Investment performance summary

              STATE OF OKLAHOMA
COMMISSIONERS OF THE LAND OFFICE
INVESTMENT PERFORMANCE SUMMARY
JUNE 30, ~ 1'197
Prepared by
HOLBEIN ASSOCIATES, INC.
15301 DALLAS PARKWAY
SUITE 810
DALLAS,TEXAS 75248
(214) 458-3206
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DESCRIPTION OF INDICES
The Dow Jones Industrial Average is based on the average market price of 30 of-the largest, most widely held stocks traded
on the New York Stock Exchange. The average is calculated by dividing the sum ofthe per share prices of the 30 stocks in
'"1tTe Index by an adjusted divisor to accommodate splits and chanqesin the stock composition.
The Standard & Poor's 500 Stock Composite Index is a capital-weighted index representing the aggregate market value
of the common equity of 500 stocks primarily traded on the New York Stock Exchange. The 500 stocks are composed of 400
industrial; 40 utility,' 40 financial, and.zo transportation companies: The weight of each stock in the' inde-x,is proportional to
its price times the number of shares outstanding.
The Wilshire SOOO·Equity Index 'is a capital-weighted index of all actively traded common -stocks in the United States. The
index is calculated daily in a manner similar to the S&P 500. The capital value of the index is composed of approximately
86% New York Stock Exchange issues, 3% American Stock Exchange issues, and 11% Over the Counter issues.
The Salomon Brothera High-Grade, Long-Term Corporate-Bond Index is a market value-weighted index composed of
approximately 775 utility and industrial debt issues with a quality rating of AAA and AA. Each issue has a minimum maturity
of 12 years with an outstanding par amount of at least $25 million.
The Lehman Brothers Government Corporate Bond Index is a market value-weighted price index composed of
approximately 5000 publicly issued corporate and U. S. Government debt issues rated investment grade or higher. Each
issue has at least one year to maturity and at least $50 million par amount outstanding.
The Lehman Brothers Aggregate Bond Index measures the total return of all major sectors of the domestic, taxable bond
markets and is composed of the Lehman Brothers Government Corporate Index, the Mortgage Backed Securities Index, and
the Asset-Backed Securities Index.
The 91-Day Treasury Bill Index is based on the average yield for 91 Day Treasury Bills at weekly auctions.
The Consumer Price Index used in this report is a measure of the inflation of the prices of goods and services for the urban
consumer. The Bureau of Labor Statistics calculates the average price changes for several thousand items in approximately
85 urban areas. The index value for the most recent month is not usually available when this report is issued, so for the most
recent quarter the mid-month value is used as an estimate of the final month's value.
1
Economic Review Second Ouarter 1997
Capital Market Review
Second Quarter 1997
i jliJd,.~~tfl#4#!:blti!~1:tl§"~~;~'i(,;l;~,(;,,~';;\,~~[Q;ft'.iH$i!t.£f'Bl?·trXl~;il~,¥I,~'YO}fiJ
Standard & Poors' 500 17.5 34.7 28.9 19.8 14.6
Wilshire 5000 Equity 16.9 29.3 26.8 19.1 14.0
Dow Jones Industrial Average 17.1 38.5 31.5 21.4 15.8
EAFE (after taxes) 13.0 12.8 9.1 12.8 6.6
EAFE Ex-Japan 8.6 27.4 19.8 15.2 N/A
IFC Investable 6.0 13.2 6.2 13.0 N/A
Lehman Aggregate 3.7 8.2 8.5 7.1 8.8
Lehman Mortgage Backed 3.8 9.1 9.0 6.9 9.1
Lehman Govt/Corp 3.6 7.8 8.3 7.2 8.7
Lehman Govt/Corp Long 5.5 9.2 10.6 9.0 10.1
Lehman Govt/Corp Intermediate 3.0 7.2 7.5 6.5 8.2
SB World Govt. Bond Index 3.0 3.9 7.4 7.6 8.9
SB Non-US Govt. Bond Index 2.8 2.2 7.2 8.2 9.3
SB Non-US Govt Bond Idx. Hedged 3.1 13.0 12.0 9.6 8.1
JPM Global Govt. X US Unhedged 2.6 2.7 8.0 7.6 9.2
JPM Global Govt. X US Hedged 3.3 10.4 11.1 8.8 N/A
JPM Emerging Mkt. Bond Index 10.6 32.5 24.8 17.6 N/A
Russell NCREIF Property Index 2.5 9.9 8.7 5.3 4.4
Sal. Bros. New Large Pension Fund 4.6 9.1 9.8 8.2 9.7
90 Day Treasury Bill 1.4 5.4 5.4 4.6 5.7
Consumer Price Index (Adjusted) 0.3 2.3 2.7 2.6 N/A
The economy eased back to a modest annualized growth rate of 2.2% in the second
quarter after the extraordinary 5.9% annualized growth rate experienced in the first
quarter. Industrial production increased steadily throughout the quarter and was up
0.8%. The CPI increased 0.3% for the quarter bringing the annualized rate for the
first half of the year to 1.4%, the smallest increase since the first 6 months of 1986.
The economy added 706,000 new jobs in the second quarter dropping the
unemployment rate to 5.0%. Consumer demand fell in the second quarter as can be
seen by the 0.7% decline in retail sales and by the increase in inventories in March,
April, and May. Housing starts fell dramatically in May before recovering somewhat
in June to finish down 2.5% for the quarter.
The equity markets skyrocketed in the second quarter, as economic data poured in
suggesting a healthy economy without inflationary pressures. All major indices
posted large gains for the quarter, with smaller cap stocks finally participating fully
in the 1997 rally. Looking for other areas of value in May, investors turned to small
cap stocks sending both the Russell 2000 Growth and the Russell 2000 Value Indices
up 15% and 18% respectively for the quarter. However, for the year-to-date and
twelve-month time periods, the Russell 1000 Index is 840 basis points and 1600 basis
points ahead of the Russell 2000 Index. The poorest performing sector of the equity
market over the past year was small-cap growth with a return of 4.6% for the Russell
2000 Growth compared to 28.2% for the Russell 2000 Value Index and more than
30% for the large-cap indices. The developed international markets, represented by
EAFE, were up 13%, while the Japanese market climbed higher for the quarter
moving the MSCI Japan Index up 23% and European issues gained 9%.
Eauitv - Short-term
I - - I Ri[Y.~~Il'$tyl{lti4i~e!(;>',::c',~':' ,';ii f:'::' Qt~·;',:,Y],r '3'.Yrs '5Tl:~ l()Ws~
Russell 1000 Value 14.7 33.2 26.0 19.9 14.4
Equity - Long-term Russell Mid Can Value 11.6 26.8 23.0 18.7 14.0
Five plus years of extremely favorable results have equity investors thinking that Russell 2000 Value 15.1 28.2 21.2 20.2 13.0
10,000 or higher is not an unreachable level for the Dow Jones Industrial Average. Russell 1000 (Large cap) 16.8 32.3 28.0 19.5 14.5
Most equity indices approach 20% for the last five years. The poorest performing Russell Mid Can 13.6 23.0 22.9 18.3 13.8
segment of the market has been small-cap growth at 15.1%. Returns for the ten-year Russell 2000 (Small cap) 16.2 16.3 20.1 17.9 11.1
period show strong results as well with large cap indices averaging 15%. Small-cap Russell 1000 Growth 18.9 31.3 29.9 19.0 14.6
stocks over that period have not performed as well as large-cap but have still Russell Mid Cap Growth 14.7 17.6 22.5 17.4 13.2
provided good absolute returns. Russell 2000 Growth 17.6 4.6 18.5 15.1 9.0
2
Capital Market Review
Second Quarter 1997
Fixed Income - Short-term
The bond market posted modest gains as positive economic data kept the Federal
Reserve from raising interest rates further and encouraged bond investors about the
future of the economy. Inflation barely rose despite the drop in unemployment rate
in May to its lowest level in 24 years. Very nice results occurred in all aspects of the
bond markets ranging from 3.0% for the Lehman Intermediate Govt./Corp. Index to
5.5% for the Lehman Long Govt./Corp. Index. Corporate bonds had the best results
of the major bond sectors with the Lehman Corporate Bond Index up 4.1% for the
quarter. For the last year the Lehman Aggregate Index returned 8.2% and the
Lehman Mortgage Backed Securities Index was up 9.1%. The single best
performing area of the bond market continues to be Emerging Market Debt with the
J.P. Morgan Emerging Markets Bond Index returning 10.6% for the quarter and
32.5% for the last twelve months.
Fixed Income - Long-term
Over the last five years, domestic fixed income returns ranged from 6.5% for the
Lehman Intermediate Govt./Corp. Index to 9.0% for the Lehman Long Govt./Corp.
Index. The Lehman Aggregate Index was up 7.1% over the same time period. Over
the last five and ten years, long term governments and corporates and high yield
bonds have shown the best results. Internationally, hedged bonds have fared better
than unhedged bonds as the dollar has strengthened considerably. The J.P. Morgan
Global Govt. Ex.-US. Hedged Bond Index returned 8.8%. The J.P. Morgan
Emerging Markets Bond Index was up 17.6% over the same time period.
Growth of a Dollar
$2.60 I ,
$2.40
$2.20
$2.00
:6 $1.80
~e
$1.60
(!}
~ $1.40
$2.47
$1.84
- -s_ e:-c:=_ _ _ _ _ _ ::t n~~
$1.25
$1.
201- ~- d;:::=::' -- 1 $1.00- - - - - - - - - - - - - - - - - ~
$0.80 - - - - - - - - - - - - - - - - - - - - - - - - - -
$0.60 I I I I I I
06/92 06/93 06/94 06/95 06/96 06/97
15.0%
E
~<:Il 10.0%
1:1::
5.0%
-90 DAY US T-BILL
-LB AGGREGATE
-S&P500
-EAFE
-SBNon-US
Return/Risk Matrix for 5 Yrs.
•
20.0% + - - - -' - - - - '- - - - ! - - - -' - -. '- - - - -
- - - - - - - - - - -, - - - - , - - - - ,- - - - - .'
, . Ii---:----:-- --~----:-- --: -- --
0.0% I I I I I I
0.0% 2.0% 4.0% li21° 8.0% 10.0% 12.0%
3
• sap 500 .90 DayT-Bills. EAFE
• LB Aggregate. SB Non-US
Equity Index Returns - Short Term
March's broad-based and significant setback in the domestic equity markets proved short-lived as April found a resumption in the ascension of large capitalization indexes toward all-time
highs. An exception to the April resurgence was found among the Russell 2000 series of indexes, which returned in the +/-1% range on the month. Looking for some relative value in May,
investors finally turned to small cap stocks and the Russell 2000 Growth Index responded with a 15% gain, while its Value counterpart returned nearly 8%. Although indexes of smaller cap
orientation managed to keep pace with larger benchmarks on the quarter, the year-to-date and twelve-month returns are a reminder of just how strong large caps have been recently: the
Russell 1000 is 840 basis points ahead of the Russell 2000 for the year-to-date and approximately 1600 basis points for the twelve months. Also climbing higher during the quarter were
Japanese shares as the MSCI Japan Index rose 23°io. Although a relative laggard, European issues gained 9%,d.e·spite Germany, France and the UK each underperforming that return.
""""""""""""""\'i"~""" """ """""" """"""" """""""""""'''''''''''''''''''''''''''''''''' """"""",' ,,: """""""""""""""""'t"""""""'""""" ,.'.,.,.,".,.,.,.,.,.,.,.,.,.,.,.....,.,.,.,.,.,.,,.·,,.·",·",·""""""""""""""",,,,',,,1 23.3%
116.2%
RUSSELL 2000 I,I,I,;,';':,,,!,,,,,,,;',,,",@@"""I,I,mtb~ ""t"g .c'''':.::<.~:.",~.. "",."""",:lR"@,Qt"""", """"""""""""""""""""",1 16.3%
S&P 500
RUSSELL 1000 GROWTH
RUSSELL 1000 VALUE
WILSHIRE 5000
S&P MIDCAP
RUSSELL 2000 GROWTH
RUSSELL 2000 VALUE
EAFE - $
EQUITY INDEX RETURNS - For The Period Ended June 30, 1997
DJIA
.......:.;.;.:.:.;:::::::::;::;:::::::::::::::::~:::~
3.0%
2.8%
17 10/"
?() 10/"
ce, """"",,~ "':"""""""":'" """"""""i""""""""'i"""""":'·,.,:,:,:,:,:,:,:,:':,:,?"",:,:,:,.,.:.;;.:;:::., ...,." """''''''}'''':'"'''''''''''''i':''''' """"""""":,,, """"""""'","", "':"':""':""': "",~",,\ ""i""':i"iiiii""""ii",""'i: {"",,,,,:,,,",,";",,,,",,,,,,,,,,,,,,"",",",",",",",",","",',~,i,",, i"""""""'i""""""""""""""""'" ,·,·,·,·,·,·,··",:"""""""""""""",,1 38.5%
I i 17 <;Ofn
?() 1;°/" ~~__""_~4_~"7&~=':=:~~=:~::W' 347%
::::::::~:::::::::;: ..-....•;••;.:.;.:.;.;.;.;.;.;.;.;. .•;.;.;.;.;.;.-.;.;.;.;-;·;·;·;;:::,:::,::::::::::;:::;:;::;;:;::;:;:::t 1;::::: ::::::::::::::.:.:....•.
Ii·} I", """"""""",,,,,,,,,,,,;;,,,,,,,,,,"''''' """"""""""""""",,,,,,,,,,,",,,,,,,,,,,,,,,,,,,,,,,,'" ''''''''''''''':''' """"",'""""",,,,,,,,,,,,,,,:,,,,,,,,, "",:""""";:"~_!£,J""""::",,,,J:,t,,,,4':<1""""';; """""""""""""""""",,,,,,,",',i",","",",",""'" """""""""""""""""""""""""",."',',',','",','," 'i",,,,,,,,,,,,,,,,,,,',',','1 33.2%
1.6.9%-
171;Ofn
H ()o;" .7 Yo" .3 Yo
17.6%
I",:," ":':"'::'''''''',:':B??lKJ"",,''',J -4. ~6i%
J 1145R.1°%ln
"""""""",;8,;'", """"""","'I'''''''''X,'''", """""""""""",""""""""""""""""""'m"";;";"',",,, .:.:.:.:.:.:·.;:..·•..,•:.:W,',' ,., ,.•,..,.,.,.".,..,•.•.,..,.,..,•.•,. ,.,.•x. ''''''''''''''''''''"''''''' """"".".""""",,,,,,,,,,,,,.,,,,,,,,,,·,",",\"·"i"}.e,,·,,' """"'] 28.2%
EAFE - LOCAL CU RRENCY j..,I,I.I,.,;I: ..I,."""".:!"""",;"".'";",,,.,.,;" ..,.,.",ii!.;I"'i}}"'V."",.,.},.";.;,!,;,";'.,,··;,;",},·,;,,·t""'!'·'·'!';'}'!!!"!·":'~·"',,{,· """V i'!",..."",.,~"B.'.~'~1~(~.1L:% I , I ' I
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%
~LAST 12 MONTHS .YEAR-TO-OATE OLAST QUARTER I
45.0%
4
Equity Index Returns - Long Term
Although most investors are likely to fear time travel back to the early 1970's, just prior to the 1973-74 bear market, the phenomenal domestic equity market returns over the past three
and five year periods can't help but conjure up a mental jukebox playing Sonny and Cher's "The Beat Goes On'. Some staggering numbers emerge from the index retums below: (1) the
Dow has cumulatively returned in excess of 125% over the past three years and 160% over the past five, and (2) a dollar invested in the worst performing domestic index (represented by
the Russell 2000 Growth), is worth 37 cents more than the dollar-denominated EAFE over three years, and nearly 20 cents more over five. The strength of the US economy is apparent
not only from the superior return premia earned by the domestic equity indices, but also from the fact that the dollar has become stronger (relative to EAFE currencies) over the same time
frame. This is indicated in the lag of the dollar-denominated EAFE return to the local currency EAFE.
EQUITY INDEX RETURNS - For The Period Ended June 30,1997
DJIA~~. ~~~~~
SOP 500 1 21.4% I 31.5
0
19.7% I 28.8%
RUSSELL 1000 GROWTH 1----- 1 29.9%
19.0%
RUSSELL 1000 VALUE 1 126.0% 19.9%
WILSHIRE 5000 1 .1 26.8%
19.1%
S&P MIDCAP 1 1 22.4%
RUSSELL 2000 j 171.76.%9% 120.1%
RUSSELL 2000 GROWTH j 15.1% 1 18.5%
~ - .~ 21.2%
RUSSELL 2000 VALUE 20.2%
*~ 1
9
.
1
EAFE - $ % 12.8%
EAFE - LOCAL CURRENCY I 111.9% 13.7%
0.0% 4.0% 8.0% 12.0% 16.0% 20.0% 24.0% 28.0% I_ FIVE YEARS DTHREE YEARS I
32.0%
5
Managed Equity Portfolios - Style Spectrum Returns - Short Term
At the median, equity managers once again fell short of the S&P 500 return for the short-term retrospective. Over the past twelve months, especially, median performance has lagged,
trailing the S&P 500 by about 800 basis points. However, when evaluated against their passive proxies (and thus neutralizing some of the big cap effect evident over the past several
quarters), managers, at the median, are faring considerably better. Both Large Value and Large Growth managers are within 100 basis points of their Russell 1000 proxies. Small Growth
managers outperformed the Russell 2000 Growth Index by 300 basis points on the quarter, although they lag over the year-to-date and twelve month measurement periods. Small Value
managers, conversely, underperformed by about 150 basis points on the quarter, but have outperformed by 200 basis points over twelve months. In addition to active outperformance,
Small Value managers have a enjoyed a style bias relative to Small Growth managers, outperforming at the median by 2700 basis points.
EQUITY STYLE SPECTRUM MEDIAN RETURNS - For The Period Ended June 30, 1997
EQUITY MANAGER UNIVERSE""1"" """""."""""""'";"""""'"""""""""""'""""""""""""""""""","""'""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""":""'""':"$!"","+1"g~"","W~"&~"~"""""""",'""""""""""""","."""",.,.".".,.",.,.,.."""",,..,,""."""""."""",.""""""""""""""""""""",."",."""""""""",""""','" """"""""""""""""'1 30.2%
LARGE CORE I""""""""""""";"""""""';;'''''''':''''';' """""""""""""""""""""""'>""""""'''''''''' ,'"',',',',, ....:.,.,.,.,,',',',',',',',',',',',',','""""""""""""""""""""""""""""""""""""""""""""""""""""",!Ili,!i:m""""",~"g,R,:(,? .""""""""""""",:,,:,,""":"""""'""";;' """"""""""""""""""';;"""":;"""",:;,',:; """:; .""""""""""""""""""",;"""""",""",,,,,,,;,,,,,,,,,,,,,,,',1 33.6P/o
LARGE GROWTH
I, """"""';";"';'" """""""""""""""""""":;"""';"."""'"""""':; :""""""""""""""""""'''''''''''' """"'.';;"'>';' :.:.;:." .•z"", """""""""",,,,,,,,,,,,,,,,""" """"""""""""" ,,',',',',',',',":; ."""""""""""""",J,~",~~t~:::",,,,,,,,,,,""""""""':""""""""""""""",..,...:.:," """"""""""""""""""""""""""""""""""""',:,%""';""':; ;""",,;,,1 31.5%
LARGE VALUE ~i·Oi i, """""';"";;""';""""'":";""""""""""';"""""";"""""""""";;':";"'"'"''"''"''"''"''"""""""""""",),"""'"",.,i.,.",".",".","'",".",""""~""';"";"""""""",','", """""vi"dC",A""",:;"""""""l:§"3~;~"""",:;""" """"""""""""""",""":"""""";"""""""""""""""",""""";'"""'""""",":";"",",,",",:;",, """,,;;,,;"""""""""""""""""",,:1 32.6%
MID CORE ;!,t·9%
"""""""",;"""",;""""""".,., ,•.,.,.,"""""""""""""""':;"""""""""""""""",,:,,>., """"""""""":"""""""""",,,,,,,,,:,,,,125.3% ;.;.~,;.;.;.;,:,;.;.;.;.=.~.:.: -:::;:~~ ::;:::::::::::~:::::::;:::':':"':' .;.:.:;:;:;:.:;;;.:;:;::;:;:::~;::::;;.:; .... ;.;.; ••...•. ;.;.:.:.:.:.:.:.:::.:::::::::::::::::::::::::::::::;::::;::::::;;Z::IT::;:
18.5% MID GROWTH !'lS%
',',',',',',',',',',': """"""""""""""""""",';;"",';;; """;:,"';;";;:::"""""",,,,,,>:,,;;,""" """""""""""""""""""""""""""""""""""""""""""""""""""':""'}';;," "',',"":'1 14.0% 1 MID VALUE """"""""""""":;;"""""'""""""::;"':",'":,"',",',',.','.,,'.,,'..,,...,:..,:.;,..'.:.,..':.;,.,.,',,',','"';""""'":""""""""""""""""""""'";':;"'>", """""""",,,,,,,,,,,,,\, """"""""""~'?5f+"~"~0,&",#,,,Kl,,>. """""""";":,,""""';'">",:;""",,,,"""""""""'" ';' """""""""';' """""""""""""",,"""; """';"" """""""':;""':":; """""""",,1 30.7%
20.9% SMALL CORE .:;::~::~:::::::::::~:~::::~:::~::: ;;"': """"",:::,:'":n""::;;,:,:,'",:,:I,',:,:,'""",,,:,"'::H"ii@':l"""~':"':'::H",mTI:"':; ",;:":",""""""",,, """"""""""""",;","";"",,,,,,,,,,,,,,,,:,;,.''M;;;;I 18.7% -:::;:::'
SMALL GROWTH
I""" """:""""":' """""""""""""""ql!P5~.2'1o I 20 7°' • 0 • /0
SMALL VALUE -,""""'>l':""', ",l"" """':""'" ,:"""""",!, ,.,.,1",("""""""""""""""""""""",',>l,',',',',',""',',',',',',',','".,.,.,., """""""'!""""""'" """"""",!""",;"""" """"""""",!,"""""""""~"'~",@~*,:,~,;:..:,"'"""':"'" """":"':; """""""""":"""""""""""":"",,,,".,,.,.,., """"""""""""""""""""""""""""':"'""';"""""":"""">"t"",1 30.4% I
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%
IBLAST 12 MONTHS .YEAR-TO-DATE oLAST QUARTER I
35.0%
6
Managed Equitv Portfolios· Style Spectrum Returns· Long Term
An interesting similarity in median returns is evident within the capitalization segments of the Style Spectrum universe over the longer term performance retrospective. Among
large cap managers, the median return is distinguished by only 50 basis points over three years, while over five years the separation is a mere 130 basis points. With smaller cap
managers, the difference is 80 basis points over three years, and 100 basis points over five years. Relative to passive proxies, the median manager has underperformed the S&P
500 by 190 basis points and outperformed by 40 basis points over three and five years, respectively. However, with average active management fees around 50 basis points, it's
safe to say less than half the active managers have outperformed the S&P 500 over the measurement periods. Small cap managers, on the other hand, have added 300 to 700
basis points over three years, and 160 to 590 basis points over five years, at the median. That is considerable outperformance, even with fee-adjusted returns.
EQUITY STYLE SPECTRUM MEDIAN RETURNS - For The Period Ended June 30,1997
EQUITY MANAGER UNIVERSE
L
L
-
20.1% =:J 26.9%
20.2%
128.0%
..j
_ 20.0%
128.3%
+-
nTa
20.5%
.., 27.0%
123.9
"- I-
19.1%
123.9%
21.1
124.0%
n/a
125.6%
t 21.0%
125.6%
21.8%
124.6%
LARGE CORE
LARGE GROWTH
LARGE VALUE
MID CORE
MID GROWTH
MID VALUE
SMALL CORE
SMALL GROWTH
SMALL VALUE
0.0% 5.0% 10.0% 15.0% 20.0% 25.0%
I_ FIVE YEARS DTHREE YEARS I
30.0%
7
Equity Sector Returns
Health care issues have soared year-to-date, as drug industry stocks have returned nearly 33%. Arnong Industry leaders, Lilly earned 52%, Schering gained 49%, Pfizer returned
45%, and Merck advanced 30%. In contrast, Pharmacia & Upjohn has lost 11% in 1997. Also not contributing to the healthy returns of the sector have been Columbia Healthcare and
United States Surgical which are down 3% and 5%, respectively, from 1996 year-end. Finance issues have maintained a torrid pace in 1997 as consolidation continues. Alex Brown,
acquired by Bankers Trust, gained 47% as did brokerage brother Merrill Lynch. NationsBank shed its institutional trust unit (also to BT) and returned 34%, while Washington Mutual (suitor
of Great Western) advanced 39%. The Travelers (40%) led insurers. In the category the Rich Get Richer, Microsoft and Coca-Cola shareholders are 53% and 43% ahead of 1996 year-end.
Dell Computers has exploded 120% this year on the strength of enormous sales through the Internet. Direct distribution competitor, Gateway 2000, not in the S&P 500, has lagged
with a 21% return.
CONSUMER DURABLES
CONSUMER NONDURABLES
FINANCE & BUILDING
HEALTH CARE
CAPITAL GOODS
ENERGY RELATED
BASIC INDUSTRY
TRANSPORTATION
S&P 500 ECONOMIC SECTOR RETURNS - For The Period Ended June 30, 1997
1145n.o2.%
,,!(,!,!,!,!,!,!(f'MHFilliilil@,dfkIb,' m !E~~n !'!,!{iI'·'}!'Mi!,tHFiWf?·, ,!!IWfI!W!!f7;f?I8Wt!!){,ri'l 22.0%
Ii;' '",,,""""#"",,,,1'''' '"'"f'·f!·'·'·',m",·!,#,!"",'@'·}·{·'·m"'g,""'"''"'''"'''""'"'''·!'!'',!w{,m,{'".J,.,.",J"l!~r,"'!~fa""'!'!f"{'!' ,f,£.:,.~.~\~,,%!,¥,)!, 1 25.6%
:::W~~{{:~{~@W:;:j:j~:j::j::::~j:::m:j:j~:@j@i:7S:j::::.::::~j.:.:jj~:j::j~:~j:ji:i:j;fj:j:~mj:m:?:~:j:j:j:~j:;:j:;~:j:j:j~:jj:j:j:;:::~;:j:j: :::~::;:::: ,'."", !,!",""""!""!'"WlW,%}l! !,,',!,lK2?iElBf, '!'}!'!';:'!'''''''''')''''''{':·};:'·),m+'',6???E",/.·,',·';;ei!···,.,·,',',·,',,{,,··;r;o,·,·,@""'"fIl 51.0%
·.·.·.~../·":$l;L,, ...e;. ···"'··"·'···'·ni"'· "<')' (" )".} ···'·m,-x"{,'?,' "·)'·"'''N·'F' ,·1 47.1%
21.7%c.
j~J.j:j:j:j:j:j:~j:~m~j~:;:j::j:j:::j:j:;:j:j:j:j:j@~j j:j~:mj:j:j~:jj::::::::::::::::::::::::~ :::~:::: :;:.,.:.:.:.~::;:::::. :::::::~:::::~::::::::~:::::~j:::: :~:W: ;.: :..: ;.:.:.:.::::::::~:::::::::::;:::::::::::;::;::::::m::{:~~: ,.,.,j,.,.:;r'".i.{.;I,m"W'i,',',',f"'IItt' ..,.".• ::::::?'\.':':'/?}'~'::::':,f,), "·""""""~""'e•... ":::::·:c.'":·:·:·}) ,fNf{,1 45.6%
1770.
:§: i:~:}~:::~:i*~~~:~:~:;@j:::@::jf::@::~j:~:~m:~~~:?:;f::::;~~M:::mj~j::j:?:::~~j:::;:::j:m:~:;:?m;:;:~j~:jm~:ii::j?:j::mj@j ~j~:j:~j:j;;~;j;~j:::mfj*~:~%j::~j::{j{:~m:~r~j~f~j::!:~jg j:j:j:~:~~j:j:::ij:::j:jf:v:::~ j:j:}~~~tjI~H:m:~~?] 33.30/0
:ru.:: j:j~~:~%~j::jjt;f::~~:::::::;: j:::j:j:~~:t:;j~i:t{t@j:j~:j~$~:f?j::{;:\::j: ~: .•.•·•..•,.,',.·.,",':;:,,',1>""bM~ij "",.";"",;,N",J 24.4%
:j~~i%~I@EGj]j~~j:j:j*jj:j:j:f: :.:::::, :::::::::::t {<~{jr~ j:j;fj:j:j{:i:<t~jmnjrjj: 1r'Iii f%f'~rtJ 25.8%
UTILITIES 10.0%11.6%
-+-
;j:Nr]jjjji@j:j:~t~;.::~~\;;;~:::;:::.::;~·
0.0% 6.0% 12.0% 18.0% 24.0% 30.0% 36.0% 42.0% 48.0% 54.0%
ICLAST 12 MONTHS .YEAR-TO-DATE oLAST QUARTER I
8
Fixed Income Yield Curve
Absent any proclamations during the quarter from Fed Chairman Alan Greenspan that used either (1) "irrational" or (2) "overexuberant", interest rates settled lower across thematurity
spectrum, about 30 basis points on average. In fact, recently, much has been made of this economic expansion's homeostatic, or self adjusting, qualities. Just when it seemsthat an
interest rate hike is certain, economic data indicate one or more of the following: an absence of inflationary pressure, slight increases in unemployment rates, an ebb in the tide of housing
starts, or rising inventory levels. The Fed's incessant pursuit of 'credible" (Le., effective) policies appears to have given its deterrent 'stick' considerable influence. While many
economists have marveled at the "miracle" of this seven-plus year expansion, others continue to pursue higher levels of adequacy in the measures of economic activity, to ensurethat
something isn't being missed here. The latter group, while falling short of pessimistic, keeps a wary eye on items such as rising consumer credit delinquencies in gauging the economy's
overall health.
8.00%
7.00%
6.00%
5.00%
~o§
(;i
~.OO%
U
Q)
>=
3.00%
2.00%
1.00%
INTEREST RATE TERM STRUCTURE
r:.::~:..-::::.-:G:ove.rnm-ent Issues -.0 to 30 Year Maturity t:.:::~t.t.:': ::~:.-:..:.::~: .:-.:..::.~:t..:':.:~.:-.:..:.:.:.:-.:.:::~.::.-.
--June 30,1997
---·March31, 1997
_.. - •. June 30,1996
0.00% I I I I
o 15
Years-to-Maturity
5 10 20 25 30
9
Fixed Income Index Returns - Short Term
With interest rates falling in the second quarter, bonds enjoyed positive price returns, with long term bonds performing best, finally outpacing what has been a heady high yield sector.
The quarter was characterized by remarkable stability, with index returns near uniformly earned throughout the three months. The CPI continues to indicate an absence of inflationary
pressure: the unadjusted rate was 0.2% for the quarter, and May's number was slightly deflationary (-0.06%). Prices went DOWN! The 2.3% rate over the past twelve months has been
effected through health care cost control (note the 47% return of the Health Care sector over the same period) and a lack of energy price pressure. A consequence of the tame inflationary
environment has been a lack of widespread interest in the Treasury's inflation-indexed bonds: at the end of June, the issues represented only 0.7% of the outstanding Treasury debt.
LEHMAN BROS. AGGREGATE
LEHMAN BROS. GOV'T.-CORP.
LEHMAN BROS. GOV'T.-CORP. LT
LEHMAN BROS. GOVERNMENT
LEHMAN BROS. CORPORATE
SALOMON BROS. HIGH YIELD
LEHMAN BROS. MORTGAGE-BACKED
MERRILL LYNCH 1-3 YEAR TREAS.
90-DAY US T-BILLS
U.S. CPI
SALOMON BROS. WORLD GOV'T.BOND
(US$)
FIXED INCOME INDEX RETURNS - For The Period Ended June 30, 1997
.3.7% c.
i""""""""'"'''''''' """""''''''''''';'''''''~''''''''''''',''.',.,.,. ,.,..".,.".•....."...,. :...,....•...............,..........,..•,...,..,...".,..,,..,..,..,.,..,..,.,.,.;;,.J 8.2%
15.0%
~---------..., 3.6%
""+""" ",,,,,,,.,.,",",,"K'@".', .•·.,.".,.., ,......•........•.~........"...•. ;,"""""""'" .,.,""' ,,., ; , ".., ,.., ,.." .',',·,',·,·,',·@"',"g·,·······,···,·"'7.8%
5.5%
""""""'; ",""'''''i.'·'A····,·"'''",, ..,., , ".,., ,;•....~ ~ , •.,..""'.,.,""',.,",.. ,."."""",,, """""'" '.m'.· ·.·.·., , ,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,".",.,".," ,;,.." , ,.,.,,.,.,,.".,.,.,............ 9.2%
3.5%
o
.........•.,..,.,.,.,.,."',"",'".,"','"',,.,.,@;,' ..,,.,.,......•............•.........,..,."',','"•..,.•,'''',',, ..,.:::.:.: : , ,."..•.,..•.,•.,..••,....•,.,.,'".,....•,...••,.,.,.,.",.,.,."s,"••••,•.•,•.•,••••,.•••"1 7.4%
4.1%
.......•.•...•".•.,.,•.'.•,•.•,.,..•.,..•.,•.•.,...,.•..,..,.",.,....•.,..,...•,,•.•,.,•.,...,•..•.,•...,...,...,.,.,.,., ,.,',',',:.,.,:,:,:,,.,•,'.:....;.................,...,..,..".,.·.,.·.,.·.,.·.•,,.·..,.'1..8....8..%
I,!:!:..;,j,..··;,·,,·· •.•.•.•.•••...., ,.,..•,..".,.,.,., •............ , ,.., ..1·;!- ·;,...·.·.·;·; , ,..;,..;..,..; J.,;,;.i.;.~,;,'!,;,;,;,;,;,;,;,I,1,.·I·;·"i,.,R ..g~®, , ,.,,..,,.,"..,, ,.,.,.,.,.,,,.,.,.,,..,,..,,..,,.,.,.,.,.,.,.,.,.,., :..:.:..:·:,:·,·,·,·,1·4,·.,6,·%,1
3.8%o
:::::;~:::;:;:::::::;:j:;;;;mj ;;~: K:;:::~j:~:}};:{::::::::. .\ .,.·.,.,.,.,.,.,.·.·.;.'.ii·.·.;.,.,.,.,.,.,.,.,.,.,.,.".,., •..,.,. """"""",. """""""""""""",'i """" ..,.,,,, """""",""" """··""·",a 9.1%
;;::;;::::::::::::::::~-x::::~:;:::;~:}:::::::.:::· •••••••••••••••••:•''•'•''•{•."•"•"•"•"•;••;•j•:•:••;6.•,•..6•"•%,•,,••••••••••••••••••••••
••••.•.·,•,•·,•,•·•,·.·.•,·'''''','.1..5,.4% ~.
p.............. . ; "', ..'"',, , .'J 2.3%
3.0%
-1.2%
••••,•.••·•"'·;?;?fmN'iii:l~';'lll;:;''iii''';'H:1'K';';.·''',·,'· ..,,"""""""':.:1 3.9%
-3.0% 0.0% 3.0% 6.0% 9.0% 12.0%
IElLAST 12 MONTHS • YEAR- TO-DATE 0 LAST QUARTER I
10
Fixed Income Index Returns - Lona Term
In paralleling (not matching) the rise of the domestic equity market over the longer term performance retrospective, the high yield fixed income market has benefited from a combination
of slightly falling interest rates, quality upgrades, and debt retirement to outperform other bond indexes. During a time, since the 1990 recession, when Corporate America's health has
dramatically improved, as exemplified by record levels of profitability (meaning better interest coverage) and stock repurchases, the 400 to 500 basis point average premium earned by
high yielding bonds is amazingly on par with historical norms (evaluated over moving average periods of three and five years).
Although absolute returns for bonds pale next to the returns in the domestic stock market, with annual inflation rates consistently below 3%, real returns continue to be strong for fixed
income indexes, ranging from 4% to B% over the past three years and ranging from 3% to 6% over five years. The last time the US saw a five-year annualized inflation rate of 2.7% was
196B.
FIXED INCOME INDEX RETURNS - For The Period Ended June 30,1997
LEHMAN BROS. AGGREGATE 7.1%
8.5%
7.2%
B.3%
9.0%
10.6%
7.0%
7.9%
8.0%
9.6%
6.9%
12.7%
9.0%
5.6%
6.6%
4.6%
5.4%
2.7%
2.7%
7.4%
7.6%
LEHMAN BROS. GOV'T.-CORP.
LEHMAN BROS. GOV'T.-CORP. LT.
LEHMAN BROS. GOVERNMENT
LEHMAN BROS. CORPORATE
SALOMON BROS. HIGH YIELD
LEHMAN BROS. MORTGAGE-BACKED
MERRILL LYNCH 1-3 YEAR TREAS.
90-DAY US T-BILLS
U.S. CPI
SALOMON BROS. WORLD GOV'T.BOND
(US$)
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%
I_FIVE YEARS DTHREE YEARS I
14.0%
11'
zoI
-oW
en
s: »z
»om
s: mz-f
ecn
s:
s»: JJ -<
en
m
(') ::j
oz
OKLAHOMA SCHOOL LAND TRUST TOTAL FUNDS - TOTAL FUND INCOME RATES OF RETURN
FOR PERIOD ENDING 6/97
~~ r
6%
§----------~-----*---§-- ---§------- ----~---- ---------- ---------- ---------- ----------
*
8%
4%
2%
0%
* 6%
4%
2%
0%
-2% =' ... -2%
THIS LAST 2 QTRS 3 QTRS LAST LAST LAST
QUARTER QUARTER AGO AGO YEAR 2 YEARS 3 YEARS * TOTAL 1.7 3 1. 3 14 1. 5 15 1.0 30 5.5 9 5. 9 7 6. 3 4
MEDIAN 0.8 0.7 0.8 0.8 3.4 3.2 3.3
HOLBEIN
OKLAHOMA SCHOOL LAND TRUST BOND FUNDS - TOTAL FUND INCOME RATES OF RETURN
FOR PERIOD ENDING 6/97
10% ....• r-
8%
6%
4%
o
2% .£f-+IU...-:. EJ 0%
J-J •
uuaj,::.
&
-------"A.::.-
p p
10%
~Q?'
u puu.uu
8%
6%
4%
2%
0%
-2% .....I L. -2%
THIS LAST 2 QTRS 3 QTRS LAST LAST LAST
QUARTER QUARTER AGO AGO YEAR 2 YEARS 3 YEARS
o OK· INTERNAL 3.3 1 0.4 80 2.5 5 1.8 24 8.2 5 7. 8 8 7.5 14
Q? LOOMIS 2.0 10 1.8 20 1.5 51 2. 3 4 8.0 7
• DODGE & COX 1.9 18 1.5 57 2.4 6
.TCW 1.9 15 1.9 14 1.9 19
=.!, WBEOLNLDICNOGMTPOONSITE 21..91 167 11..79 3158 11..97 3125 1.2 69 7. 1 30 7.0 33 7.0 33
MEDIAN 1.6 1.6 1.6 1.6 6.7 6.6 6.5
3
HOLBEIN
OKLAHOMA SCHOOL LAND TRUST
EQUITY FUNDS - TOTAL FUND INCOME RATES OF RETURN
FOR PERIOD ENDING 6/97
~~ ~
4%
-~--<>o-----
D
6%
2%
~
~
1-
P-b-c-O-~~B
~
l':::,.
p
4%
2%
0%
-2% ='
, -2%
THIS LAST 2 QTRS 3 QTRS LAST LAST LAST
QUARTER QUARTER AGO AGO YEAR 2 YEARS 3 YEARS
.0. BOSTON PARTNERS 0.4 41 0.4 38 0.4 42 0.5 30 1.7 43
b BJURMAN O. 2 68 0.2 60 0.2 63 0.2 56 O. 8 70
~ HOTCHKIS 0.8 6 0.8 4 0.8 10 0.9 5 3.3 9 o MACKAY 0.2 71 0.2 63 0.2 63 0.2 54 0.7 71 o OAK O. 1 76 O. 1 67 O. 1 68 O. 1 62 0.4 80
l':::,.BERNSTEIN 0.7 11 0.6 11 0.7 13 0.6 15 2.6 16 o WOOD STRUTHERS 0.6 20 0.5 26 0.5 31 0.5 25 2. 1 30
(: ESSEX 0.3 51 0.4 37
MEDIAN 0.3 0.3 0.3 0.3 1.4 1.5 1.7 4
0%
~
~
~ l':::,. p--------U
b <>0
OKLAHOMA SCHOOL LAND TRUST
EQUITY FUNDS - TOTAL FUND INCOME RATES OF RETURN
FOR PERIOD ENDING 6/97
6% =i •••
4%
c=J
~
*
6%
0%
2%
0%
4%
2%
-2% =' L... -2%
THIS LAST 2 QTRS 3 QTRS LAST LAST LAST
QUARTER QUARTER AGO AGO YEAR 2 YEARS 3 YEARS * TOTAL EQUITY 0.4 38 0.4 36 0.5 36 0.5 29 1.8 39
MEDIAN 0.3 0.3 0.3 0.3 1.4 1.5 1.7
HOLBEIN
----g---- ----~---- ~
~
5
OKLAHOMA SCHOOL LAND TRUST
TOTAL FUNDS-TOTAL RATES OF RETURN
EFFECTS OF EQUITY ALLOCATION ON RATE OF RETURN
32% =i QUARTER ENDING 6/97 i YEAR ENDING 6/97 r=
26% -
20% -
14% -
8% - * ~ t2j-------- --------- ------
--------- ---
32%
*
I- 26%
I- 20%
I- 14%
I- 8%
2% .J ' , I L
* TOTAL
MEDIAN
BELOW
40%
7.2 38
6.5
ABOVE BELOW
40-55% 55-70% 70% 40%
14.8 39
9.6 11. 2 12. 9 13. 6 18. 8
40-55%
2%
ABOVE
55-70% 70%
20.5 21. 9
6
OKLAHOMA SCHOOL LAND TRUST TOTAL FUNDS - TOTAL RATES OF RETURN
EFFECTS OF EQUITY ALLOCATION ON RATE OF RETURN
26% ==t 3 YEARS ENDING 6/97 , 5 YEARS ENDING 6/97 ••••
22% -
18% -
14% -
10% -
I C-----
---------
6% =' I J...
* TOTAL
MEDIAN
HOLBEIN
BELOW
40%
13.3 50
13. 3
40-55%
16. 6
ABOVE
~
BELOW
55-70% 70% 40%
10.8 51
18. 5 20.6 10. 9
40-55%
13. 3
ABOVE
55-70% 70%
14. 4 15. 7
• Includes International Segment
26%
~ 22%
I- 18%
I- 14%
I- 10%
6%
7
OKLAHOMA SCHOOL LAND TRUST
TOTAL FUNDS - TOTAL RETURN VS RISK
3 YEARS ENDING 6/97
30 -
--cf ~ za
:
:::> I--
~ 20-
LL o
l1.I
I--
<t a:
ol1.I
!.:.:.:.:J! 10-
<t
:::> zz
<t
o -
"..: '
.*
~ . .MEDiAN
RETURN
3 9
I
* TOTAL
~ S&P500
~ LB AGGREGA TE
MEDIAN
:il!><: C ~ :U:J;: a:
-.
• l>' • ."
.,.-. . I.'· 11
':
~
I I I
4 5 678
HISTORICAL STANDARD DEVIATION OF RETURN (RISK)
ANNUALIZED RETURN
VALUE RANK
STANDARD DEVIATION
VALUE RANK
13. 3
28.8
8.5
17. 3
88
1
96
6.8
9.0
4.8
6.5
41
4
87
I
8
OKLAHOMA SCHOOL LAND TRUST TOTAL FUNDS - TOTAL RETURN VS RISK
5 YEARS ENDING 6/97
20 i ~I~ ~ _ 19J :;;
cf!.
-z 18- § 17-
t- • I .' w 16~ '.
IX
u.. 15 ~ .. .' . I' .... o .' . ~'.,
w 14 .: :".:' ':: '. : .•... ' .' . MEDIAN
~a: 13 .' • • .' .' '. .' _,: ,- RETURN
~ 12-
N:::i 11, .. I * <:::l 10- z~
9-
8 - 71 I ~I I I---""I'~-----..,~~----...,Ir-------4 5 6 7 8 9 10
HISTORICAL STANDARD DEVIATION OF RETURN (RISK)
ANNUALIZED RETURN
VALUE RANK
STANDARD DEVIATION
VALUE RANK
* TOTAL
~ S&P500
~ LBAGGREGATE
10. 8
19. 7
7. 1
13. 7
7.7
9.0
4.8
143
89
88
1
98
MEDIAN 6.4
HOLBEIN
9
OKLAHOMA SCHOOL LAND TRUST
BOND FUNDS - TOTAL RATES OF RETURN
PERIODS ENDING 6/97
OUARTERS 16% YEARS
12% -
8% -
4% -
b
--+~~~~ & )
0_r-!-f--+--.~--------.-r
• dZ+--g--
L
~------J..
•
~ b
-..•--~---
r!f :::::
b
DB
J
____._1_~_
16%
~ 12%
I- 8% I:r-------J:
I- 4%
0% ...J I t... 0%
LAST LAST 2 LAST 3 LAST LAST 2 LAST 3 LAST 4 LAST 5
QTR QTRS QTRS YEAR YEARS YEARS YEARS YEARS
o OK· INTERNAL 5.0 9 3. 1 46 6.2 50 7.2 78 5. 8 83 10. 0 14 6.3 38 8. 8 15
r!f- LOOMIS 3.5 52 4. 1 10 6.9 31 9.0 31
+ DODGE & COX 4. 1 21 3.6 20 7. 0 27 9.5 24
• TCW 3.8 34 4. 1 10 7.8 13 11. 1 9
d; WELLINGTON 3.9 29 3.8 13 6. 8 32 9.3 26
:::B:O:ND COMPOSITE 4.0 24 3.9 1 1 7.2 24 9.0 32 6.7 47 10. 6 9 6.7 24 9.2 1 1
J LEHMAN GOVT BD 3.5 53 2.6 84 5.6 70 7.4 72 5.9 78 7.9 62 5.5 74 7.0 67
~ LB AGGREGATE 3.7 42 3. 1 48 6. 2 49 8.2 51 6.6 50 8.5 43 6. 0 52 7. 1 61
MEDIAN 3.6 3. 1 6.2 8.2 6.6 8.3 6. 1 7.4 10
OKLAHOMA SCHOOL LAND TRUST BOND FUNDS - TOTAL RATES OF RETURN
PERIODS ENDING 6/97
12%..... •...
10%
f7:.
-------f-------
12%
6%
______ .1. f7:.
--------
--c:L----------- 10%
8%
6%
4% =' '= 4%
LAST 6 LAST 7 LAST 8 LAST 9 LAST 1 0
YEARS YEARS YEARS YEARS YEARS o OK -INTERNAL 9.6 21 9.8 24
:::B:O:ND COMPOSITE 9.9 1'9 10. 1 17
J LEHMAN GOVT BD 8. 1 71 8.4 73 8. 2 73 8.6 76 8. 5 74
f7:. LB AGGREGATE 8.2 66 8.6 68 8.5 65 8.9 63 8. 8 58
MEDIAN 8.7 9. 1 8.8 9.2 9. 1
HOLBEIN
~--g------------
8%
f7:. _______ r f7:. ~------:f-------
:1--------
f7;.
------J--------
11
OKLAHOMA SCHOOL LAND TRUST BOND FUNDS - TOTAL RETURN VS RISK
3 YEARS ENDING 6/97
12 - -eft. i' 11-
a:
::::> I-UJ
a: 10-
u,o
UJ
~ 9-
a:cw
N:i 8-
e:(
::::> z~
7-
6 -
'.
D
MEDIAN
RETURN
1 2 9
I I
D· OK - INTERNAL
=:; BOND COMPOSITE
J LEHMAN GOVT BD
~ LB AGGREGA TE
MEDIAN
HOI RFIN
:cil~~ U:J; a:
, .....
. '" I.... .'. .• " •• :~ -0;,..
"
. 1-: .....
: .::.J' f
I I I I
3 456 7
HISTORICAL STANDARD DEVIATION OF RETURN (RISK)
8
ANNUALIZED RETURN
VALUE RANK
STANDARD DEVIATION
VALUE RANK
10. 0
10. 6
7.9
8.5
8. 3
1 4
9
62
43
7.2
6.7
5.0
4. 8
8
1 0
36
45
4.7
12
HOLBEIN
OKLAHOMA SCHOOL LAND TRUST BOND FUNDS - TOTAL RETURN VS RISK
5 YEARS ENDING 6/97
10-1 ~1i1i
- I w ~ ::;:
~o
-Z 9 _' ~ I -
~ I .1 .. .. 0
~ "
~ 8-
~ ~ .
« - .,.
~ 7 . :~ .J::.. ::: w .
N . -
:«::i I .- .
::l . . . Z 6 - .. . ~. ..
5 -
• T T T "'T T • • •
1 345 678
HISTORICAL STANDARD DEVIATION OF RETURN (RISK)
2 9
ANNUALIZED RETURN STANDARD DEVIATION
VALUE RANK VALUE RANK
o OK - INTERNAL 8.8 15 7.8 9
:::: BOND COMPOSITE 9. 2 1 1 7.6 10
J LEHMAN GOVT BD 7.0 67 5.2 46
~ LB AGGREGATE 7. 1 61 4.8 61
MEDIAN 7.4 5.2
•
10
13
OKLAHOMA SCHOOL LAND TRUST MORTGAGES - RATES OF RETURN
PERIODS ENDING 6/97
20% =i qUARTERS i YEARS r=
16% -
-.-=*--- J,
12% -
8% -
4% - .•~*"-- -.--g---"---
0% -
20%
..-------
J, *
I- 16%
~ 12%
I- 8%
~ 4%
~ 0%
-4% --' I '- -4%
LAST LAST 2 LAST 3 LAST LAST 2 LAST 3 LAST 4 LAST 5
OTR OTRS OTRS YEAR YEARS YEARS YEARS YEARS
.TCW 3.9 25 4. 1 41 7.8 35 10. 9 23
J, WELLINGTON 3.9 27 3.8 61 6.9 44 9.5 45
:::B:O:ND COMPOSITE 3.9 25 4.0 53 7.5 38 10. 3 31 * TOTAL 3.9 25 4.0 53 7.5 38 10. 3 31
MEDIAN 2.2 4.0 6.3 8.8 8.4 9.4 8.6 8.7
HOLBEIN
15
OKLAHOMA SCHOOL LAND TRUST
EQUITY FUNDS - TOTAL RATES OF RETURN
PERIODS ENDING 6/97
48% •....• QUARTERS i YEARS ••••
40% -
32% -
24% -
16% -
8% -
0% -
o
.h.-O----~ ~- -11---68
.0
.0
b
.Q.
---------~ ---------~
48%
q 6
<> 0
-!:r--.D---
------6- ~
~
~
OD
o ~ ------tr-
~
<>
-b-------
o
E3-------- t- 24%
--------- t- 16%
~--------k
I- 40%
I- 32%
I- 8%
I- 0%
-8% =' I L. -8%
LAST LAST 2 LAST 3 LAST LAST 2 LAST 3 LAST 4 LAST 5
aTR aTRS aTRS YEAR YEARS YEARS YEARS YEARS
.0 BOSTON PARTNERS 16. 5 44 23.5 2 36. 0 1 40.7 3
b BJURMAN 18. 7 20 10. 6 74 11 . 0 81 19. 2 76
~ HOTCHKIS 13. 0 79 16. 2 48 26.6 37 30. 6 38
<> MACKAY 17. 9 26 13. 7 65 15. 8 76 23. 1 69
o OAK 21. 0 8 10. 9 74 22. 2 61 36.0 1 2
6 BERNSTEIN 11. 9 85 16. 8 42 28.9 24 33.5 25
o WOOD STRUTHERS 13. 8 74 15. 0 57 23.8 52 26.6 58
~ S&P500 17. 5 32 20.6 1 1 30.7 14 34.7 1 8 30. 2 17 28. 8 17 21. 3 25 19. 7 42
MEDIAN 1 6. 1 16. 0 24.4 28.4 26.4 25. 7 1 9. 8 19. 4 16
•..•"1 J:U::IM
---\5----
OKLAHOMA SCHOOL LAND TRUST EQUITY FUNDS· TOTAL RATES OF RETURN
PERIODS ENDING 6/97
48% .., qUARTERS i YEARS r-
40% -
32% -
24% -
16% -
8% -
0% -
<t:
-----~---
*
*
~
__J___
-----~--- -----~---
48%
~
*
c
~ r- 24%
t=J t- 16%
-----~---
I- 40%
I- 32%
I- 8%
I- 0%
-8% -='i i •... -8%
LAST LAST 2 LAST 3 LAST LAST 2 LAST 3 LAST 4 LAST 5
aTR aTRS aTRS YEAR YEARS YEARS YEARS YEARS
<t: ESSEX 21.1 7 3.5 89 * TOTAL EQUITY 16. 3 47 14. 3 60 22. 2 60 28.7 48
~ S&P500 17. 5 32 20. 6 11 30.7 14 34.7 1 8 30. 2 17 28. 8 17 21. 3 25 19. 7 42
MEDIAN 16. 1 16. 0 24.4 28.4 26.4 25. 7 19. 8 19. 4
HOLBEIN
17
OKLAHOMA SCHOOL LAND TRUST
FIXED INCOME MANAGER STYLE DEFINITIONS
SHORT
Short Term Fixed Income managers are generally retained as "cash" managers. They provide an alternative to SHORT TERM INVESTMENT
VEHICLES and attempt to add value through superior management of high quality short term instruments. In order to be classified as Short Term,
a managers portfolio duration should be 0-40% of the Lehman Brothers Aggregate's. In addition, the portfolio's quality should exceed 8.
Contractual restrictions limiting a short term fund's duration generally preclude the use of one of the major bond indices as a relevant benchmark.
Instead, 90 day T-Bills are generally used as the portfolio's standard.
INTERMEDIATE
An Intermediate manager invests in high quality issues with a duration that is 40-80% of the Lehman Brothers Aggregate and a quality rating
greater than 8. Although many Intermediate managers are contractually prevented from extending a portfolio's maturity, other Intermediate
managers assert that intermediate duration securities provide the best risk/reward trade-off relative to short and long duration instruments.
LONG
To be classified as a Long manager, an investment manager's portfolio must have a duration that is greater than 120% of the Lehman
Brothers Aggregate's. Long managers believe that the increased return provided by the long end of the maturity spectrum compensates for
the higher volatility of longer duration issues.
CORE
A Core manager differs from the above three styles in that he does not concentrate on achieving a superior return within a certain duration range.
Instead, he prefers to emphasize sector or individual bond selection to create a portfolio whose duration is similar to the index's, but produces a
superior return. A Core manager's defining criteria include a duration ranging from 80-120% of the Lehman Brothers Aggregate and a quality
rating above 8.
INTEREST RATE ANTICIPATOR
In contrast to the first four categories, all of which emphasize security selection as the primary means of adding value, the Interest Rate
Anticipator attempts to add value primarily through interest rate forecasting. By extending maturities when he believes interest rates will fall and
shortening them when he believes rates will rise, an Interest Rate Anticipator may display the qualities of any of the above styles. To be classified
as an Interest Rate Anticipator, a manager's portfolio must show at least a 30% change in duration relative to the benchmark over the prior two
years.
HIGH YIELD
A High Yield Manager invests in lower quality, higher yielding issues; generally companies in financial difficulty or with limited financing means.
The debt issued by these types of companies carry higher rates to compensate for the increased credit risk. A High Yield manager emphasizes
security selection to take advantage of the superior return produced by the debt of less credit-worthy companies. A High Yield manager's portfolio
must have a current yield to maturity that is greater than 120% of the Lehman Brothers Aggregate's.
11il
16%
12% -
OKLAHOMA SCHOOL LAND TRUST FIXED INCOME MANAGER STYLE ANALYSIS - TOTAL RETURNS
QUARTER ENDING 6/97
8% -
16%
I- 12%
~ 8%
4%; R ~
~-+.J,=-i I I r=J ---------- a --------
t-
---------- ..
4%
----------
O%J
r----------]
----------
L
INTER
o OK -INTERNAL
SHORT MEDIATE
INT RATE HIGH 0%
CORE
BOND
LONG ANTIC
r!f- LOOMIS
5.0 28
YIELD UNIV
• DODGE &COX
3. 5 60
5.0 9
• TCW
4. 1 10
3. 5 52
,!, WELLINGTON
3.8 29
4. 1 21
:::: BOND COMPOSITE
3.9 20
3.8 34
4.0 11
3.9 29
MEDIAN 1 . 8
4.0 24
2.8 3.6 4. 1 4.2 3.6
HOLBEIN
: 19
OKLAHOMA SCHOOL LAND TRUST
FIXED INCOME MANAGER STYLE ANALYSIS - TOTAL RETURNS
YEAR ENDING 6/97
30% - -
24% -
18% -
12% -
6% -
• -Cf-+--,!;=-
b---------
30%
I- 24%
I- 18%
I- 12%
I- 6%
ii
0% ....I L... 0%
INTER- INT RATE HIGH BOND
SHORT MEDIATE CORE LONG ANTIC YIELD UNIV
o OK • INTERNAL 7.2 92 7.2 78 cr LOOMIS 9.0 26 9.0 31
• DODGE & COX 9.5 18 9.5 24
• TCW 11. 1 3 11. 1 9
J, WELLINGTON 9.3 21 9.3 26
::= BOND COMPOSITE 9.0 28 9.0 32
MEDIAN 6.2 7.3 8.3 9.2 9. 7 8. 2
:. "n
~~
~ ~
OKLAHOMA SCHOOL LAND TRUST FIXED INCOME MANAGER STYLE ANALYSIS - TOTAL RETURNS
TWO YEARS ENDING 6/97
24% i i i i
20% -
16% -
12% -
8% -
--------------------
4% -
--1]------
24%
o
I- 20%
~ 16%
I- 12%
I- 8% ~ E§--------- -------------------- --------~-
I- 4%
0% =-' •... 0%
INTER- INT RATE HIGH BOND
SHORT MEDIATE CORE LONG ANTIC YIELD UNIV
o OK -INTERNAL 5. 8 85 5.8 83
:::B:O:N:D COMPOSITE 6.7 47 6.7 47
MEDIAN 5. 8 6. 1 6.6 7.2 7.6 6.6
HOLBEIN
21'
16%
12%
OKLAHOMA SCHOOL LAND TRUST
FIXED INCOME MANAGER STYLE ANALYSIS - TOTAL RETURNS
THREE YEARS ENDING 6/97
8%
o
16%
4%
12%
8%
4%
0% . '= 0%
INTER- INT RATE HIGH BOND
SHORT MEDIATE CORE LONG ANTIC YIELD UNIV
o OK -INTERNAL 10. 0 46 10. 0 14
= BOND COMPOSITE 10. 6 2 10. 6 9
MEDIAN 6.2 7.4 8.4 9.9 9. 7 8.3
cc==JJ n
22
OKLAHOMA SCHOOL LAND TRUST FIXED INCOME MANAGER STYLE ANALYSIS - TOTAL RETURNS
FIVE YEARS ENDING 6/97
10% 10%
8%
6%
4% 4%
D
8%
6%
2% =' L... 2%
INTER- INT RATE HIGH BOND
SHORT MEDIATE CORE LONG ANTIC YIELD UNIV
D OK -INTERNAL 8.8 41 8.8 15
:::B:O;ND COMPOSITE 9.2 3 9.2 11
MEDIAN 5. 5 6.4 7.4 8. 6 7.4
HOLBEIN
D
23
OKLAHOMA SCHOOL LAND TRUST EQUITY STYLE SPECTRUM METHODOLOGY
Background:
Equity Style Spectrum analysis is intended to quantify the investment approach of each managed portfolio in the universe, and to group portfolios
with similar styles of investing. While no methodology can claim to capture all of the decisions an investment manager makes, the two most
important factors of style that explain performance results are the size of companies in which a manager invests and their relative valuation, or
whether they exhibit growth or value characteristics.
Exhibits:
Style Spectrum provides a map based on Size (y-axis) and Value vs. Growth (x-axis). This map is then further divided into nine distinct styles, three
based on the size of companies in which a manager invests and three based on the manager's proclivity toward value, core or growth styles of
investing. The goal of this exhibit is to identify gaps and overlap in the allocation among styles, while depicting the magnitude of each manager's
style bias.
In addition, Style Spectrum measures an investment manager's style bias over time, in an effort to capture "style drift". Finally, while style
calculations are based on a weighted average of the characteristics of a portfolio's holdings, it is also interesting to look at percentage
distribution of the portfolio's holdings. For instance, Midcap can be a concentration in mid-cap stocks or the result of holding large stocks and
small stocks. Similarly, a Core classification can result in a market likestrategy or from holding both growth and value stocks in equal proportion.
Methodology:
Size is the BARRA Size factor. In addition to market capitalization, this factor takes into consideration the number of years that a company has
been operating and the total value of the firm's assets.
Value/Growth is a weighted average of several BARRA factors: Book/Price (40%), Growth (25%), Earnings/Price (25%) and Yield (10%). This
weighted average approach takes into consideration the various investment opinions regarding the definition of value and growth characteristics.
The break points for the three Size quadrants are:
Small
Mid
Large
Size exposure less than -1.90
Size exposure -1.90 to -1.10
Size exposure greater than -1.10
The break points for the three Value/Growth quadrants are:
Value
Core
Growth
Value/Growth exposure less than -0.10
Value/Growth exposure -0.10 to +0.10
Value/Growth exposure greater than +0.10
?L1
OKLAHOMA SCHOOL LAND TRUST
EQUITY STYLE SPECTRUM ANALYSIS
AS OF 6/97
(MOVEMENT OVER PAST TWO YEARS)
1.0 l'-------------------------------------:'r-----------------li------------------------------------ I I
I
I
II
I
I
I
I
II
II
I!l
------------------------------;---------------------------~;-------------------------------
I I
Mid I I r; I
I II
-----------------------------~---------------~-------1 -------------~
I I
I I
I I
I I
I I
I I
I I
3 0
_ • -i ' Va,lue , 1I p.JtUltr~1 1I
-1.5 " {, , ,
0.5
~ -0.5 ~l- I~
w
!e::n:! -1.0
-1.5
-2.0
Small clt-
-2.5
Growth
-1.0 -0.5 -0.3 -0.1 0.0 0.1 0.3 0.5 1.0
VALUE/GROWTH
.0. BOSTON PARTNERS o OAK
-« TOTAL EQUITY
b BJURMAN
6 BERNSTEIN * TOTAL
~ HOTCHKIS
o WOOD STRUTHERS
~ S&P 500
o MACKAY
( ESSEX
, 25
HOLBEIN
1.5
OKLAHOMA SCHOOL LAND TRUST
EQUITY MANAGER SPECTRUM STYLE ANALYSIS - TOTAL RETURNS
QUARTER ENDING 6/97
32%
26%
o
20%
b
8%
Ei-------- BEJ------- --------
-i1---~- -----
<>
14% o
2%
SMALL SMALL SMALL MEDIUM MEDIUM MEDIUM LARGE LARGE LARGE
VALUE CORE GROWTH VALUE CORE GROWTH VALUE CORE GROWTH
.Q. BOSTON PARTNERS 16. 5 26
b BJURMAN 18. 7 30
~ HOTCHKIS 13. 0 75
<> MACKAY 17.9 57
o OAK 21. 0 1 4
6. BERNSTEIN 11. 9 89
o WOOD STRUTHERS 13. 8 65
« ESSEX 21 . 1 33
MEDIAN 15. 9 19. 2 19. 6 14. 8 14. 6 16. 8 14. 6 16. 4 18. 5 26
26%
20%
14%
. 8%
OKLAHOMA SCHOOL LAND TRUST
EaUITY MANAGER SPECTRUM STYLE ANALYSIS - TOTAL RETURNS
aUARTER ENDING 6/97
2%
SMALL SMALL SMALL MEDIUM MEDIUM MEDIUM LARGE LARGE LARGE
VALUE CORE GROWTH VALUE CORE GROWTH VALUE CORE GROWTH
~ TOTAL EQUITY 16. 3 52
MEDIAN 15. 9 19. 2 19. 6 14. 8 14. 6 16. 8 14. 6 16. 4 18. 5
32% -I ,
HOLBEIN
Ba------- --------
--------
--------
27
OKLAHOMA SCHOOL LAND TRUST EQUITY MANAGER SPECTRUM STYLE ANALYSIS - TOTAL RETURNS
YEAR ENDING 6/97
48% """i i
36%
24%
12%
0%
-12%
r;
D
<>
o
b
-----6- B
Lj '1
-24%
SMALL SMALL SMALL MEDIUM MEDIUM MEDIUM LARGE LARGE LARGE
VALUE CORE GROWTH VALUE CORE GROWTH VALUE CORE GROWTH
D BOSTON PARTNERS 40.7 3
b BJURMAN 19. 2 34
~ HOTCHKIS 30. 6 56
<> MACKAY 23. 1 87
o OAK 36. 0 20
6. BERNSTEIN 33. 5 35
o WOOD STRUTHERS 26.6 63
~ TOTAL EQUITY 28. 7 74
MEDIAN 29. 1 19. 6 3.9 30. 6 24. 1 14. 0 31. 6 32. 6 30. 2 ; 29
HOLBEIN
OKLAHOMA SCHOOL LAND TRUST
PERFORMANCE HISTORY
OKLAHOMA SCHOOL LAND TRUST
QENUDAIRNTGER TFOUTNADL AINLDLEOXC ESQEGUMITEYNT SIN&DPE5X00 SBEOGNMDENT AGLGEHINMDNX SECGAMSEHNT T91·B·DILALY
00016932///1999323 92 6065....4460 6O56....4 461 4402....336 1
ANNUAL 19. 6 1 9. a 11. 8
000193621//19944 9933 •·•2551. ...4 463 ••• 2551....4 436 ·•22O1. ...6 901
ANNUAL • 4. 2 • 4. 2 • 1 . 3
00013692////99994554 69O1....577 1 0056....64 01 6O91....7 671 056O....6 041
ANNUAL 18. 9 12. 5 19. 0 12. 5
00016392/11916 999556 • 0O51....85 91 • 24O1....4 011 45..30 45..4 5 -• O351....85 41 - 0241....63 80 111...323 111... 235
ANNUAL 6. 6 7. 5 3. 6 5.0
001932///999676 - 43O...2 35 420...42 1 - 571...67 8 328...7 31 - 3O1... 441 - 3O1...08 6 111...22 1 111...3 43 06/97 7.2 6. 6 16. 9 17. 5 4. 3 3. 7 1 . 3 1.4
ANNUAL 14. 8 13. 9 30. 6 34. 7 8.7 8.2 5. 0 5. 4
CHUISMTUOLRAICTAIVLE 110. 4 37. 8 42. 9 48. 3 94. 1 78. 0 9. 1 9.7
AENQNUUIVAALLENT 11. 2 11. 3 26. 9 30.0 9.9 8.6 5. 1 5.4
, 30
OKLAHOMA SCHOOL LAND TRUST
EQUITY MANAGER ALLOCATION ANALYSIS
As of June 30,1997
OKLAHOMA SCHOOL LAND TRUST
HOLBEIN
CURRENT ALLOCATION BY MANAGER
•.
MANAGER
BERNSTEIN
BJURMAN
BOSTON PARTNERS
DODGE & COX
ESSEX
HOTCHKIS
LOOMIS
MACKAY
OAK
OK - INTERNAL
TCW
WELLINGTON
WOOD STRUTHERS
BERNSTEIN
4.7"10
WOOD STRUTHERS
2.4"10
BJURMAN
2.3"10
WELLINGTON
14.4"10
$OSTON PARTNERS
2.8"10
TCW
18"10
TOTAL
ESSEX
1.9"10
HOTCHKIS
4.5"10
OK - INTERNAL
10.$"10
OAK MACKAY
4.7"10 4.5"10
CURRENT
DOLLARS
42,103,929
20,573,949
25,004,016
155,714,764
17,258,200
40,378,006
103,032,543
39,839,843
41,564,252
95,548,900
157,252,541
128,322,906
21,748,267
888,342,116
CURRENT
%
4.7
2.3
2.8
17.5
1.9
4.5
11.6
4.5
4.7
10.8
17.7
14.4
2.4
100.0
State of Oklahoma Commissioners of the Land Office
Total Fund Review & Analysis
Index: LB Gov't
Time Frame: 5 Years ending 06/30/97
Income Yield %
Year Total Fund LB Gov't
1997 YTD 6.6% 2.6%
1996 7.6% 2.8%
1995 24.7% 18.3%
1994 -6.1% -3.4%
1993 16.0% 10.7%
1992 7.8% 7.2%
1991 16.3% 15.3%
I~O% I I
8.0%
60% 5.5%
4.0%
2.0%
0.0% +t---
I Year
Current Allocation 06/30/97
Cash
2.2%
Mortgages
32.0%
Domestic
Stocks
27.2%
Holbein Associates, Inc.
Domestic
Bonds
38.6%
5.9%
2 Years
6.3%
3 Years
Asset Allocation 12/31/96
Cash
4.5% Domestic
Bonds
32.1% Mortgages
33.3%
Domestic
Stocks
30.1%
Total Fund Track Record
Ql Q2 Q3 Q4 Year Annualized
1997 -0.5% 7.2% 6.6% YTD
1996 -0.9% 0.9% 3.2% 4.4% 7.6% 14.8% I Year
1995 6.5% 9.7% l.5% 5.1% 24.7% 10.6% 2 Years
1994 -5.4% -2.6% 0.1% 1.7% -6.1% 13.3% 3 Years
1993 6.4% 5.0% 5.4% -l.5% 16.0% 8.7% 4 Years
1992 -3.1% 4.0% 6.4% 0.6% 7.8% 10.8% 5 Years
1991 2.0% 0.8% 6.6% 6.0% 16.3% 1l.3% 6 Years
1990 0.5% 7.2%
Performance
20% I BTotal Fund 1::1LB Gov't I 18% j 16% 14.8%
14%
12%
10%
8%
6%
4%
2%
0%
I Year 2 Years 3 Years 4 Years 5 Years
Target Allocation 12/31/98 Statistics
i
Fund Return Risk Sharpe
I Year 14.8%
Cash
2% 2 Years 10.6%
3 Years 13.3% 6.7% 1.31 ~.~ 4 Years 8.7% 8.0% 0.52
Stocks • -.-.
40% .. ~ Domestic 5 Years 10.8% 7.7% 0.81
Bonds Index Return Risk Sharpe
58% 1 Year 7.4%
2 Years 5.9%
3 Years 7.9% 5.0% 0.69
4 Years 5.5% 5.3% 0.20
5 Years 7.0% 5.2% 0.48