% ROCgW 00D CAPITAL ADVISORS i 4 Equity Transactions Fourth Quarter 2006 Sold Oct Chesapeake Energy Corp. Oct Canadian Pacific Railway Oct Prudential Financial I Nov Caterpillar Inc. Nov Landstar System Inc. Nov Seagate Technology Nov Pacer Intemational Inc. Dec Protective Life Corp. Dec AFLAC Inc. Dec McKesson Corp. Bought Oct Anheuser-Busch Cos. Inc. Oct International Game Technology Oct JP Morgan Chase & Co. Oct Wendy's International Inc. Nov PPL Corp. Nov EchoStar Communications Corp. Nov Alliant Energy Corp. Nov Colgate-Palmolive Co. Dec Federated Department Stores Inc. Dec Bayer AG Dec Praxair Inc. ROCKWOOD CAPITAL ADVISORS 5 Proxy Voting Record .. Meeting for Holders of ADRs For For 2,165 10/26/06 Elect Directors For For 2,165 10/26/06 Approve an increase in shares eligible for issuance under 2004 stock For For 2,165 10/26/06 compensation plan Approve an increase in the issuable shares for purchase under employee For For 2,165 10/26/06 stock purchase plan Ratify the appointment of Ernst 8 Young LLP to serve as independent For For 2,165 10/26/06 registered accounting firm. 'ROCgW00D CAPITAL ADVISORS g u Equity Holdings -December 31, 2006 ~-~ ii ROCKWOOD CAPITAL ADVISORS 7 1 Tequesta Public Safety Officers' Pension Fund Fixed Income -Fourth Quarter 2006 14% 12% 10% 8% 6% 4% 2% 0% Market Environment • The federal funds rate target ended the year at 5.25%, a 1 % increase from year end 2005. Despite the Fed's tightening, the economy grew at a very solid 3.3% rate (estimated) in 2006. The economy will have to decelerate and inflation must ease before the Fed will begin dropping the funds rate in 2007 as many analysts expect. • The Treasury yield curve flattened during 2006, as 2-year yields jumped 0.4% while 30-year yields rose less than 0.3%. At year end, both the 2-year and the 30-year Treasuries finished the year at 4.81 %. • The 10-year Treasury returned a paltry 1.68% in 2006. It vastly underperformed the 3-month Treasury bill, which returned 4.90%. The 30-year bond lost 1.1 % in 2006, its worst year since 1999. • The Lehman Aggregate Index was up 4.3% in 2006. The Mortgage sector was by far the best performing sector in 2006, returning 5.2%. US Treasuries lagged far behind at 3.1 %. Sector Index Returns U.S. Treasury Yield Curves ^ 4th Qtr 2006 O 2006 6°i° 5% 4% 3% 2% 1% 0% 1 `_~ _ - -- •-•- -~ --- Tsy Agy NBS Credit FIY 3 2 5 10 30 mos yrs yrs yrs yrs Fixed Income Performance 4th Qtr. One Since Inception ' 2006 Year (5/1 /05) ~ Tequesta Public Safety Lehman Int. Gov't/Credit ', ROC)(W OOD CAPITAL ADVISORS g Fixed Income Portfolio Structure December 31, 2006 i 1 Characteristics Tequesta Public Safety u.s. Cash Treasuries ' 33% ' encies 26% 1 ROCRWOOD CAPITAL ADVISORS Effective Maturity 1 to 3 yrs 3 to 5 yrs ~ Tequesta Pub. Safety Lehman Int. G/C 5 to 10 yrs 10+ 0% 20% 40% 60% Lehman Int. Gov't/Credit u.s. Treasuries Corporate 36% gencies 22% Mortgages 0% 9 Bond Holdings -December 31, 2006 1 ROC1{W OOD CAPITAL ADVISORS 10 ' Economic Environment & Outlook Fourth Quarter 2006 ~ The Fed refrained from hiking the funds rate for the second quarter in succession in Q4 2006. The federal funds rate target ended the year at 5.25%, a 1 increase from year end 2005. Many analysts are expecting substantial easing by the Fed in 2007. However, the economy will have to decelerate and ,inflation must ease before the Fed will begin dropping the funds rate. ~ Employment growth averaged 153,000 jobs per month in 2006. The unemployment rate reached acycle-low of 4.4% in October, but finished the year at 4.5%. The job market has not been this tight since 2001. At least one Fed ' governor believes that, due to decreases in the size of the labor force, monthly job growth in excess of only 100,000 will push the unemployment rate lower. ~ A tightening labor market has put upward pressure on wages. In September 2005, average hourly earnings were rising at a modest annual rate of 2.7%. However, as of December 2006 the rate has climbed to 4.2%, the highest since early 2001. ' ~ While core CPI inflation has fallen over the past couple of months, the Fed remains concerned about the prospect of rising inflation pressures. The Median CPI, a widely followed measure of core inflation, rose to ayear-over-year rate of 3.7% in November, a level not seen since April 2002. ' ~ Most analysts believe that due to the slowing in housing and in employment growth, the Fed will reduce the funds rate this year. Fed funds futures are currently pricing in approximately 50 basis points of easing in 2007. However, we feel that the Fed has been very clear: inflation remains above their comfort zone, and there will be no easing until core inflation eases. ' ~ The yield spread between Corporate bonds and US Treasuries narrowed during 2006. Low interest rate volatility and solid corporate profits have been the ' primary drivers of these historically tight spreads. Given the modest additional yield offered by Corporate debt, and the likelihood that spreads will widen as interest rate volatility increases, we recommend underweighting Corporate ' bonds. ~ We have become less defensive from a duration standpoint, and our portfolios maintain durations near their respective benchmarks. Market sentiment has changed dramatically, with many analysts anticipating a Fed ease in 2007. We are not so certain. We feel that the economy maintains a good deal of vigor, while inflation remains above the upper bound of the Fed's comfort zone. 'ROCg-WOOD CAPITAL ADVISORS 11 Monetary Policy , , Fed Funds Target Rate 8% 6% ' 4% ' 2% ' 0% 6/00 12/00 6/01 12/01 6/02 12/02 6/03 12/03 6/04 12/04 6/05 12/05 6/06 12/06 ' Real GDP Growth (Quarterly Growth at Annualized Rate) ' 10% 8% 6% 4% 2% 0% -2% -4°/ o " Bloomberg Median Estimate ROCgW00D CAPITAL ADVISORS 12 Inflation Pressures Building ~~ Capacity Utilization 86 84 w U ~ 82 d (0 U ' ~ 80 .` 78 c co 0 76 0 74 72 70 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 ROCRWOOD CAPITAL ADVISORS 13 Labor Market Keeps Tightening Unemployment Rate 9% 8% 7% 6% 5% 4% 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 ROCLWOOD CAPITAL ADVISORS 14 ' Can the Fed Pause? 1 1 ' 7% ' 6% 5% 0 4% c 0 3% } 2% 0 1% } 0% 88 90 92 94 96 98 00 02 04 06 1 1 ROCgWOOD CAPITAL ADVISORS 15 Wages Are Rising 5.0% 4.5% •~ 4.0% L ~ 3.5% = 3.0% rn Q 2.5% 0 } 2.0% 1.5% 1.0% 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 ROCgW00D CAPITAL ADVISORS 16 ManingstarDrcect" I Pnm Date: 2001-0i-19 ' Rockwood Capital Strat Eq Investment Summary ' TraUinB Realm Total +/- +/- Cal % ~ Rdurn% BM1 BM2 flank' I Mo 1.40 -0.00 0.20 18 3 Mo 5.20 -1.50 -1.92 58 6 Mo I0.06 -2.68 -2.03 50 YTD 13.16 -2.63 -2.55 53 1 Yr 13.16 -2.63 -2.55 92 3 Yr 14.46 4.02 3.27 7 5 Yr 13.64 7.45 6.48 2 10Yr - - - - 15Yr - - - - 'Rank dmeas d 20060&30 Rattinps as of 2006 Momm star ---.-_--_ _. 9_.-- -09.30 MlaBa -.-_.3.Yaar. _5Year.._ ...._10Year - Ratin _._ 2 5nt 5~t 5* -- '~ . . - - ._ flick - -'-. = _ ~,_~.. __ _.__T:59 __ _ - Return - 13.96 12.21 - ~ Ytvestmems Rated 243 243 213 118 RisWilsward Versus Benchmark l 3 Year S Year t0 Year Alpha 1.75 8.35 - Beta 1.34 0.72 - RSquared (%I 71.04 56.44 - Tracbng Bror 6.29 8.57 - Information Ratio 0.66 0.88 - Excess Return 4.17 7.55 - Miscelbneous 3 Year 5 Year t0 Year Standard Deviation 10.83 11.84 - Sharpe Ratio 1.05 0.95 - SortinoRatio 1.92 1.74 - Manager IlTforrna8on IavssbnsM SVetegy Our irnestmem philosophy Is based on research that vve have conducted over the past 30 years. We believe that stocks processing good undedying klndamemals and irnesta psychdogy/sponsorship provide the best opportunity to lead stocks and industry groups to a protracted period. Our strategy is nonconelated to most other managers, maldrlg rt attractive to clients seelnng style diversification without the added e~ense of employing numerous style managers. Oparetiens Minimum Initial Investment - Incepnon0ate 1994-01-01 Management Fees Actual: -% Max: 0.70% Sales Fees - Finn Name = Telephone Web Address www.rockwoodcapbl.can Page , d 1 Data as of Cartaacy Baedlaaark 1 Banchanaalt 2 2006-12-31 USO Standard B Pkxx's 500 TR Russell 300(1 Perfonaantx 1 Manager Change ........................................................... . ......... ...................... I~.o ......................... 9 PartialMgrCAange 1996 1997 1998 1999 2000 2001 2002 2000 2004 2005 06.12 - - - - - -0.45 -3.57 31.09 25.19 5.84 13.16 - - - - - 7.44 18.53 2.41 14.31 0.93 -2.63 - - - - - 7.01 17.97 0.04 1325 -0.28 -2.55 - ............ - ........... - ........... - ........... - ........... 80.00 ............ 80.00 ........... 80.00 ........... 80.00 ........... 80.00 ........... - ................ ......_ ......_. ......_. -....._. ....-.._. ......._. ......_. ......_. ......_ '100.00 100.00..... ...._. ......_. ...--_ -....._. ...-_. ......._. ......_. ......_. ......._. ....0.00. ....0.00...... HollWgs Analrsh as of 2006-09 Canpositiaa -30 % ~ ~ Cash 0.0 0 • Stocks 100.0 38 Bonds 0.0 0 Other 0.0 0 Total ............ ............. ~~ ..... .....-38 EaeKy Style % MaM1et Cap % 7 a Grant ............. ....................._ 10.4 ............_.. 21 - 1 Large 50.6 ID 1o Is ~ Mid 36.3 ti 3 Small 2.7 0 0 3 ............. Micro ........___--....... .... 0.0 Val Coe Grlh ....... ..._ ................_ ----....._..... Avg Market Cap Imll 13766.8 Measures % CxoMh Factors % PncPJEarrwngs 19.03 LT Earn Gr 1226 PnceNBoolc 3.02 Hlst Earn Gr 10.98 Price/Sales 1.46 Rods Val Gr 669 Pnce/Cash Flow 11.18 Sales Gr 7.46 Drvldend Yldd 1.38 Cash Flow Gr 5.15 WkM Meese Slyle Avg Eff Ouratian' - Avg Eff Maturity' - Avg Credit Quality' Not Rated Avg Wtd Coupon' - Avg Wtd Rice - Shod Intma Long ........................................... ' as d 200649-30 ............................. Credd Hating Breakdown ............................................... % Mmurily Breakdown AAA - 1-3 AA - 3-5 A - 5-7 BBB - 7-10 BB - 10-15 B w Below B - 15-20 Not Rated - 20-30 30+ d5 le»staroet Perferseeoe Ouerledy Rdsan ao Gtyory Separate Attroums US SA Larye 8bnd a5 70 Perterereeoe llesrtie lwiltkn categrsyl liatary Total Return % +/- Benchmark 1 +/- Benchmark 2 Turnover Ratio % .................................... Total Net Assets Imlt Expense Rago Stock % .................................... Band % TopHddirys Styb MklCap %Mkt Box Sects Irrdl Cep Safeway Inc. ®Q 13,494 3.58 flyanair Hokings PLCADR ®© 8.243 3.41 Volvo AB AOR ®~ 24, I (b 3.14 Bayer AG ADR ®~ 37,191 3.13 Reclslon Castparts Corp. ®~ 8,557 3.09 Lockheed Martin Corporation ® ~ 36.478 3.05 Apartment Irnestment fi Management ®© 5,298 294 StancyrJe, hc. ®8 3,073 2.93 Hevalett-Packard Canparry ®~ 100,492 2.86 0 Peso Corporation ®~ 9,490 273 J2 Global Communications, Inc. ®® 1,350 2.71 VCA Antech, trtc. ®® 3.002 2.68 knerrlational Game Tech ®~ 14,065 2.66 Smm Property Group, Inc. ®© 20.042 2.ss PG fi E Corporation .. .. . . ®Q . .... . 14,497 . ... 2.64 ........ ....................... .......... .. . .. F4L Ckxporetim . . ®Q 12,534 2.64 EchoSter Commurxcatiorts Corp. ®® 14.563 2.64 ~in9 ~~rn ®~ s2,s7s z.s2 Loews Capaation ®© 20,872 2.61 NYSE Group ®© 11,668 2.61 Top 20 hddngs 57.3 Ty 3 Epity Seotas % Rd BMt Rel BAA2 Rrtancial Senates 28.58 - - "" Business Services 15.54 - - _ Industrial Materials 14.04 - - - Tep 3 FixM laeesae Seoters % Rd BMI Rel BM2 - Asset-backed - - - - Cash - - - - Cmvertible - - - ® Morringstar 2007 Aq rights rcservcd Use dthis codem repsids erpert pwrNedae. a is is he used W spedakst nstiomans tints The slomreon romekud herdrt 111 rs propietary m Momngs[a arid'or M\ lRN ING V II'll le its corned prowlers; 121 may rim tie coped, adapted a dis9ibued; and 131 is not wanrrted m he ackvdte, compleoe or tarcty. Netts Momsgstx ror es corrted providers tiro responsible for arty damages kn losses rising horn arty use d the ufotmaoon, seep[ where such damages a bsses canna[ be limted a excluded W bw n you psisdidbn Past 6sarcel pedamarce is m giarantee d hture ressks MaNnpstarDiretY•' I Pnm Date: 2007-01-19 I ' Rockwood Capital Strat Eq Investment Summary it 1~ Treilinq l1aWm Taal +/- +1- Cat% Return% BM1 BM2 Rank' 1 Mo 1.40 -0.00 0.20 18 3 Mo 5.20 -1.50 -1.92 58 6 Mo 10.06 -2.68 -2.03 50 YTD 13.16 -2.63 -2.55 53 1 Yr 13.16 -2.63 -2.55 92 3 Yr 14.46 4.02 3.27 7 5 Yr 13.64 7.45 6.48 2 10Yr - - - - 15Yr - - - - 'Rank date as of 2001:09-30 llat6tps as of 200 ManrnQsta_ r _-_~ 6.09-30 nvwau a user s var _ 10 Year - ~faating 5* 5* 5* --_~'' Risk - .3- --- - Return - 13.96 12.21 - ~ hvestmems Rated 243 243 213 118 RisWReward Versus Benchmark I 3 Year 5 Year 10 Year Alpha 1.75 8.35 - Beta 1.34 0.72 - RSquared (%} 71.04 56.44 - Traclang Enor 6.29 8.57 - Information RatrO 0.66 0.88 - Excess Return 4.17 7.55 - ............................ Miscellaneous ........... ................. 3 Year ................ SYear ............ 10 Year Standard Deviation 10.83 11.84 - Sharpe Ratio 1.05 0.95 - Sortino Ratio 1.92 1.74 - Invesbnorrt Shstegy Our imvestmem phdosaphy Is based on research that we have cmducted over the past 30 years. We believe that stocks processing good underlying iundamerdals and Investor psychdogy/sponsorsMp provide the best opporwniry to Ind stocks and industry groups far a protracted penod. Our strategy is non-correlated to mast other managers, malnng rt attractive to clients seelang style dlverslflcatlon uvlthout the added expense of employing numerous style managers. Operations Minimum Inltral Investment - IncepnonDate 1994-01-01 Management Fees Actual: -% Max: 0.7096 Sales Fees - Firm Name - Telephone - WebAddress uvww.rockwoodcaptat.com Page l d t MU .s sf Grnaey B.adnrorlr t 8.t~tk 2 2006-12-31 USD Standard ti Paor's 500 TA Russell 3000 - - - - - 1996 1997 1998 1999 2000 2001 2002 20013 2004 2005 06.12 - - - - - -0.45 -3.57 31.09 25.19 5.84 13.16 - - - - - 7.d4 I&53 2.41 14.31 0.93 -2.63 - - - - - 7.01 17.97 0.09 13.25 -0.28 -2.55 - - - - - 80.00 80.00 80.00 80.00 80.00 - ......_ . ......_ . ......_. ......_. ......._. ......._.. ......_ . ......_ . .... __ . .100.00 100.00 ...._ . ......_ . ......_. ......_. ......_. ......._ . ......_ . ......_ . ......_ . ....0.00. ....0.00..... ilbldinps Analysis as of 2006-09 Composition -30 % +1' ~ Cash 0.0 0 • Stacks 100.0 38 Bonds 0.0 0 aher o.0 0 Total ............ ............. ~ ~...... ...... EOsity Sty/o % Markel Cap % 21 17 ,a Grant .._._- .............................. 10.4 ............ Lmge 50.6 l0 1o Is ~ Mid 36.3 H 3 Small 2.7 0 0 3 .................................... Miao _-. _ 0.0 VaI Core Grri ..............................~-- ....-----... Avg Market Cap (mll 13766.8 Measaes % GrowthFamors % Pnce/Earrkrlgs 19.03 LT Earn Gr 1226 PricPlBook 3.02 Hist Earn Gr 10.98 PricrJSaks 1.46 Rook Val Gr 5.69 PricelCash Flaw 1 L 18 Sales Gr 7.46 Orvldend Yldd 1.38 Cash Fbw Gr 5.15 Fixd Moems StYI• Avg Eff Duration' - ~ Avg Eff Maturity' - 8 Avg Credt Quality' Not R ated i Avg W[d Coupon' - Avg Wtd Price - Shat Intrm Lmp ...................................... ............. ' ns of 2006-09.30 Credit Bering Breakdown % Maturity Breakdown % AAA - 1.3 - AA - 3-5 - A - 5-7 - BBB - 7-10 - BB - 10-15 - B or Below B - 15-20 - Not Rated - 20-30 - 30+ - as lawsfntoat Porfornrnnoo Duarledy Rerun no Gegery SeparateACCOUms l1S SA Larye Bfend E5 r.o PoAorrnnooOasrOe (withn category) iHiamfy Total Retum % +/- Berxhmark 2 .................................... Turnover Rata % Total Net Assets Iml} .................................... Expense Raao ........................... Stock % .................................... Band % Tep Holdings Style MN Cap %Ntld Boa Sector Ima11 Cap Safeway hc. ®~ 13,499 3.58 Ryanair Hollings PLC ADR ®~ 8,243 3.41 Volvo AB AGR ®Q 24,105 3.14 Bayer AG ADR ®~ 37.191 3.13 Preclsan Castparts Corp. ®Q 8,557 3.09 Lockheed Martin Corporation ®~ 36,478 3.05 Apertmem itvestment 6 Management ®© 5,296 294 Stencyde, Inc. ®8 3,073 2.93 Hewlett-Packard Comparry ®~ 100,492 286 ~ Paso C°rporatan ®~ 9,493 273 .................... J2 Globid Comrnxtaatrons, Inc. .... ®® 1,350 2.71 VCA Antech, Inc. ®® 3,002 2.68 hterrtatanal Game Tech. ®~ 14,085 ZJ36 Sman Property Group, ktc. ®© 20,042 2.66 PG ti E Corporation ®Q 14,497 2.64 FPL Corporation ® Q ,2.534 2.64 EchoStar Comrrlurncetions Corp. ®® 14,563 2.64 B0ein9 ~P®M ®~ 62,679 2.62 Loewe Carporaton ®© 20,872 261 NYSE Group ®© 11.668 2.61 Top 20 hd6ngs 57.3 Tap 3 Epity Sootars % Rtl BM7 Rol BM2 Rnantaal Services 26.58 - - Business Services 15.54 - - kdurtrial Materials 14.04 - - Tep S ('ixod Mosme Sseters % Rtl BM7 Bel BM2 Asset~acked - - - Cash - - - Cmv:;mble - - - O Mornnpsar 2007 All n~rts reserved Use of Mis cotlem repures evert proMedpe. k is to De used by spetietlst nsatwons onM The idortmeon coNabed herere 11) is pmpritlary m Momngstaranya f11T1 p1f{1• rte cement prowlers; 12) may na De coped, adapted a disoibuted; and 131 i; nawanamed m be acwrtle, conplete or terNy. Nertter Mbmagitar mr ks cmhm providers are resporadtle f0. arty images a MnRN ING V 1111 losses arnmg horn arty use U UG utormaaon, except where such rbmages a bsses carma be GmteO a excluded by law n you ynsdiabn Past IYlercnl pedarrerce Is no guaranore tl faun resJts 1 tv@nagarChange ...................... ...tr'o Q Partial Mgr Charge n I ManingstarDirettsa ~ Prim Date: 700)-0119 Page 1 d t ' Rockwood Capital Strat Eq Investment Summary i~ II ~~ i~ Trailing Rtrwm total +/- +/- cat % fleturn% BMt 8M2 flank' 1 Mo 1.40 -0.00 0.20 18 3 Mo 5.20 -1.50 -1.92 58 6 Mo 10.06 -2.68 -2.03 50 YTD 13.16 -2.63 -2.55 53 1 Yr 13.16 -2.63 -2.55 92 3 Yr 14.46 4.02 3.27 7 5 Yr 13.64 7.45 6.48 2 IOYr - - - - 15Yr - - - - •flank date as d 200(:0930 Ratings as of 200 Mommgstar._- 6-09-30 ra..rau a y 5 Y~ 0 Y9ar - ~~I".~ 5* 5* 5* _-~~ -_ ____._ Risk - '-T;5r3- --_.._ fleturn - 13.96 12.21 - ~ itvestmerrts Rated 243 243 213 118 RisWRtsward Versus Bencnmark 1 3 Year 5 Year 10 Year Alpha 1.75 8.35 - Beta 1.34 0.72 - RSquared (%} 71.04 56.44 - Tracking Erra 6.29 8.57 - Information Ratio 0.66 0.88 - Excess Retum 4.17 7.55 - Miscellaneous 3 Year SYear 10 Year Standard Deviation 10.83 11.89 - Sharpe Ratio 1.05 0.95 - Satino Ratio 1.92 1.74 - ~m~~ 2006-12-31 Crsnaey Bandamerk 1 Brraokraark 2 USD Standard 8 Poor's 500 TR Russet 3000 zo 0 ~"~ °~r~p~e~ In»s1meM Strategy Our investmem phtbsaphy is based on research that we have conducted over the past 30 years. We belreve that stocks processing good underlying iundameMals and invests psychdogy/sponsorship prwlde the best opporturnry to land stocks and industry groups fa a protracted period. Our strategy is nanconelated to most other managers, making rt atoracove to clients seeking style dlverslficanon without the added expense of employing numerous style managers. Operations Minimum Inroal Imrestment - MceptionDate 1994-01-01 Management Fees Actual: -% Max: 0.7096 Sales Fees Finn Name - Telephone - Web Address www.rockwoodcaptal.com I~ L__J - - - - - 1996 1997 1998 1999 2000 2001 2002 2006 2004 2005 06-12 - - - - - -0.45 -3.57 31.09 25.19 5.84 13.16 - - - - - 7.44 1&53 2.41 14.31 0.93 -2.63 - - - - - 7.01 17.97 0.04 1325 -0.28 -2.55 - - - - - 80.00 80.00 80.00 80.00 80.00 - .....-_ .... . _.. ...... . ......_. ...... . ......_. -..... . ......._. ...... . ......._. ....... . ......_. ...... .....__. - ......._. .100.00 100.00._... _ _ _ _ _ _ _. . .._. ......._. ....0.00. ....0.0(1..... Hoidinps Analysis as of 2006.09 Composition .30 % f m Cash 0.0 0 • Stocks 100.0 38 Bonds 0.0 0 Other 0.0 0 Total ............. ..... --..100...... .....38 Eatriry Style % Markel Cap % 1 a Gtanr ............. ...............-....... 10.4 ................ 2 17 Large 50.6 l0 10 Is ~ Mid 36.3 0 0 3 3 Small ... . ............... ...... 2.7 ............... Micro 0.0 Val Core GrYI ............ ........................ ............... Avq Market Cap (ml} 13766:8 Measures % Cxavth Factors - % PnceJEarrungs 19.03 lT Earn Gr 1226 Price/Book 3.02 Hist Eam Gr 10.98 Price/Seles 1.46 Rode Val Gr 5.69 PncelCash Flaw 11.18 Sales Gr 7.46 Dmdend Yldd 1.38 Cash Flow Gr S 15 Fixed Moome SIyN ,~ Avg Eff Ouraliont - Avg Eff Matttritya Avg Credt Oualrtyt Not Rated ~ Avg Wtd Coupons - Shai Intrm Lmg Avg Wtd Puce - ' as d 2006-0930 Cadiz Bating &eak~wn % Maturity Breakdown % AAA - 1-3 - AA - 3-5 - A - 5-7 - BBB - 7-10 - BB - 10-15 - B or Below 6 - 15-20 - Not Rated - 20-30 - 30+ - fly aar•saserrt reasarsesrwe Orrarterly Relrxn no GtMaY Sa1>erale AtTOtsms US SA Large BNnd fly zo Pertarwerwe 0raA7e IvMhin category) listoty Total Retain % +/- Benchmad: 1 +/- Benchmark 2 Tumwa Rata % Total Net Assets (ml}~ - Expense RaDO .. ......................... Stock % ... a«tc 9u .................... Tepael~tags Styb Mkt Cap %Mkt Box Setter Irlr11 Cap Safeway Inc. ®® 13,494 3.58 RyanairHokingsPICADR ®© 8,243 3.41 Volvo AB ADR ®~ 24,105 3.14 Bayer AG ADR ®Q 37.191 3.13 Precnsart Castparts Corp. ®Q 8.557 3.09 lodcheed Maron Corpaabon ®~ 36.478 3.05 Apartmem kwestment 8 Management ®© 5,298 294 Stencyde, Inc. ®~ 3,073 2.93 Hewlett-Packard Company ®® 100,492 2.86 0 Peso Corporaton .. . ®~ 9.490 2.73 J2 Global Comnunlcations, ktc. ®® 1,350 2.71 VCA Antech, Inc. ®® 3,002 2.68 knernatanal Game Tech ®a 14,085 2.66 Smm Property Group, k1c. ®© 20,042 2.66 PG 8 E Corpaatim ............................ ®Q 14,497 2.64 .................. PPL Corporation ........ ®Q 12,534 2.64 EchoStar Commtracatbns Corp. ®® 14,563 2.64 Boerlg Comparry ®Q 62,679 2.62 )Dews Corporation ®Q 20,872 2.61 NYSE Grnup ®© t 1,668 2.61 Top 20 hddlrtgs 57.3 Tep 3 FJgnity SeMess % fle1 BM1 HeI BM2 Fnanclai Sawces 26.58 - - Business Services 15.54 - - Industrial Materials 14.04 - - Tsp 3 F'oud hoenae Seotars % Bel BMt flN BMZ Asset-backed Cash Convertible O Mornngstar 2007 All OgMS aserwad Ose d this codelt awes overt bwwsedgc. k rs to be used b/ speaakst 11s1imaons ony Tk sfortroaon mrnabed herdn~ 111 rs propietary m Mampstarend'a ~\ /11~ IN6~171• ns convert prawders; IT) may nor be copied, adapted a dis[rib~ted; and 131 is nor warramed m he acaaate, tornpkte a turcly. Ne[her Momugsror rot ks crxnea prseMers aro aspasible fa arty damages a losses arising aom arty use d the ulorrnaoon, except where such damages or bsses canna be )tinted a exduded W taw m you luisdidbn Past rnarcnl perfarrrerce is m guraMee dhxue restks 1~ Maningslar Direde" ~ grid Date: 2007-01-19 Rockwood Capital Strat Eq Investment Summary TrsilinB Return Trial +/- +!- Cat% Return% BMt BM2 Rank' 1 Mo 1.40 -0.00 0.20 18 3 Mo 520 -1.50 -1.92 58 6 Mo 10.06 -2.68 -2.03 50 YTD 13.16 -2.63 -2.55 53 1 Yr 13.16 -2.63 -2.55 92 3 Yr 14.46 4.02 3.27 7 5Yr 13.64 7.~ 6.48 2 IOYr - - - - 15Yr - - - - 'Rank date as 4200609-30 Ratings as of 2006 Manmgstar__~..,_____ -09-30 (araWl - ayaer SYear 10 Year c.;; Rating 5* 5* 5* ~_ %' --- flick .. ----_ __..~ __, __r ~.. _ .__--}-TOg-- - ~ Return - 13.96 12.21 - ~ itvestments Rated 243 243 213 118 Risk/Aeward Versus Benchrrrerk 1 3 Year 5 Year 10 Year Alpha 1.75 8.35 - Beta 1.34 0.72 - RSquared (%} 71.04 56.44 - Tracking Error 6.29 8.57 - Information Ratio 0.66 0.88 - Excess Return 4.17 7.55 - Misselbneous 3 Year 5 Year 10 Year Standard Deviation 10.83 11.84 - Sharpe Ratio 1.05 0.95 - SortinoRatio 1.92 1.74 - InvegmeM Strategy Our irrvestmem philosophy Is based on research that we have conducted ova the past 30 years. We believe that stocks processing yood underlying fundamentals and invests psychdogy/sponsorsfup provide the best opporWnity to lead stocks and industry groups to a protracted period. Our strategy is non-correlated to most other managers, making rt atlracDve to clients seelnng style dlversitcation without the added expense ~ employing numerous style managers. Operations Minimum InlDal Iwestnrent - IncepnonDa[e 1994-01-01 Management Fees Actual: -% Max: 0.70% Sales Fees - Finn Name - Telephone - Web Address www.rockwoodcaptai.can 1996 1997 1998 1999 2000 2001 2002 2000 2004 2005 06-12 - - - - - -0.45 -3.57 31.09 25.19 5.84 13.16 - - - - - 7.44 18.53 2.41 14.31 0.93 -263 - - - 7.01 17.97 0.04 13.25 -0.28 -2.55 - - - - - 80.00 80.00 80.00 80.00 80.00 - ......_. ......_. . -.._. ......_. ......._. .....__. ......_. .....__. ......._.. .100.00 100.00..... ...__. ......_. ...-.._. ._..._. ....- _. ......_. .. _ -._._- ......._. ....0.00 ....0.00..... Hold'mps Analys Compositioe is as of 2006 -09-30 % ~ w Cash 0.0 0 • Stocks 100.0 38 Bonds 0.0 0 Other 0.0 0 Taal 100 38 Epuiry style % Market Cap % Grant 10.4 Large 50.6 10 l0 t6 ~ Mid 36.3 N Small 2.7 0 0 3 3 .............. Miao ............._.. _.._.. __--~ 0.0 Ual Core Grtt ........... ................... ._- - -- ..... Avq Market Cap (still 13766.8 Measures % Growth facbrs % PncelEarrNngs 19.03 LT Earn Gr 1226 PnceBook 3.02 Hest Earn Gr 10.98 Price/Sales 1.46 Rook Val Gr 5.69 Pnce/CashFlryw 11.18 SalesGr 7.46 Dividend Yldd 1.38 Cash Fbw 6r 5.15 Foe! 4raeme Style Avg Eff DaaOm' - Avg Eff Maturity' - Avg Credit Oualay' Not Rated Avg Wtd Coupon' - Avg Wtd Rice - Sha11n1nn Lanq .._ ................................~---..._..... ' as d 2006-09.30 Crodit Rating Breakdown % Matudy Broakdorvn % AAA - 1-3 - AA - 3-5 - A - 5-7 - BBB - 7-10 - BB - f0-15 - B or Bebw B - 15-20 - Not Rated - 20-30 - 30+ - T NAnagerChanga ~..... . -- ------------------~- --....._......n.o Q PartialMgrCharge a5 1a11esdMe[ rernrweeee Orrartedy Retran d0 Gregory Separate Accounts US SA Lava Blend a5 zo Pestarnleeoe Oeertis Iwithin category) ~~1I Total Return % +/- Bertchmark 1 +/- Benchmark 2 Turnover Ratio % Total Net Assets (mq .................................... Expense RaDO Stock % Bmd% TepNeldings Styb Mkt Cap %NMct Box sacra IfNI Cap Safeway Inc. ®Q 13,494 3.58 Ryanair Hokfings PLC ADR ®© 8,243 3.41 Volvo AB ADR ®~ 24,106 3.14 Bayer AG AI#1 ®Q 37.191 3.13 Reaslon Castparts Corp. ®Q 8,557 3.09 Lockheed Moron CorpaaDOn ®~ 36,478 3.05 Apartmem kwestment S Management ®© 5,298 2.94 Stencyce, Mc. ®~ 3,073 2.93 Hewlett-PackardComperry ®p 1(10,492 2.86 D Paso Corpaatron ®Q 9,490 2.73 J2 dotal Communications, inc. ®® 1,350 2.71 YCA Antech, Inc. ®® 3,002 2.68 6tterrratanal Game Tech. ®a 14,085 2.66 Smm Property Group, Inc. ®© 20,0 2.66 PG 1r E Coryaaem ®Q 14,497 2.64 PPL Corporatim ®Q 12,534 2.64 EchoStar Comnwracatiorts Corp. ®® 14,563 2.64 Boeatg Comparry ®~ 62,679 2.62 Loews Corporation ®© 20,872 261 NYSE Group ®© 11,668 2.61 Top 20 hddings 57.3 Tep 3 E9nity Seotan % Rel BM1 Bel BM2 Financial Services 26.56 - - Business Services 15.54 - - Industdal Materials 14.04 - - Tag ~ FixeA Yoewe Seetars % Ral BMt Bel BM2 Asset~acked - - - Cash - - - Cmvertttle - - - ' L Morningstar 2001. All ddrts reserved Use dthis tooted reprrrcs expert lnrwledge. h is [o oe used M speddist nsrdodians only. Th ktonrooon rpdabed hertim 11) is proprietary to Momnpstararr4ru Ml /RN 11~6~s7 to Rs corxed prmnders; 12) may rid De coped, adapted a disbibued; arM 13) is ndwanaded m be accurate, cornplete a tercp. Neither Momsgstar ror is cnkent prodders are respom~ble to arty damages a losses xking from arty uce d the idorrnadon, except where such damages a bsses canrrot be limtetl v exduded oy law in you hmdicibn Past rnar¢bt pedameree is no guararxee d h[ve recces lilt pate es d Grraaey Bmehmark 1 Baadwesrk 2 2006-12-31 USD Standard B Prxx's 500 TR Russeq 3000