485BPOS 1 0001.txt STI PROSPECTUS FILING AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 21, 2000 File No. 33-45671 File No. 811-6557 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ] POST-EFFECTIVE AMENDMENT NO. 37 [X] AND REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ] AMENDMENT NO. 39 [X] STI CLASSIC FUNDS -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) 101 Federal Street Boston, Massachusetts 02110 -------------------------------------------------------------------------------- (Address of Principal Executive Offices, Zip Code) Registrant's Telephone Number, including Area Code (800) 342-5734 Mark E. Nagle C/o SEI Corporation Oaks, Pennsylvania 19456 -------------------------------------------------------------------------------- (Name and Address of Agent for Service) Copies to: Richard W. Grant, Esquire W. John McGuire Morgan, Lewis & Bockius LLP Morgan, Lewis & Bockius LLP 1701 Market Street 1800 M Street, N.W. Philadelphia, PA 19103 Washington, DC 20036 It is proposed that this filing become effective (check appropriate box): [ ] Immediately upon filing pursuant to paragraph (b) [X] On September 30, 2000 pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1) [ ] On [date] pursuant to paragraph (a)(1) [ ] 75 days after filing pursuant to paragraph (a)(2) [ ] On [date] pursuant to paragraph (a) of Rule 485. STI CLASSIC FUNDS-EQUITY FUNDS TRUST SHARES PROSPECTUS OCTOBER 1, 2000 BALANCED FUND CAPITAL APPRECIATION FUND CORE EQUITY E-COMMERCE OPPORTUNITY FUND GROWTH AND INCOME FUND INTERNATIONAL EQUITY FUND INTERNATIONAL EQUITY INDEX FUND MID-CAP EQUITY FUND SMALL CAP GROWTH STOCK FUND SMALL CAP VALUE EQUITY FUND (FORMERLY SMALL CAP EQUITY FUND) TAX SENSITIVE GROWTH STOCK FUND VALUE INCOME STOCK FUND INVESTMENT ADVISER TO THE FUNDS: TRUSCO CAPITAL MANAGEMENT, INC. (the "Adviser") [STI LOGO OMITTED] THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PROSPECTUS ABOUT THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Trust Shares of the Equity Funds that you should know before investing. Please read this prospectus and keep it for future reference. THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN THAT IS COMMON TO EACH OF THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE: 2 BALANCED FUND 4 CAPITAL APPRECIATION FUND 6 CORE EQUITY FUND 8 E-COMMERCE OPPORTUNITY FUND 10 GROWTH AND INCOME FUND 12 INTERNATIONAL EQUITY FUND 14 INTERNATIONAL EQUITY INDEX FUND 16 MID-CAP EQUITY FUND 18 SMALL CAP GROWTH STOCK FUND 20 SMALL CAP VALUE EQUITY FUND 22 TAX SENSITIVE GROWTH STOCK FUND 24 VALUE INCOME STOCK FUND 26 MORE INFORMATION ABOUT RISK 27 MORE INFORMATION ABOUT FUND INVESTMENTS 27 INVESTMENT ADVISER AND PORTFOLIO MANAGERS 29 PURCHASING AND SELLING FUND SHARES 30 DIVIDENDS AND DISTRIBUTIONS 31 TAXES 32 FINANCIAL HIGHLIGHTS 38 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS -------------------------------------------------------------------------------- [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION [CHART GRAPHIC OMITTED] WHAT IS AN INDEX? [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES [MOUNTAINTOP GRAPHIC OMITTED] MORE INFORMATION ABOUT FUND INVESTMENTS [MAGNIFIER GRAPHIC OMITTED] INVESTMENT ADVISER [HANDSHAKE GRAPHIC OMITTED] PURCHASING AND SELLING FUND SHARES -------------------------------------------------------------------------------- OCTOBER 1, 2000 PROSPECTUS 1 RISK/RETURN INFORMATION COMMON TO THE FUNDS Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. Each Fund has its own investment goal and strategies for reaching that goal. The Adviser invests Fund assets in a way that it believes will help a Fund achieve its goal. Still, investing in each Fund involves risk and there is no guarantee that a Fund will achieve its goal. The Adviser's judgments about the markets, the economy or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job the Adviser does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. The value of your investment in a Fund is based on the market prices of the securities the Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, may be greater or lesser depending on the types of securities a Fund owns and the markets in which they trade. The effect on a Fund of a change in the value of a single security will depend on how widely the Fund diversifies its holdings. 2 PROSPECTUS BALANCED FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOALS Capital appreciation and current income -------------------------------------------------------------------------------- INVESTMENT FOCUS PRIMARY U.S. common stocks SECONDARY Bonds -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with a history of earnings growth and bonds with minimal risk -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want income from their investment,as well as an increase in its value -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Balanced Fund invests in common and preferred stocks, convertible securities, U.S. government obligations and investment grade corporate bonds. In selecting stocks for the Fund, the Adviser attempts to identify high-quality companies with a history of above average earnings growth. In selecting bonds, the Adviser tries to minimize risk while attempting to outperform selected market indices. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points follows: 1995 25.51% 1996 12.13% 1997 21.14% 1998 19.55% 1999 4.66% BEST QUARTER WORST QUARTER 12.57% -5.70% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 4.24%. PROSPECTUS 3 BALANCED FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN BROTHERS U.S. GOVERNMENT/CREDIT INDEX AND THE S&P 500 INDEX. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION ------------------------------------------------------------------------------- Balanced Fund 4.66% 16.36% 12.63%* ------------------------------------------------------------------------------- Lehman Brothers U.S. Government/ Credit Index -2.15% 7.60% 5.67%** ------------------------------------------------------------------------------- S&P 500 Index 21.04% 28.55% 23.55%** ------------------------------------------------------------------------------- * SINCE 1/3/94 ** SINCE 12/31/93 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers U.S. Government/Credit Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, corporate debt backed by the U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least 1 year. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.95% Other Expenses 0.12% ----- Total Annual Fund Operating Expenses 1.07% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $109 $340 $590 $1,306 ------------------------------------------------------------------------------- FUND EXPENSES ------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.92% and 1.04%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 4 PROSPECTUS CAPITAL APPRECIATION FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Capital appreciation ------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. common stocks ------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate ------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with above average growth potential ------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need to receive income on their investment ------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Capital Appreciation Fund invests primarily in U.S. common stocks and other equity securities that the Adviser believes have strong business fundamentals, such as revenue growth, cash flows and earnings trends. In selecting investments for the Fund, the Adviser chooses companies that it believes have above average growth potential. The Adviser's strategy focuses on large-cap stocks with a strong growth history. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1993 9.89% 1994 -7.41% 1995 31.15% 1996 20.31% 1997 31.13% 1998 28.06% 1999 9.71% BEST QUARTER WORST QUARTER 22.93% -11.16% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 5.91%. PROSPECTUS 5 CAPITAL APPRECIATION FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 500 INDEX. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION ------------------------------------------------------------------------------- Capital Appreciation Fund 9.71% 23.79% 17.41%* ------------------------------------------------------------------------------- S&P 500 Index 21.04% 28.55% 21.24%** ------------------------------------------------------------------------------- * SINCE 7/1/92 ** SINCE 6/30/92 [CHART GRAPHIC OMITTED] ------------------------------------------------------------------------------- WHAT IS AN INDEX? ------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 1.15% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.26% ------------------------------------------------------------------------------- EXAMPLE ------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $128 $400 $692 $1,523 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 1.13% and 1.24%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 6 PROSPECTUS CORE EQUITY FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Long-term capital growth -------------------------------------------------------------------------------- INVESTMENT FOCUS Common stocks of mid- to large-cap companies ------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate to high ------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with superior earnings trends ------------------------------------------------------------------------------- INVESTOR PROFILE Investors seeking long-term growth of capital without regard to income who are willing to accept more volatility for the possibility of higher returns ------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Core Equity Fund invests primarily in common stocks of U.S. companies with market capitalizations of more than $1 billion. In selecting stocks for the Fund, the Adviser attempts to capture superior growth prospects based on earnings potential, profitability and other measures. These measures include growth characteristics such as whether a company makes significant investments in research and product development or whether a company is participating in rapidly expanding industries. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that mid- to large-capitalization growth stocks may underperform other segments of the equity market or the equity markets as a whole. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The Core Equity Fund commenced operations on September 30, 1999, and therefore does not have a performance history for a full calendar year. PROSPECTUS 7 CORE EQUITY FUND [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 1.10% Other Expenses 0.17% ----- Total Annual Fund Operating Expenses 1.27% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $129 $403 $697 $1,534 ------------------------------------------------------------------------------- FUND EXPENSES ------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 8 PROSPECTUS E-COMMERCE OPPORTUNITY FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Long-term capital growth ------------------------------------------------------------------------------- INVESTMENT FOCUS Common stocks of companies participating in multiple electronic commerce market segments ------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Very high ------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies utilizing electronic commerce opportunities to achieve above average growth ------------------------------------------------------------------------------- INVESTOR PROFILE Aggressive investors with long-term investment goals who are willing to accept significant volatility for the possibility of higher returns [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The E-Commerce Opportunity Fund invests primarily in common stocks of U.S. companies that are expected to benefit substantially from electronic commerce and achieve above average growth. The Fund defines electronic commerce, or e-commerce, as conducting business through the use of computers, the Internet, telecommunication lines and other electronic means of information transfer. The Fund's holdings are generally diversified across three market segments. The first segment is comprised of corporations whose core line of business focuses on an emerging e-commerce market. The second segment consists of established technology companies that provide the infrastructure to support electronic commerce. The third segment includes established, non-tech companies that are expected to achieve substantial direct or indirect benefits from e-commerce. In selecting investments for the Fund, the Adviser focuses on a "bottom-up" analysis that evaluates the competitive advantages and market sustainability of individual companies. The Fund invests primarily in companies with market capitalizations over $1 billion, but may invest a portion of its assets in smaller companies. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange. Due to the focus of the Fund, many holdings share similar risk factors. Many companies in the portfolio have limited operating histories, function in rapidly changing business environments and trade at valuations which are significantly higher than average. As a result, the Fund's net asset value ("NAV") may be more volatile than other, broadly diversified equity funds. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The E-Commerce Opportunity Fund commenced operations on September 30, 1999, and therefore does not have a performance history for a full calendar year. PROSPECTUS 9 E-COMMERCE OPPORTUNITY FUND [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 1.10% Other Expenses 0.24% ----- Total Annual Fund Operating Expenses 1.34% ------------------------------------------------------------------------------- EXAMPLE ------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $136 $425 $734 $1,613 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 10 PROSPECTUS GROWTH AND INCOME FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOALS PRIMARY Long-term capital appreciation SECONDARY Current income -------------------------------------------------------------------------------- INVESTMENT FOCUS Equity securities ------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate ------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify securities of companies with market capitalizations of at least $1 billion with attractive valuation and/or above average earnings potential relative either to their sectors or the market as a whole ------------------------------------------------------------------------------- INVESTOR PROFILE Investors who are looking for capital appreciation potential and income with less volatility than the equity markets as a whole ------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Growth and Income Fund invests primarily in equity securities, including common stock and listed American Depositary Receipts (ADRs), of domestic and foreign companies with market capitalizations of at least $1 billion. However, the average market capitalization can vary throughout a full market cycle and will be flexible to allow the Adviser to capture market opportunities. The Adviser uses a quantitative screening process to identify companies with an attractive fundamental profile. The portfolio management team selects stocks of companies with strong financial quality and above average earnings momentum to secure the best relative values in each economic sector. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1993 10.20% 1994 -0.81% 1995 29.38% 1996 19.06% 1997 27.69% 1998 18.20% 1999 14.17% BEST QUARTER WORST QUARTER 17.38% -10.36% (6/30/97) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS -0.35%. PROSPECTUS 11 GROWTH AND INCOME FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 500/BARRA VALUE INDEX. PREVIOUSLY, THE FUND'S RETURNS HAD BEEN COMPARED TO THE S&P 500 INDEX, BUT THE ADVISER BELIEVES THAT S&P 500/BARRA VALUE INDEX, BECAUSE OF ITS GREATER EMPHASIS ON LARGE CAP VALUE STOCKS, MORE ACCURATELY REFLECTS THE TYPE OF SECURITIES IN WHICH THE FUND INVESTS. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION ------------------------------------------------------------------------------- Growth and Income Fund 14.17% 21.56% 16.83%* ------------------------------------------------------------------------------- S&P 500/BARRA Value Index 12.72% 22.94% 18.54%** ------------------------------------------------------------------------------- S&P 500 Index 21.04% 28.55% 21.52%** ------------------------------------------------------------------------------- * SINCE 9/26/92 ** SINCE 9/30/92 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? ------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The previous index, the S&P 500 Index, is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. The S&P 500/BARRA Value Index is a widely-recognized index of the stocks in the S&P 500 Index that have lower price-to-book ratios. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.90% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.01% ------------------------------------------------------------------------------- EXAMPLE ------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $103 $322 $558 $1,236 ------------------------------------------------------------------------------- FUND EXPENSES ------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 12 PROSPECTUS INTERNATIONAL EQUITY FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Long-term capital appreciation ------------------------------------------------------------------------------- INVESTMENT FOCUS Foreign common stocks -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY High -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with good fundamentals or a history of consistent growth -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want an increase in the value of their investment without regard to income, are willing to accept the increased risks of international investing for the possibility of higher returns, and want exposure to a diversified portfolio of international stocks -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The International Equity Fund invests primarily in common stocks and other equity securities of foreign companies. The Fund invests primarily in developed countries, but may invest in countries with emerging markets. The Adviser's "bottom-up" approach to stock selection focuses on individual stocks and fundamental characteristics of companies. The Adviser's goal is to find companies with top management, quality products and sound financial positions, or a history of consistent growth in cash flows, sales, operating profits, returns on equity and returns on invested capital. In selecting investments for the Fund, the Adviser diversifies the Fund's investments among at least three foreign countries. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that foreign common stocks may underperform other equity market segments or the equity markets as a whole. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. Emerging market countries are countries that the World Bank or the United Nations considers to be emerging or developing. Emerging markets may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in other countries. As a result, there will tend to be an increased risk of price volatility associated with the Fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to December 1995, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. PROSPECTUS 13 INTERNATIONAL EQUITY FUND THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1996 22.08% 1997 13.35% 1998 11.22% 1999 9.47% BEST QUARTER WORST QUARTER 16.88% -18.28% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 3.91%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA AND FAR EAST (MSCI EAFE) INDEX. TRUST SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- International Equity Fund 9.47% 18.78%* -------------------------------------------------------------------------------- MSCI EAFE Index 26.96% 13.97%* -------------------------------------------------------------------------------- * SINCE 1/31/95 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The MSCI EAFE Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than smaller market capitalizations) index of over 900 securities listed on the stock exchanges in Europe, Australasia and the Far East. The country weighting of the Index is calculated using the market capitalization of each of the various countries, and then with respect to the market capitalization of the various companies operating in each country. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 1.25% Other Expenses 0.23% ----- Total Annual Fund Operating Expenses 1.48% ------------------------------------------------------------------------------- EXAMPLE ------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $151 $468 $808 $1,768 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 14 PROSPECTUS INTERNATIONAL EQUITY INDEX FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Investment results that correspond to the performance of the MSCI EAFE-GDP Weighted Index ------------------------------------------------------------------------------- INVESTMENT FOCUS Foreign common stocks in MSCI EAFE-GDP Weighted Index -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY High -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Statistical analysis to track the Index -------------------------------------------------------------------------------- INVESTOR PROFILE Aggressive investors who want exposure to foreign markets and are willing to accept the increased risks of foreign investing for the possibility of higher returns -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The International Equity Index Fund invests primarily in common stocks of foreign companies. In selecting investments for the Fund, the Adviser chooses companies included in the MSCI EAFE-GDP Weighted Index, an index of equity securities of companies located in Europe, Australasia and the Far East. While the Fund is structured to have overall investment characteristics similar to those of the Index, it selects a sample of stocks within the Index using a statistical process. So, the Fund will not hold all stocks included in the Index. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that foreign common stocks may underperform other segments of the equity markets or the equity markets as a whole. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. In addition to the above mentioned risks, the Adviser may not be able to match the performance of the Fund's benchmark. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1995 10.73% 1996 6.04% 1997 8.99% 1998 30.02% 1999 30.66% BEST QUARTER WORST QUARTER 21.26% -12.98% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS -4.88%. PROSPECTUS 15 INTERNATIONAL EQUITY INDEX FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA AND FAR EAST - GROSS DOMESTIC PRODUCT (MSCI EAFE-GDP) WEIGHTED INDEX. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION ------------------------------------------------------------------------------- International Equity Index Fund 30.66% 16.80% 14.43%* ------------------------------------------------------------------------------- MSCI EAFE-GDP Weighted Index (Price Return) 29.49% 14.45% 12.59%** ------------------------------------------------------------------------------- * SINCE 6/6/94 ** SINCE 5/31/94 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? ------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The MSCI EAFE-GDP Weighted Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than smaller market capitalizations) index of over 900 securities listed on the stock exchanges in Europe, Australasia and the Far East. The country weighting of the Index is calculated by the gross domestic product of each of the various countries and then with respect to the market capitalization of the various companies operating in each country. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.90% Other Expenses 0.28% ----- Total Annual Fund Operating Expenses 1.18% ------------------------------------------------------------------------------- EXAMPLE ------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $120 $375 $649 $1,432 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.81% and 1.09%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 16 PROSPECTUS MID-CAP EQUITY FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Capital appreciation ---------------------------------------------------------------------- INVESTMENT FOCUS U.S. mid-cap common stocks ---------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate to high ---------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with above average growth potential at an attractive price ---------------------------------------------------------------------- INVESTOR PROFILE Investors who want the value of their investment to grow and who are willing to accept more volatility for the possibility of higher returns ------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Mid-Cap Equity Fund invests primarily in a diversified portfolio of common stocks and other equity securities of U.S. companies. In selecting investments for the Fund, the Adviser primarily chooses companies that have small- to mid-sized market capitalizations (I.E., companies with market capitalizations of $500 million to $10 billion and companies in the S&P 400 Mid Cap Index) and that have above average growth potential at attractive prices. The Adviser evaluates companies based on their industry sectors and the market in general. The Fund maintains holdings in the industries that appear to perform best during a given business cycle. The Adviser analyzes companies that are in favored industries based on their fundamental characteristics, such as growth rates and earnings. The Adviser does not consider current income in selecting investments for the Fund. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that its market segment, mid-cap common stocks, may underperform other equity market segments or the equity markets as a whole. The small- to mid-sized capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap and mid-cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1995 31.22% 1996 15.42% 1997 21.23% 1998 6.48% 1999 16.14% BEST QUARTER WORST QUARTER 24.73% -19.96% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 9.78%. PROSPECTUS 17 MID-CAP EQUITY FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 400 MID CAP INDEX. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION ------------------------------------------------------------------------------- Mid-Cap Equity Fund 16.14% 17.82% 14.56%* ------------------------------------------------------------------------------- S&P 400 Mid Cap Index 14.72% 23.04% 17.96%** ------------------------------------------------------------------------------- * SINCE 2/2/94 ** SINCE 1/31/94 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 400 Mid Cap Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of 400 domestic mid-cap stocks chosen for market size, liquidity, and industry group representation. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 1.15% Other Expenses 0.10% ----- Total Annual Fund Operating Expenses 1.25% ------------------------------------------------------------------------------- EXAMPLE ------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $127 $397 $686 $1,511 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 1.12% and 1.22%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 18 PROSPECTUS SMALL CAP GROWTH STOCK FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Long-term capital appreciation ------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. small cap common stocks of growth companies ------------------------------------------------------------------------------- SHARE PRICE VOLATILITY High ------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Identifies small cap companies with above average growth potential ------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need current income ------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Small Cap Growth Stock Fund invests primarily in small U.S. companies with market capitalizations between $50 million and $3 billion in size. The Fund's investment philosophy is based on the premise that a portfolio of small cap stocks with positive earnings trends, reasonable valuation, and strong fundamentals will provide superior returns over time. The Adviser selects companies with strong current earnings growth, improving profitability, a strong balance sheet, strong current and projected business fundamentals, and priced at reasonable valuations. The Adviser believes in executing a very disciplined and objective investment process and in controlling risk through a broadly diversified portfolio. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and the potential for capital gains tax liabilities for taxable investors. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that small capitalization growth stocks may underperform other equity market segments or the equity markets as a whole. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS THE PERFORMANCE OF THE FUND'S TRUST SHARES FOR ONE YEAR.* [Bar Chart Omitted] Plot points are as follows: 1999 20.55% BEST QUARTER WORST QUARTER 20.77% -11.36% (6/30/99) (3/31/99) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 16.26%. PROSPECTUS 19 SMALL CAP GROWTH STOCK FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 600 SMALL CAP INDEX. TRUST SHARES 1 YEAR SINCE INCEPTION ------------------------------------------------------------------------------- Small Cap Growth Stock Fund 20.55% 58.61%* ------------------------------------------------------------------------------- S&P 600 Small Cap Index 12.41% 25.01%** ------------------------------------------------------------------------------- * SINCE 10/8/98 ** SINCE 9/30/98 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 600 Small Cap Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of 600 small cap stocks. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 1.15% Other Expenses 0.08% ----- Total Annual Fund Operating Expenses 1.23% ------------------------------------------------------------------------------- EXAMPLE ------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $125 $390 $676 $1,489 ------------------------------------------------------------------------------- FUND EXPENSES ------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 20 PROSPECTUS SMALL CAP VALUE EQUITY FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOALS PRIMARY Capital appreciation SECONDARY Current income ------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. small cap common stocks ------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate ------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify undervalued small cap stocks ------------------------------------------------------------------------------- INVESTOR PROFILE Investors who primarily want the value of their investment to grow, but want to receive some income from their investment ------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Small Cap Value Equity Fund invests primarily in common stocks of U.S. companies. In selecting investments for the Fund, the Adviser chooses common stocks of small sized companies (I.E., companies with market capitalizations under $1 billion) that it believes are undervalued in the market. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that small capitalization common stocks may underperform other equity market segments or the equity markets as a whole. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to January 1997, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1995 30.99% 1996 34.25% 1997 32.59% 1998 -13.45% 1999 -2.72% BEST QUARTER WORST QUARTER 19.82% -21.99% (6/30/99) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 1.49%. PROSPECTUS 21 SMALL CAP VALUE EQUITY FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE RUSSELL 2000 VALUE INDEX. PREVIOUSLY, THE FUND'S RETURNS HAD BEEN COMPARED TO THE RUSSELL 2000 INDEX, BUT THE ADVISER BELIEVES THAT THE RUSSELL 2000 VALUE INDEX, BECAUSE OF ITS GREATER EMPHASIS ON SMALL U.S. COMPANIES WITH LOWER GROWTH RATES AND PRICE-TO-BOOK RATIOS, MORE ACCURATELY REFLECTS THE TYPE OF SECURITIES IN WHICH THE FUND INVESTS. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION ------------------------------------------------------------------------------- Small Cap Value Equity Fund -2.72% 14.44% 13.63%* ------------------------------------------------------------------------------- Russell 2000 Value Index -1.49% 13.13% 11.41%* ------------------------------------------------------------------------------- Russell 2000 Index 21.26% 16.69% 15.09%* ------------------------------------------------------------------------------- * SINCE 8/31/94 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? ------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The previous index, the Russell 2000 Index, is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of the 2,000 smallest U.S. companies out of the 3,000 largest companies. The Russell 2000 Value Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of companies in the Russell 2000 Index with lower growth rates and price-to-book ratios. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 1.15% Other Expenses 0.10% ----- Total Annual Fund Operating Expenses 1.25% ------------------------------------------------------------------------------- EXAMPLE ------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be 1 YEAR 3 YEARS 5 YEARS 10 YEARS $127 $397 $686 $1,511 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 22 PROSPECTUS TAX SENSITIVE GROWTH STOCK FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Long-term capital growth with nominal dividend income ------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. common stocks of growth companies ------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate ------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies that have above- average growth potential and uses a low portfolio turnover strategy to reduce capital gains distributions ------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want to increase the value of their investment while minimizing taxable capital gains distributions ------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Tax Sensitive Growth Stock Fund invests primarily in a diversified portfolio of common stocks of financially strong U.S. growth companies. Many of these companies have a history of stable or rising dividend payout policies. The Adviser attempts to minimize the impact of capital gains taxes on investment returns by using a low turnover rate (generally 50% or less) strategy, in conjunction with other tax management strategies. These strategies may lead to lower capital gains distributions and, therefore, lower capital gains taxes. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day-to-day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that common stocks of U.S. growth companies may underperform other segments of the equity market or the equity markets as a whole. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to December 1998, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1996 21.04% 1997 28.76% 1998 31.73% 1999 24.74% BEST QUARTER WORST QUARTER 27.74% -9.96% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 0.50%. PROSPECTUS 23 TAX SENSITIVE GROWTH STOCK FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF S&P 500 INDEX. TRUST SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Tax Sensitive Growth Stock Fund 24.74% 26.56%* -------------------------------------------------------------------------------- S&P 500 Index 21.04% 26.39%* -------------------------------------------------------------------------------- * SINCE 12/31/95 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 1.15% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.26% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your share at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $128 $400 $692 $1,523 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 24 PROSPECTUS VALUE INCOME STOCK FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOALS PRIMARY Current income SECONDARY Capital appreciation -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. common stocks -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify high dividend-paying, undervalued stocks -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who are looking for current income and capital appreciation with less volatility than the average stock fund -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Value Income Stock Fund invests primarily in common stocks and other equity securities of U.S. companies. In selecting investments for the Fund, the Adviser primarily chooses companies that have a market capitalization of at least $500 million and that have a history of paying regular dividends. The Adviser focuses on high dividend-paying stocks that trade below their historical value. The Adviser's "bottom-up" approach to stock selection emphasizes individual stocks over economic trends. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to February 1993, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THE BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1990 -4.93% 1991 39.30% 1992 20.05% 1993 11.14% 1994 3.54% 1995 35.93% 1996 19.46% 1997 27.08% 1998 10.58% 1999 -2.93% BEST QUARTER WORST QUARTER 18.56% -14.86% (3/31/91) (9/30/90) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS -6.33%. PROSPECTUS 25 VALUE INCOME STOCK FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 500/BARRA VALUE INDEX. TRUST SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION ------------------------------------------------------------------------------- Value Income Stock Fund -2.93% 17.24% 15.02% 15.06%* ------------------------------------------------------------------------------- S&P 500/ BARRA Value Index 12.72% 22.94% 15.37% 15.46%* ------------------------------------------------------------------------------- * SINCE 10/31/89 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? ------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500/BARRA Value Index is a widely-recognized index of the stocks in the S&P 500 Index that have lower price-to-book ratios. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.80% Other Expenses 0.09% ----- Total Annual Fund Operating Expenses 0.89% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $91 $284 $493 $1,096 ------------------------------------------------------------------------------- FUND EXPENSES ------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 26 PROSPECTUS MORE INFORMATION ABOUT RISK [INNERTUBE GRAPHIC OMITTED] MORE INFORMATION ABOUT RISK EQUITY RISK ALL FUNDS Equity securities include public and privately issued equity securities, common and preferred stocks, warrants, rights to subscribe to common stock and convertible securities, as well as instruments that attempt to track the price movement of equity indices. Investments in equity securities and equity derivatives in general are subject to market risks that may cause their prices to fluctuate over time. The value of securities convertible into equity securities, such as warrants or convertible debt, is also affected by prevailing interest rates, the credit quality of the issuer and any call provision. Fluctuations in the value of equity securities in which a mutual fund invests will cause a fund's net asset value to fluctuate. An investment in a portfolio of equity securities may be more suitable for long-term investors who can bear the risk of these share price fluctuations. FIXED INCOME RISK BALANCED FUND The market value of fixed income investments change in response to interest rate changes and other factors. During periods of falling interest rates, the values of outstanding fixed income securities generally rise. Moreover, while securities with longer maturities tend to produce higher yields, the prices of longer maturity securities are also subject to greater market fluctuations as a result of changes in interest rates. In addition to these fundamental risks, different types of fixed income securities may be subject to the following additional risk: CREDIT RISK The possibility that an issuer will be unable to make timely payments of either principal or interest. FOREIGN SECURITY RISKS GROWTH AND INCOME FUND INTERNATIONAL EQUITY FUND INTERNATIONAL EQUITY INDEX FUND Investments in securities of foreign companies or governments can be more volatile than investments in U.S. companies or governments. Diplomatic, political, or economic developments, including nationalization or appropriation, could affect investments in foreign countries. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets. In addition, the value of securities denominated in foreign currencies, and of dividends from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign companies or governments generally are not subject to uniform accounting, auditing, and financial reporting standards comparable to those applicable to domestic U.S. companies or governments. Transaction costs are generally higher than those in the U.S. and expenses for custodial arrangements of foreign securities may be somewhat greater than typical expenses for custodial arrangements of similar U.S. securities. Some foreign governments levy withholding taxes against dividend and interest income. Although in some countries a portion of these taxes are recoverable, the non-recovered portion will reduce the income received from the securities comprising the portfolio. TRACKING ERROR RISK INTERNATIONAL EQUITY INDEX FUND Factors such as Fund expenses, imperfect correlation between the Fund's investments and those of their benchmarks, rounding of share prices, changes to the benchmark, regulatory policies, and leverage, may affect their ability to achieve perfect correlation. The magnitude of any tracking error may be affected by a higher portfolio turnover rate. Because an index is just a composite of the prices of the securities it represents PROSPECTUS 27 MORE INFORMATION ABOUT FUND INVESTMENTS rather than an actual portfolio of those securities, an index will have no expenses. As a result, a Fund, which will have expenses such as taxes, custody, management fees and other operational costs, and brokerage, may not achieve its investment objective of accurately correlating to an index. [MOUNTAINTOP GRAPHIC OMITTED] MORE INFORMATION ABOUT FUND INVESTMENTS This prospectus describes the Funds' primary strategies, and the Funds will normally invest in the types of securities described in this prospectus. However, in addition to the investments and strategies described in this prospectus, each Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). The investments and strategies described in this prospectus are those that the Funds use under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, each Fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and short-term obligations that would not ordinarily be consistent with a Fund's objectives. The Small Cap Value Equity Fund also may invest in investment grade fixed income securities and mid- to large-cap common stocks. A Fund will do so only if the Adviser believes that the risk of loss outweighs the opportunity for capital gains or higher income. Of course, a Fund cannot guarantee that it will achieve its investment goal. [MAGNIFIER GRAPHIC OMITTED] INVESTMENT ADVISER The Investment Adviser (the "Adviser") makes investment decisions for the Funds and continuously reviews, supervises and administers each Fund's respective investment program. The Board of Trustees supervises the Adviser and establishes policies that the Adviser must follow in its management activities. Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Funds. As of July 1, 2000, Trusco had approximately $47 billion in assets under management. For the fiscal period ended May 31, 2000, the Adviser received advisory fees of: BALANCED FUND 0.85% CAPITAL APPRECIATION FUND 1.06% CORE EQUITY FUND 1.03% E-COMMERCE GROWTH OPPORTUNITY FUND 0.96% GROWTH AND INCOME FUND 0.90% INTERNATIONAL EQUITY FUND 1.25% INTERNATIONAL EQUITY INDEX FUND 0.79% MID-CAP EQUITY FUND 1.07% SMALL CAP GROWTH STOCK FUND 1.12% SMALL CAP VALUE EQUITY FUND 1.12% TAX SENSITIVE GROWTH STOCK FUND 1.09% VALUE INCOME STOCK FUND 0.80% The Core Equity and E-Commerce Opportunity Funds had not completed a full fiscal year as of May 31, 2000. The Adviser may use its affiliates as brokers for Fund transactions. For periods prior to January 1, 2000, STI Capital Management, N.A. ("STI"), a subsidiary of SunTrust Banks, Inc. served as Investment Adviser to the Balanced Fund, Capital Appreciation Fund, International Equity Fund, Mid-Cap Equity Fund, Small Cap Value Equity Fund, and Value Income Stock Fund. On January 1, 2000, SunTrust Bank (formerly SunTrust Bank, Atlanta), a subsidiary of SunTrust Banks, Inc. succeeded STI as the Investment Adviser to those Funds. On July 1, 2000, SunTrust Banks, Inc. reorganized its money management units, including those of SunTrust Bank, into Trusco Capital Management, Inc. As a result, Trusco now serves as the Investment Adviser to each STI Classic Fund. 28 PROSPECTUS INVESTMENT ADVISER AND PORTFOLIO MANAGERS PORTFOLIO MANAGERS The Balanced Fund is co-managed by Mr. Robert J. Rhodes, CFA, Mr. Earl L. Denney, CFA, and Mr. Dave E. West, CFA. Mr. Rhodes manages the equity portion of the Fund. Mr. Denney and Mr. West co-manage the fixed-income portion of the Fund. Mr. Rhodes has also managed the Core Equity Fund since it began operating in September 1999 and the Capital Appreciation Fund since June 2000. Mr. Rhodes is an Executive Vice President and head of the Equity Funds group at Trusco. Mr. Rhodes has been employed by Trusco since 1973 and was Director of Research at Trusco from 1980 to 2000. Mr. Rhodes has more than 27 years of investment experience. Mr. West has served as a Managing Director of STI and has worked there since 1985. In January 2000, Mr. West was named Managing Director of SunTrust Bank and is now a Managing Director of Trusco. Mr. West has more than 14 years of investment experience. Mr. Denney has served as Managing Director of STI since 1983. In January 2000 Mr. Denny was named Managing Director of SunTrust Bank and is now a Managing Director of Trusco. Mr. Denney has more than 21 years of investment experience. Mr. Alan S. Kelley has served as a Vice President of Trusco since July 2000. He has managed the E-Commerce Opportunity Fund since it began operating in September 1999. Prior to joining Trusco, Mr. Kelley served as a Portfolio Manager with SunTrust Bank, Atlanta from 1995 to 1999. He has more than 7 years of investment experience. Mr. Jeffrey E. Markunas, CFA, has served as Lead Portfolio Manager of the Growth and Income Fund since it began operating in September 1992. From 1992 until July 2000, he served as Senior Vice President and Director of Equity Management for Crestar Asset Management Company. Additionally, he was named Senior Vice President of Trusco in January 1999 and Managing Director in July 2000. Mr. Markunas has more than 17 years of investment experience. The International Equity Index Fund is managed by Mr. Chad Deakins, CFA, and co-managed Mr. Robert J. Rhodes, CFA. Mr. Deakins serves as a Vice President of Trusco and has worked there since 1996. He has co-managed the International Equity Index Fund since February 1999. Mr. Deakins has also managed the International Equity Fund since May 2000. Prior to joining Trusco, Mr. Deakins worked at SunTrust Bank. He has more than 6 years of investment experience. Mr. Rhodes is an Executive Vice President and head of the Equity Funds group at Trusco. Mr. Rhodes has been employed by Trusco since 1973 and was Director of Research at Trusco from 1980 to 2000. Mr. Rhodes has co-managed the International Equity Index Fund since it began operating in June 1994. Mr. Rhodes has more than 27 years of investment experience. Mr. John Hamlin has served as a Vice President of Trusco since July 2000, after serving as a Portfolio Manager of STI since March 1999. He has managed the Mid-Cap Equity Fund since April 1999. Prior to joining STI, Mr. Hamlin served as Portfolio Manager at Phoenix Investment Counsel, Inc. from 1992 to 1999. He has more than 11 years of investment experience. Mr. Mark D. Garfinkel, CFA, has served as a Portfolio Manager of Trusco since 1994. He has managed the Small Cap Growth Stock Fund since it began operating in October 1998. He has more than 13 years of investment experience. Mr. Brett Barner, CFA, has served as a Vice President of Trusco since July 2000, after serving as a Managing Director of STI since 1994. He has managed the Small Cap Value Equity Fund since it began operating in January 1997. He has more than 16 years of investment experience. Mr. Jonathan Mote, CFA, CFP, has served as a Portfolio Manager of Trusco since August 1998. He has managed the Tax Sensitive Growth Stock Fund since it began operating in December 1998. Prior to joining Trusco, Mr. Mote served as a Portfolio Manager with SunTrust Banks. He has more than 15 years of investment experience. PROSPECTUS 29 PURCHASING AND SELLING FUND SHARES The Value Income Stock Fund is co-managed by Mr. Mills Riddick, CFA, and Mr. Dan Lewis. Mr. Riddick has served as a Managing Director of Trusco since July 2000, after serving as a Managing Director of STI since 1994. He has managed the Value Income Stock Fund since April 1995. Mr. Riddick has more than 18 years of investment experience. Mr. Lewis has served as a Portfolio Manager of Trusco since July 2000, after serving as a Portfolio Manager for STI since 1993. He has been an analyst of the Value Income Stock Fund since 1995. He has more than 9 years of investment experience. [HANDS GRAPHIC OMITTED] PURCHASING AND SELLING FUND SHARES This section tells you how to purchase and sell (sometimes called "redeem") Trust Shares of the Funds. HOW TO PURCHASE FUND SHARES The Funds offer Trust Shares only to financial institutions or intermediaries, including subsidiaries of SunTrust Banks, Inc. (SunTrust), for their own or their customers' accounts for which they act as fiduciary, agent, investment adviser, or custodian. As a result, you, as a customer of a financial institution may purchase Trust Shares through accounts made with financial institutions and potentially through the Investor's Advantage Account (an asset allocation account available through SunTrust Securities, Inc.). Trust Shares will be held of record by (in the name of) your financial institution. Depending upon the terms of your account, however, you may have, or be given, the right to vote your Trust Shares. The Funds may reject any purchase order if it is determined that accepting the order would not be in the best interests of the STI Classic Funds or its shareholders. WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange is open for business (a Business Day). The price per share (the offering price) will be the net asset value per share (NAV) next determined after the Funds receive your purchase order. Each Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m., Eastern time). So, for you to receive the current Business Day's NAV for each Fund, generally the Funds must receive your purchase order before 4:00 p.m. Eastern time. FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES, AND OTHER FINANCIAL INSTITUTIONS YOU MAY HAVE TO TRANSMIT YOUR PURCHASE AND SALE REQUESTS TO SUNTRUST OR OTHER FINANCIAL INSTITUTIONS AT AN EARLIER TIME FOR YOUR TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS THE FINANCIAL INSTITUTION TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE OR SELL FUND SHARES, INCLUDING SPECIFIC SUNTRUST OR OTHER FINANCIAL INSTITUTIONS INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR FINANCIAL INSTITUTION DIRECTLY. HOW THE FUNDS CALCULATE NAV In calculating NAV, each Fund generally values its investment portfolio at market price. If market prices are unavailable or a Fund thinks that they are unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. Some Funds hold securities that are listed on foreign exchanges. These securities may trade on weekends or other days when the Funds do not calculate NAV. As a result, the market value of these investments may change on days when you cannot purchase or sell Fund shares. NET ASSET VALUE NAV for one Fund share is the value of that share's portion of the net assets of the Fund. 30 PROSPECTUS DIVIDENDS AND DISTRIBUTIONS HOW TO SELL YOUR FUND SHARES You may sell (sometimes called "redeem") your shares on any Business Day by contacting SunTrust or your financial institution. SunTrust or your financial institution will give you information about how to sell your shares including any specific cut-off times required. Holders of Trust Shares may sell shares by following the procedures established when they opened their account or accounts with the Funds or with their financial institution or intermediary. The sale price of each share will be the next NAV determined after the Funds receive your request. RECEIVING YOUR MONEY Normally, the Funds will send your sale proceeds within five Business Days after the Funds receive your request, but it may take up to seven days. REDEMPTIONS IN KIND The Funds generally pay sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) the Funds might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES A Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. TELEPHONE TRANSACTIONS Purchasing and selling Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believes to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. DIVIDENDS AND DISTRIBUTIONS Each Fund distributes its income as follows: QUARTERLY ------------------------------------------------------------------------------- BALANCED FUND CAPITAL APPRECIATION FUND CORE EQUITY FUND E-COMMERCE OPPORTUNITY FUND GROWTH AND INCOME FUND MID-CAP EQUITY FUND SMALL CAP GROWTH STOCK FUND SMALL CAP VALUE EQUITY FUND TAX SENSITIVE GROWTH STOCK FUND VALUE INCOME STOCK FUND ANNUALLY ------------------------------------------------------------------------------- INTERNATIONAL EQUITY FUND INTERNATIONAL EQUITY INDEX FUND Each Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Funds in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Funds receives your written notice. To cancel your election, simply send the Funds written notice. PROSPECTUS 31 TAXES TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Funds have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from a Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE OR EXCHANGE OF FUND SHARES IS A TAXABLE EVENT. The International Equity Fund and International Equity Index Fund may be able to pass along a tax credit for foreign income taxes they pay. Each Fund will notify you if it gives you the credit. MORE INFORMATION ABOUT TAXES IS IN THE SAI. 32 PROSPECTUS FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS The tables that follow present performance information about Investor and Flex Shares of each Fund. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. This information for each Fund, except the Growth and Income Fund for the periods ended prior to May 31, 1999, have been audited by Arthur Andersen LLP, independent public accountants. The financial highlights for the Growth and Income Fund for the periods ended prior to May 31, 1999 have been audited by Deloitte & Touche LLP, independent public accountants. The reports of Arthur Andersen LLP, along with each Fund's financial statements, appears in the annual report that accompanies the Statement of Additional Information. You can obtain the annual report, which contains more performance information, at no charge by calling 1-800-428-6970. For the Periods Ended May 31, (unless otherwise indicated) For a Share Outstanding Throughout the Periods
NET REALIZED NET ASSET NET AND DISTRIBUTIONS VALUE INVESTMENT UNREALIZED FROM NET DISTRIBUTIONS NET ASSET BEGINNING INCOME GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN (+) --------- ---------- --------------- ------------- -------------- --------- ---------- ------------- BALANCED FUND ------------- Trust Shares 2000 ........ $13.26 $0.32 $0.33 $(0.30) $(0.24) $13.37 5.02% 1999 ........ 13.09 0.28 1.09 (0.28) (0.92) 13.26 10.98 1998 ........ 11.94 0.31 2.19 (0.32) (1.03) 13.09 22.15 1997 ........ 11.55 0.33 1.47 (0.32) (1.09) 11.94 16.66 1996 ........ 10.26 0.33 1.41 (0.34) (0.11) 11.55 17.26 1995 ........ 9.76 0.33 0.49 (0.32) -- 10.26 8.72 ------------------------- CAPITAL APPRECIATION FUND ------------------------- Trust Shares 2000 ........ $16.62 $0.02 $1.40 $ -- $(0.92) $17.12 8.98% 1999 ........ 16.48 0.05 2.70 (0.06) (2.55) 16.62 17.83 1998 ........ 15.09 0.09 3.96 (0.09) (2.57) 16.48 29.51 1997 ........ 14.90 0.12 3.13 (0.12) (2.94) 15.09 24.66 1996 ........ 12.18 0.12 3.32 (0.13) (0.59) 14.90 28.97 ---------------- CORE EQUITY FUND ---------------- Trust Shares 2000(1) ..... $10.00 $(0.02) $1.13 $ -- $ -- $11.11 11.10% --------------------------- E-COMMERCE OPPORTUNITY FUND --------------------------- Trust Shares 2000(1) ..... $10.00 $(0.04) $5.91 $ -- $ -- $15.87 58.70% -------------------------- GROWTH AND INCOME FUND (A) -------------------------- Trust Shares 2000 ........ $16.09 $0.11 $0.55 $(0.10) $(1.12) $15.53 4.11% 1999(2) ..... 15.10 0.04 1.97 (0.02) (1.00) 16.09 14.24 For the years ended November 30: 1998 ........ 16.55 0.09 1.64 (0.09) (3.09) 15.10 13.64 1997 ........ 13.39 0.14 3.24 (0.15) (0.07) 16.55 25.41 1996 ........ 11.60 0.17 2.38 (0.17) (0.59) 13.39 22.68
RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME (LOSS) TO RATIO OF INVESTMENT AVERAGE NET AVERAGE NET NET ASSETS EXPENSES TO INCOME (LOSS) ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO END OF AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE ------------ ----------- ------------- ----------------- ----------------- --------- ------------- BALANCED FUND ------------- Trust Shares 2000 ........ $223,634 0.97% 2.39% 1.07% 2.29% 182% 1999 ........ 251,752 0.97 2.19 1.06 2.10 179 1998 ........ 188,465 0.96 2.51 1.08 2.39 154 1997 ........ 151,358 0.95 2.89 1.08 2.76 197 1996 ........ 111,638 0.95 3.00 1.09 2.86 155 1995 ........ 89,051 0.95 3.44 1.11 3.28 157 ------------------------- CAPITAL APPRECIATION FUND ------------------------- Trust Shares 2000 ........ $1,296,927 1.17% 0.10% 1.26% 0.01% 129% 1999 ........ 1,966,842 1.17 0.29 1.26 0.20 147 1998 ........ 1,532,587 1.16 0.61 1.27 0.50 194 1997 ........ 1,085,128 1.15 0.83 1.25 0.73 141 1996 ........ 981,498 1.15 0.90 1.27 0.78 156 ---------------- CORE EQUITY FUND ---------------- Trust Shares 2000(1) ..... $151,421 1.20% (0.30)% 1.27% (0.37)% 44% --------------------------- E-COMMERCE OPPORTUNITY FUND --------------------------- Trust Shares 2000(1) ..... $106,425 1.20% (0.54)% 1.34% (0.68)% 250% -------------------------- GROWTH AND INCOME FUND (A) -------------------------- Trust Shares 2000 ........ $885,109 1.01% 0.76% 1.01% 0.76% 53% 1999(2) ..... 634,279 1.14 0.49 1.43 0.20 31 For the years ended November 30: 1998 ........ 577,042 1.03 0.63 1.21 0.45 71 1997 ........ 590,824 1.02 0.92 1.17 0.77 100 1996 ........ 553,648 1.02 1.38 1.17 1.23 82 (+) Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (1) Commenced operations on June 14, 1995. All ratios for the period have been annualized. (2) For the six month period ended May 31, 1999. All ratios for the period have been annualized. (A) On May 24, 1999, the CrestFunds Value Fund exchanged all of its assets and certain liabilities for shares of the Growth and Income Fund. The CrestFunds Value Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. Amounts designated as "--" are either $0 or round to $0.
PROSPECTUS 33 FINANCIAL HIGHLIGHTS
NET REALIZED NET ASSET NET AND DISTRIBUTIONS VALUE INVESTMENT UNREALIZED FROM NET DISTRIBUTIONS NET ASSET BEGINNING INCOME GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN (+) --------- ---------- --------------- ------------- -------------- --------- ---------- ------------------------- INTERNATIONAL EQUITY FUND ------------------------- Trust Shares 2000 ........ $12.97 $(0.10) $1.42 $(0.07) $(1.66) $12.56 10.58% 1999 ........ 15.00 -- (1.14) (0.05) (0.84) 12.97 (7.43) 1998 ........ 13.63 0.04 2.69 (0.04) (1.32) 15.00 21.87 1997 ........ 11.40 0.03 2.57 (0.02) (0.35) 13.63 23.29 1996(3) ..... 10.00 0.05 1.35 -- -- 11.40 14.00 ------------------------------- INTERNATIONAL EQUITY INDEX FUND ------------------------------- Trust Shares 2000 ........ $11.82 $ 0.16 $ 2.13 $(0.03) $(0.11) $13.97 19.36% 1999 ........ 13.31 0.09 0.85 (0.24) (2.19) 11.82 7.87 1998 ........ 11.34 0.11 2.65 (0.11) (0.68) 13.31 25.82 1997 ........ 10.96 0.10 0.69 (0.11) (0.30) 11.34 7.48 1996 ........ 10.24 0.10 0.84 (0.13) (0.09) 10.96 9.29 ------------------- MID-CAP EQUITY FUND ------------------- Trust Shares 2000 ........ $12.68 $(0.04) $ 2.32 $ -- $(0.86) $14.10 19.10% 1999 ........ 13.79 0.01 0.07 -- (1.19) 12.68 1.61 1998 ........ 13.21 -- 2.54 -- (1.96) 13.79 21.14 1997 ........ 12.76 0.03 1.69 (0.05) (1.22) 13.21 14.23 1996 ........ 11.00 0.08 2.63 (0.08) (0.87) 12.76 25.54 --------------------------- SMALL CAP GROWTH STOCK FUND --------------------------- Trust Shares 2000 ........ $14.55 $(0.08) $ 4.02 $ -- $(0.19) $18.30 27.24% 1999(4) ..... 10.00 (0.05) 4.62 -- (0.02) 14.55 45.70 --------------------------- SMALL CAP VALUE EQUITY FUND --------------------------- Trust Shares 2000 ........ $ 9.70 $ 0.13 $(0.59) $(0.11) $ -- $ 9.13 (4.72)% 1999 ........ 12.88 0.13 (2.57) (0.13) (0.61) 9.70 (18.72) 1998 ........ 11.07 0.14 2.41 (0.12) (0.62) 12.88 23.59 1997(5) ..... 10.00 0.05 1.04 (0.02) -- 11.07 10.97 ------------------------------- TAX SENSITIVE GROWTH STOCK FUND ------------------------------- Trust Shares 2000 ........ $29.96 $0.02 $3.12 $ -- $ -- $33.10 10.48% 1999(6) ..... 25.61 0.02 4.34 (0.01) -- 29.96 17.04 ----------------------- VALUE INCOME STOCK FUND ----------------------- Trust Shares 2000 ........ $12.85 $ 0.23 $(1.49) $(0.22) $(0.99) $10.38 (10.52)% 1999 ........ 13.90 0.24 1.02 (0.24) (2.07) 12.85 11.13 1998 ........ 13.71 0.26 2.62 (0.27) (2.42) 13.90 23.10 1997 ........ 13.15 0.30 2.32 (0.30) (1.76) 13.71 22.18 1996 ........ 11.59 0.35 2.71 (0.34) (1.16) 13.15 27.91
RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME (LOSS) TO RATIO OF INVESTMENT AVERAGE NET AVERAGE NET NET ASSETS EXPENSES TO INCOME (LOSS) ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO END OF AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE ------------ ----------- ------------- ----------------- ----------------- --------- ------------------------- INTERNATIONAL EQUITY FUND ------------------------- Trust Shares 2000 ........ $ 299,100 1.48% 0.59% 1.48% 0.59% 179% 1999 ........ 573,255 1.48 0.68 1.53 0.63 161 1998 ........ 628,870 1.47 0.61 1.48 0.60 108 1997 ........ 489,325 1.46 0.51 1.51 0.46 139 1996(3) ..... 213,306 1.46 1.36 1.65 1.17 113 ------------------------------- INTERNATIONAL EQUITY INDEX FUND ------------------------------- Trust Shares 2000 ........ $ 340,853 1.07% 0.83% 1.18% 0.72% 9% 1999 ........ 74,616 1.07 0.69 1.18 0.58 32 1998 ........ 56,200 1.06 0.88 1.18 0.76 1 1997 ........ 53,516 1.05 0.71 1.15 0.61 2 1996 ........ 90,980 1.05 0.84 1.19 0.70 30 ------------------- MID-CAP EQUITY FUND ------------------- Trust Shares 2000 ........ $ 206,545 1.17% --% 1.25% (0.08)% 131% 1999 ........ 254,055 1.17 (0.47) 1.28 (0.58) 76 1998 ........ 337,825 1.16 (0.29) 1.27 (0.40) 129 1997 ........ 287,370 1.15 0.23 1.26 0.12 152 1996 ........ 253,905 1.15 0.70 1.29 0.56 116 --------------------------- SMALL CAP GROWTH STOCK FUND --------------------------- Trust Shares 2000 ........ $ 431,478 1.20% (0.86)% 1.23% (0.89)% 110% 1999(4) ..... 152,290 1.20 (0.48) 1.49 (0.77) 75 --------------------------- SMALL CAP VALUE EQUITY FUND --------------------------- Trust Shares 2000 ........ $ 212,074 1.22% 1.31% 1.25% 1.28% 65% 1999 ........ 301,984 1.22 1.27 1.27 1.22 63 1998 ........ 390,841 1.21 1.07 1.31 0.97 55 1997(5) ..... 131,049 1.20 1.86 1.37 1.69 27 ------------------------------- TAX SENSITIVE GROWTH STOCK FUND ------------------------------- Trust Shares 2000 ........ $ 710,179 1.20% 0.13% 1.26% 0.07% 30% 1999(6) ..... 223,543 1.20 0.21 1.34 0.07 18 ----------------------- VALUE INCOME STOCK FUND ----------------------- Trust Shares 2000 ........ $ 921,797 0.89% 2.02% 0.89% 2.02% 62% 1999 ........ 1,589,951 0.92 1.91 0.92 1.91 69 1998 ........ 1,725,418 0.92 1.85 0.92 1.85 99 1997 ........ 1,488,062 0.91 2.40 0.91 2.40 105 1996 ........ 1,244,399 0.92 2.86 0.92 2.86 134 (+) Returns are for the period indicated and have not been annualized. Total return figures do not include applicable sales loads. (3) Commenced operations on December 1, 1995. All ratios for the period have been annualized. (4) Commenced operations on January 31, 1997. All ratios for the period have been annualized. (5) Commenced operations on October 8, 1998. All ratios for the period have been annualized. (6) Commenced operations on December 11, 1998. All ratios for the period have been annualized. Amounts designated as "--" are either $0 or round to $0.
34 PROSPECTUS NOTES PROSPECTUS 35 NOTES 36 PROSPECTUS NOTES (THIS PAGE INTENTIONALLY LEFT BLANK) 38 PROSPECTUS HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS INVESTMENT ADVISER Trusco Capital Management, Inc. 50 Hurt Plaza Suite 1400 Atlanta, Georgia 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 2000, includes detailed information about the STI Classic Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list each Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends and their impact on Fund performance. The reports also contain detailed financial information about the Funds. TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION: BY TELEPHONE: Call 1-800-428-6970 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, Pennsylvania 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the EDGAR Database on the SEC's website ("HTTP://WWW.SEC.GOV"). You may review and copy documents at the SEC Public Reference Room in Washington, DC (for information on the operation of the Public Reference Room, call 202-942-8090). You may request documents by mail from the SEC, upon payment of a duplicating fee, by writing to: Securities and Exchange Commission, Public Reference Section, Washington, DC 20549-0102. You may also obtain this information, upon payment of a duplicating fee, by e-mailing the SEC at the following address: PUBLICINFO@SEC.GOV. The STI Classic Funds' Investment Company Act registration number is 811-06557. XXX-XX-XX XXXXXXXX STI CLASSIC FUNDS-EQUITY FUNDS FLEX AND INVESTOR SHARES PROSPECTUS OCTOBER 1, 2000 BALANCED FUND CAPITAL APPRECIATION FUND CORE EQUITY FUND E-COMMERCE OPPORTUNITY FUND GROWTH AND INCOME FUND INTERNATIONAL EQUITY FUND INTERNATIONAL EQUITY INDEX FUND MID-CAP EQUITY FUND SMALL CAP GROWTH STOCK FUND SMALL CAP VALUE EQUITY FUND (FORMERLY SMALL CAP EQUITY FUND) TAX SENSITIVE GROWTH STOCK FUND VALUE INCOME STOCK FUND INVESTMENT ADVISER TO THE FUNDS: TRUSCO CAPITAL MANAGEMENT, INC. (the "Adviser") [STI Logo Omitted] THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PROSPECTUS ABOUT THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Investor Shares and Flex Shares of the Equity Funds that you should know before investing. Please read this prospectus and keep it for future reference. Investor Shares and Flex Shares have different expenses and other characteristics, allowing you to choose the class that best suits your needs. You should consider the amount you want to invest, how long you plan to have it invested, and whether you plan to make additional investments. INVESTOR SHARES FLEX SHARES [bullet] Front-end sales charge [bullet] Contingent deferred sales charge [bullet] 12b-1 fees [bullet] Higher 12b-1 fees [bullet] $2,000 minimum initial [bullet] $5,000 minimum initial investment investment THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN THAT IS COMMON TO EACH OF THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE: 2 BALANCED FUND 4 CAPITAL APPRECIATION FUND 6 CORE EQUITY FUND 8 E-COMMERCE OPPORTUNITY FUND 10 GROWTH AND INCOME FUND 12 INTERNATIONAL EQUITY FUND 14 INTERNATIONAL EQUITY INDEX FUND 16 MID-CAP EQUITY FUND 18 SMALL CAP GROWTH STOCK FUND 20 SMALL CAP VALUE EQUITY FUND 22 TAX SENSITIVE GROWTH STOCK FUND 24 VALUE INCOME STOCK FUND 26 MORE INFORMATION ABOUT RISK 27 MORE INFORMATION ABOUT FUND INVESTMENTS 27 INVESTMENT ADVISER AND PORTFOLIO MANAGERS 29 PURCHASING, SELLING AND EXCHANGING FUND SHARES 34 DIVIDENDS, DISTRIBUTIONS AND TAXES 35 FINANCIAL HIGHLIGHTS 42 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS -------------------------------------------------------------------------------- [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING? [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION [CHART GRAPHIC OMITTED] WHAT IS AN INDEX? [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES [MOUNTAINTOP GRAPHIC OMITTED] MORE INFORMATION ABOUT FUND INVESTMENTS [MAGNIFIER GRAPHIC OMITTED] INVESTMENT ADVISER [HANDSHAKE GRAPHIC OMITTED] PURCHASING, SELLING AND EXCHANGING FUND SHARES [DOLLAR GRAPHIC OMITTED] SALES CHARGES -------------------------------------------------------------------------------- OCTOBER 1, 2000 PROSPECTUS 1 RISK/RETURN INFORMATION COMMON TO THE FUNDS Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. Each Fund has its own investment goal and strategies for reaching that goal. The Adviser invests Fund assets in a way that it believes will help a Fund achieve its goal. Still, investing in each Fund involves risk and there is no guarantee that a Fund will achieve its goal. The Adviser's judgments about the markets, the economy or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job the Adviser does, you could lose money on your investment in a Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. The value of your investment in a Fund is based on the market prices of the securities the Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, may be greater or lesser depending on the types of securities a Fund owns and the markets in which they trade. The effect on a Fund of a change in the value of a single security will depend on how widely the Fund diversifies its holdings. 2 PROSPECTUS BALANCED FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOALS Capital appreciation and current income -------------------------------------------------------------------------------- INVESTMENT FOCUS PRIMARY U.S. common stocks SECONDARY Bonds -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with a history of earnings growth and bonds with minimal risk -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want income from their investment, as well as an increase in its value -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Balanced Fund invests in common and preferred stocks, convertible securities, U.S. government obligations and investment grade corporate bonds. In selecting stocks for the Fund, the Adviser attempts to identify high-quality companies with a history of above average earnings growth. In selecting bonds, the Adviser tries to minimize risk while attempting to outperform selected market indices. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's equity securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Chart Omitted] Plot points are as follows: 25.08% 11.85% 20.71% 19.21% 4.31% 1995 1996 1997 1998 1999 BEST QUARTER WORST QUARTER 12.52% -5.81% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 4.06%. PROSPECTUS 3 BALANCED FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999 TO THOSE OF THE LEHMAN BROTHERS U.S. GOVERNMENT/CREDIT INDEX AND THE S&P 500 INDEX. INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION ------------------------------------------------------------- Balanced Fund 4.31% 16.00% 12.23%* ------------------------------------------------------------- Lehman Brothers U.S. Government/ Credit Index -2.15% 7.60% 5.67%** ------------------------------------------------------------- S&P 500 Index 21.04% 28.55% 23.55%** ------------------------------------------------------------- * SINCE 1/3/94 ** SINCE 12/31/93 FLEX SHARES 1 YEAR SINCE INCEPTION ------------------------------------------------------------- Balanced Fund 3.51% 13.88%* ------------------------------------------------------------- Lehman Brothers U.S. Government/ Credit Index -2.15% 5.90%** ------------------------------------------------------------- S&P 500 Index 21.04% 26.98%** ------------------------------------------------------------- * SINCE 6/14/95 ** SINCE 5/31/95 [CHART GRAPHIC OMITTTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers U.S. Government/Credit Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, corporate debt backed by the U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least 1 year. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00% * THIS SALES CHARGE VARIES DEPENDING ON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.95% 0.95% Distribution and Service (12b-1) Fees 0.28% 1.00% Other Expenses 0.28% 0.23% ---- ----- Total Annual Fund Operating Expenses 1.51% 2.18% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $523 $834 $1,168 $2,109 Flex Shares $421 $682 $1,169 $2,513 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $523 $834 $1,168 $2,109 Flex Shares $221 $682 $1,169 $2,513 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Investor Shares are 0.92%, 0.13% and 1.33%, respectively. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares are 0.92%, 0.94% and 2.09%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 4 PROSPECTUS CAPITAL APPRECIATION FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Capital appreciation -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. common stocks -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with above average growth potential -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need to receive income on their investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Capital Appreciation Fund invests primarily in U.S. common stocks and other equity securities that the Adviser believes have strong business fundamentals, such as revenue growth, cash flows and earnings trends. In selecting investments for the Fund, the Adviser chooses companies that it believes have above average growth potential. The Adviser's strategy focuses on large cap stocks with a strong growth history. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Chart Omitted] Plot points are as follows: 9.27% -8.01% 30.33% 19.50% 30.34% 27.26% 9.06% 1993 1994 1995 1996 1997 1998 1999 BEST QUARTER WORST QUARTER 22.78% -11.26% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 5.55%. PROSPECTUS 5 CAPITAL APPRECIATION FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1999, TO THOSE OF THE S&P 500 INDEX. INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Capital Appreciation Fund 9.06% 23.02% 17.09%* -------------------------------------------------------------------------------- S&P 500 Index 21.04% 28.55% 20.74%** -------------------------------------------------------------------------------- * SINCE 6/9/92 ** SINCE 5/31/92 FLEX SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Capital Appreciation Fund 8.53% 21.73%* -------------------------------------------------------------------------------- S&P 500 Index 21.04% 26.98%** -------------------------------------------------------------------------------- * SINCE 6/1/95 ** SINCE 5/31/95 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00% * THIS SALES CHARGE VARIES DEPENDING ON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Investment Advisory Fees 1.15% 1.15% Distribution and Service (12b-1) Fees 0.68% 1.00% Other Expenses 0.15% 0.24% ----- ----- Total Annual Fund Operating Expenses 1.98% 2.39% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $568 $973 $1,402 $2,595 Flex Shares $442 $745 $1,275 $2,726 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $568 $973 $1,402 $2,595 Flex Shares $242 $745 $1,275 $2,726 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Investor Shares are 1.13%, 0.60% and 1.88%, respectively. Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares are 1.13%, 0.98% and 2.35%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 6 PROSPECTUS CORE EQUITY FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Long-term capital growth -------------------------------------------------------------------------------- INVESTMENT FOCUS Common stocks of mid- to large-cap companies -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate to high -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with superior earnings trends -------------------------------------------------------------------------------- INVESTOR PROFILE Investors seeking long-term growth of capital without regard to income who are willing to accept more volatility for the possibility of higher returns -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Core Equity Fund invests primarily in common stocks of U.S. companies with market capitalizations of more than $1 billion. In selecting stocks for the Fund, the Adviser attempts to capture superior growth prospects based on earnings potential, profitability and other measures. These measures include growth characteristics such as whether a company makes significant investments in research and product development or whether a company is participating in rapidly expanding industries. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. In addition, the Fund is subject to the risk that mid- to large-capitalization growth stocks may underperform other segments of the equity market or the equity markets as a whole. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The Core Equity Fund commenced operations on September 30, 1999, and therefore does not have a performance history for a full calendar year. PROSPECTUS 7 CORE EQUITY FUND [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)* 2.00% * THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- FLEX SHARES Investment Advisory Fees 1.10% Distribution and Service (12b-1) Fees 1.00% Other Expenses 0.60% ----- Total Annual Fund Operating Expenses 2.70% -------------------------------------------------------------------------------- EXAMPLE ------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Flex Shares $473 $838 $1,430 $3,032 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Flex Shares $273 $838 $1,430 $3,032 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses are 1.10%, 0.55% and 2.25%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 8 PROSPECTUS E-COMMERCE OPPORTUNITY FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Long-term capital growth -------------------------------------------------------------------------------- INVESTMENT FOCUS Common stocks of companies participating in multiple electronic commerce market segments -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Very high -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies utilizing electronic commerce opportunities to achieve above average growth -------------------------------------------------------------------------------- INVESTOR PROFILE Aggressive investors with long-term investment goals who are willing to accept significant volatility for the possibility of higher returns -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The E-Commerce Opportunity Fund invests primarily in common stocks of U.S. companies that are expected to benefit substantially from electronic commerce and achieve above average growth. The Fund defines electronic commerce, or e-commerce as conducting business through the use of computers, the Internet, telecommunication lines and other electronic means of information transfer. The Fund's holdings are generally diversified across three market segments. The first segment is comprised of corporations whose core line of business focuses on an emerging e-commerce market. The second segment consists of established technology companies that provide the infrastructure to support electronic commerce. The third segment includes established, non-tech companies that are expected to achieve substantial direct or indirect benefits from e-commerce. In selecting investments for the Fund, the Adviser focuses on a "bottom-up" analysis that evaluates the competitive advantages and market sustainability of individual companies. The Fund invests primarily in companies with market capitalizations over $1 billion, but may invest a portion of its assets in smaller companies. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange. Due to the focus of the Fund, many holdings share similar risk factors. Many companies in the portfolio have limited operating histories, function in rapidly changing business environments and trade at valuations which are significantly higher than average. As a result, the Fund's NAV may be more volatile than other, broadly diversified equity funds. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The E-Commerce Opportunity Fund commenced operations on September 30, 1999, and therefore does not have a performance history for a full calendar year. PROSPECTUS 9 E-COMMERCE OPPORTUNITY FUND [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)* 2.00% * THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- FLEX SHARES Investment Advisory Fees 1.10% Distribution and Service (12b-1) Fees 1.00% Other Expenses 0.30% ----- Total Annual Fund Operating Expenses 2.40% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Flex Shares $443 $748 $1,280 $2,736 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Flex Shares $243 $748 $1,280 $2,736 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses are 1.10%, 0.85% and 2.25%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 10 PROSPECTUS GROWTH AND INCOME FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOALS PRIMARY Long-term capital appreciation SECONDARY Current income -------------------------------------------------------------------------------- INVESTMENT FOCUS Equity securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify securities of companies with market capitalizations of at least $1 billion with attractive valuation and/or above average earnings potential relative either to their sectors or the market as a whole -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who are looking for capital appreciation potential and income with less volatility than the equity markets as a whole -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Growth and Income Fund invests primarily in equity securities, including common stock and listed American Depositary Receipts (ADRs), of domestic and foreign companies with market capitalizations of at least $1 billion. However, the average market capitalization can vary throughout a full market cycle and will be flexible to allow the Adviser to capture market opportunities. The Adviser uses a quantitative screening process to identify companies with an attractive fundamental profile. The portfolio management team selects stocks of companies with strong financial quality and above average earnings momentum to secure the best relative values in each economic sector. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Chart Omitted] Plot points are as follows: -0.91% 29.45% 19.12% 27.58% 18.25% 14.10% 1994 1995 1996 1997 1998 1999 BEST QUARTER WORST QUARTER 17.35% -10.35% (6/30/97) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS -0.43%. PROSPECTUS 11 GROWTH AND INCOME FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 500/BARRA VALUE INDEX. PREVIOUSLY, THE FUND'S RETURNS HAD BEEN COMPARED TO THE S&P 500 INDEX, BUT THE ADVISER BELIEVES THAT S&P 500/BARRA VALUE INDEX, BECAUSE OF ITS GREATER EMPHASIS ON LARGE CAP VALUE STOCKS, MORE ACCURATELY REFLECTS THE TYPE OF SECURITIES IN WHICH THE FUND INVESTS. INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Growth and Income Fund 14.10% 21.56% 16.57%* -------------------------------------------------------------------------------- S&P 500/ BARRA Value Index 12.72% 22.94% 18.16%** -------------------------------------------------------------------------------- S&P 500 Index 21.04% 28.55% 22.37%** -------------------------------------------------------------------------------- * SINCE 5/7/93 ** SINCE 4/30/93 FLEX SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Growth and Income Fund 13.30% 19.73%* -------------------------------------------------------------------------------- S&P 500/ BARRA Value Index 12.72% 21.89%** -------------------------------------------------------------------------------- S&P 500 Index 21.04% 27.74%** -------------------------------------------------------------------------------- * SINCE 4/5/95 ** SINCE 3/31/95 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The previous index, the S&P 500 Index, is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. The S&P 500/BARRA Value Index is a widely-recognized index of the stocks in the S&P 500 Index that have lower price-to-book ratios. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00% * THIS SALES CHARGE VARIES DEPENDING ON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.90% 0.90% Distribution and Service (12b-1) Fees 0.25% 1.00% Other Expenses 0.21% 0.25% ----- ----- Total Annual Fund Operating Expenses 1.36% 2.15% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $508 $790 $1,092 $1,949 Flex Shares $418 $673 $1,154 $2,483 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $508 $790 $1,092 $1,949 Flex Shares $218 $673 $1,154 $2,483 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Investor Shares are 0.90%, 0.07% and 1.18%, respectively. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares are 0.90%, 0.78% and 1.93%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 12 PROSPECTUS INTERNATIONAL EQUITY FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Long-term capital appreciation -------------------------------------------------------------------------------- INVESTMENT FOCUS Foreign common stocks -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY High -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with good fundamentals or a history of consistent growth -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want an increase in the value of their investment without regard to income, are willing to accept the increased risks of international investing for the possibility of higher returns, and want exposure to a diversified portfolio of international stocks -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The International Equity Fund invests primarily in common stocks and other equity securities of foreign companies. The Fund invests primarily in developed countries, but may invest in countries with emerging markets. The Adviser's "bottom-up" approach to stock selection focuses on individual stocks and fundamental characteristics of companies. The Adviser's goal is to find companies with top management, quality products and sound financial positions, or a history of consistent growth in cash flows, sales, operating profits, returns on equity and returns on invested capital. In selecting investments for the Fund, the Adviser diversifies the Fund's investments among at least three foreign countries. Due to the Fund's investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that foreign common stocks may underperform other segments of the equity market or the equity markets as a whole. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. Emerging market countries are countries that the World Bank or the United Nations considers to be emerging or developing. Emerging markets may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in other countries. As a result, there will tend to be an increased risk of price volatility associated with the Fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to December 1995, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The periods from December 1995 to January 1996 represent the performance of the Trust Shares of the Fund. Trust Shares have lower expenses than Investor and Flex Shares, which results in higher performance shown below. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE PERIODS FROM JANUARY 1996 TO THE PRESENT REPRESENT THE PERFORMANCE OF THE INVESTOR SHARES OF THE FUND. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Chart Omitted] Plot points are as follows: 21.58% 13.01% 10.69% 9.05% 1996 1997 1998 1999 BEST QUARTER WORST QUARTER 16.74% -18.33% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 3.69%. PROSPECTUS 13 INTERNATIONAL EQUITY FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, AND FAR EAST (MSCI EAFE) INDEX. INVESTOR SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- International Equity Fund 9.05% 18.40%* -------------------------------------------------------------------------------- MSCI EAFE Index 26.96% 13.97%* -------------------------------------------------------------------------------- * SINCE 1/31/95 FLEX SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- International Equity Fund 8.27% 17.76%* -------------------------------------------------------------------------------- MSCI EAFE Index 26.96% 13.97%* -------------------------------------------------------------------------------- * SINCE 1/31/95 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The MSCI EAFE Index is a widely-recognized, capitalization-weighted (larger market capitalizations have more influence than smaller market capitalizations) index of over 900 securities listed on the stock exchanges in Europe, Australasia and the Far East. The country weighting of the Index is calculated using the market capitalization of each of the various countries, and then with respect to the market capitalization of the various companies operating in each country. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00% * THIS SALES CHARGE VARIES DEPENDING ON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Investment Advisory Fees 1.25% 1.25% Distribution and Service (12b-1) Fees 0.33% 1.00% Other Expenses 0.37% 0.49% ----- ----- Total Annual Fund Operating Expenses 1.95% 2.74% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $566 $964 $1,388 $2,564 Flex Shares $477 $850 $1,450 $3,070 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $566 $964 $1,388 $2,564 Flex Shares $277 $850 $1,450 $3,070 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Investor Shares are 1.25%, 0.21% and 1.83%, respectively. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares are 1.25%, 0.79% and 2.53%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 14 PROSPECTUS INTERNATIONAL EQUITY INDEX FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Investment results that correspond to the performance of the MSCI EAFE-GDP Weighted Index -------------------------------------------------------------------------------- INVESTMENT FOCUS Foreign common stocks in the MSCI EAFE-GDP Weighted Index -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY High -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Statistical analysis to track the Index -------------------------------------------------------------------------------- INVESTOR PROFILE Aggressive investors who want exposure to foreign markets and are willing to accept the increased risks of foreign investing for the possibility of higher returns -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The International Equity Index Fund invests primarily in common stocks of foreign companies. In selecting investments for the Fund, the Adviser chooses companies included in the MSCI EAFE-GDP Weighted Index, an index of equity securities of companies located in Europe, Australasia and the Far East. While the Fund is structured to have overall investment characteristics similar to those of the Index, it selects a sample of stocks within the index using a statistical process. So, the Fund will not hold all stocks included in the index. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that foreign common stocks may underperform other segments of the equity market or the equity markets as a whole. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. In addition to the above mentioned risks, the Adviser may not be able to match the performance of the Fund's benchmark. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Chart Omitted] Plot points are as follows: 10.20% 5.78% 8.44% 29.68% 29.97% 1995 1996 1997 1998 1999 BEST QUARTER WORST QUARTER 21.20% -13.09% (12/13/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS -5.07%. PROSPECTUS 15 INTERNATIONAL EQUITY INDEX FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, AND FAR EAST-GROSS DOMESTIC PRODUCT (MSCI EAFE-GDP) WEIGHTED INDEX. INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- International Equity Index Fund 29.97% 16.33% 13.95%* -------------------------------------------------------------------------------- MSCI EAFE-GDP Weighted Index (Price Return) 29.49% 14.45% 12.59%** -------------------------------------------------------------------------------- * SINCE 6/6/94 ** SINCE 5/31/94 FLEX SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- International Equity Index Fund 29.15% 15.99%* -------------------------------------------------------------------------------- MSCI EAFE-GDP Weighted Index (Price Return) 29.49% 14.74%** -------------------------------------------------------------------------------- * SINCE 6/8/95 ** SINCE 5/31/95 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The MSCI EAFE-GDP Weighted Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of over 900 securities listed on the stock exchanges in Europe, Australasia and the Far East. The country weighting of the Index is calculated using the gross domestic product of each of the various countries and then with respect to the market capitalization of the various companies operating in each country. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00% * THIS SALES CHARGE VARIES DEPENDING ON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.90% 0.90% Distribution and Service (12b-1) Fees 0.38% 1.00% Other Expenses 0.51% 0.71% ----- ----- Total Annual Fund Operating Expenses 1.79% 2.61% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $550 $917 $1,308 $2,401 Flex Shares $464 $811 $1,385 $2,944 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $550 $917 $1,308 $2,401 Flex Shares $264 $811 $1,385 $2,944 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Investor Shares are 0.81%, 0.17% and 1.49%, respectively. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares are 0.81%, 0.62% and 2.14%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 16 PROSPECTUS MID-CAP EQUITY FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Capital appreciation -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. mid-cap common stocks -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate to high -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with above average growth potential at an attractive price -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want the value of their investment to grow and who are willing to accept more volatility for the possibility of higher returns -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Mid-Cap Equity Fund invests primarily in a diversified portfolio of common stocks and other equity securities of U.S. companies. In selecting investments for the Fund, the Adviser primarily chooses companies that have small- to mid-sized market capitalizations (I.E., companies with market capitalizations of $500 million to $10 billion and companies in the S&P 400 Mid Cap Index) and that have above average growth potentials at attractive prices. The Adviser evaluates companies based on their industry sectors and the market in general. The Fund maintains holdings in the industries that appear to perform best during a given business cycle. The Adviser analyzes companies that are in favored industries based on their fundamental characteristics, such as growth rates and earnings. The Adviser does not consider current income in selecting investments for the Fund. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that mid-cap common stocks may underperform other segments of the equity market or the equity markets as a whole. The small- to-mid-sized capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small-cap and mid-cap stocks may be more volatile than those of larger companies. These securities may be traded over the counter or listed on an exchange. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Chart Omitted] Plot points are as follows: 30.57% 14.93% 20.67% 5.98% 15.69% 1995 1996 1997 1998 1999 BEST QUARTER WORST QUARTER 24.52% -20.00% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 9.50%. PROSPECTUS 17 MID-CAP EQUITY FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 400 MID CAP INDEX. INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Mid-Cap Equity Fund 15.69% 17.29% 14.01%* -------------------------------------------------------------------------------- S&P 400 Mid Cap Index 14.72% 23.04% 17.96%* -------------------------------------------------------------------------------- * SINCE 1/31/94 FLEX SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Mid-Cap Equity Fund 14.97% 15.04%* -------------------------------------------------------------------------------- S&P 400 Mid Cap Index 14.72% 22.08%** -------------------------------------------------------------------------------- * SINCE 6/5/95 ** SINCE 5/31/95 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 400 Mid Cap Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of 400 domestic mid-cap stocks chosen for market size, liquidity, and industry group representation. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00% * THIS SALES CHARGE VARIES DEPENDING ON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Investment Advisory Fees 1.15% 1.15% Distribution and Service (12b-1) Fees 0.43% 1.00% Other Expenses 0.23% 0.29% ----- ----- Total Annual Fund Operating Expenses 1.81% 2.44% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $552 $923 $1,318 $2,422 Flex Shares $447 $761 $1,301 $2,776 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $552 $923 $1,318 $2,422 Flex Shares $247 $761 $1,301 $2,776 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Investor Shares are 1.12%, 0.33% and 1.68%, respectively. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares are 1.12%, 0.87% and 2.28%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 18 PROSPECTUS SMALL CAP GROWTH STOCK FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Long-term capital appreciation -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. small cap common stocks of growth companies -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY High -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Identifies small cap companies with above average growth potential -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need current income -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Small Cap Growth Stock Fund invests primarily in small U.S. companies with market capitalizations between $50 million and $3 billion in size. The Fund's investment philosophy is based on the premise that a portfolio of small cap stocks with positive earnings trends, reasonable valuation, and strong fundamentals will provide superior returns over time. The Adviser selects companies with strong current earnings growth, improving profitability, a strong balance sheet, strong current and projected business fundamentals, and priced at reasonable valuations. The Adviser believes in executing a very disciplined and objective investment process and in controlling risk through a broadly diversified portfolio. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and the potential for capital gains tax liabilities for taxable investors. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that small capitalization growth stocks may underperform other segments of the equity market or the equity markets as a whole. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over the counter or listed on an exchange. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FOR ONE YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Chart Omitted] Plot point is as follows: 20.48% 1999 BEST QUARTER WORST QUARTER 20.77% -11.36% (6/30/99) (3/31/99) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 16.09%. PROSPECTUS 19 SMALL CAP GROWTH STOCK FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 600 SMALL CAP INDEX. INVESTOR SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Small Cap Growth Stock Fund 20.48% 58.53%* -------------------------------------------------------------------------------- S&P 600 Small Cap Index 12.41% 25.01%** -------------------------------------------------------------------------------- * SINCE 10/8/98 ** SINCE 9/30/98 FLEX SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Small Cap Growth Stock Fund 19.29% 56.97%* -------------------------------------------------------------------------------- S&P 600 Small Cap Index 12.41% 25.01%** -------------------------------------------------------------------------------- * SINCE 10/8/98 ** SINCE 9/30/98 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 600 Small Cap Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of 600 domestic small cap stocks. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00% * THIS SALES CHARGE VARIES DEPENDING ON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Investment Advisory Fees 1.15% 1.15% Distribution and Service (12b-1) Fees 0.50% 1.00% Other Expenses 0.22% 0.27% ----- ----- Total Annual Fund Operating Expenses 1.87% 2.42% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Flex Shares $558 $941 $1,348 $2,483 Investor Shares $445 $755 $1,291 $2,756 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Flex Shares $558 $941 $1,348 $2,483 Investor Shares $245 $755 $1,291 $2,756 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Investor Shares are 1.15%, 0.24% and 1.61%, respectively. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares are 1.15%, 0.89% and 2.31%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 20 PROSPECTUS SMALL CAP VALUE EQUITY FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOALS PRIMARY Capital appreciation SECONDARY Current income -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. small cap common stocks -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify undervalued small cap stocks -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who primarily want the value of their investment to grow, but want to receive some income from their investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Small Cap Value Equity Fund invests primarily in common stocks of U.S. companies. In selecting investments for the Fund, the Adviser chooses common stocks of small sized companies (I.E., companies with market capitalizations under $1 billion) that it believes are undervalued in the market. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that small capitalization common stocks may underperform other segments of the equity market or the equity markets as a whole. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to January 1997, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The periods from January 1997 to June 1997 represent the performance of Trust Shares of the Fund. The periods from June 1997 to the present represent the performance of the Flex Shares of the Fund. Trust Shares have lower expenses than Flex Shares, which results in higher performance shown below. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S FLEX SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Chart Omitted] Plot points are as follows: 30.99% 34.25% 31.79% -14.33% -3.67% 1995 1996 1997 1998 1999 BEST QUARTER WORST QUARTER 19.45% -22.14% (6/30/99) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 0.90%. PROSPECTUS 21 SMALL CAP VALUE EQUITY FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE RUSSELL 2000 VALUE INDEX. PREVIOUSLY, THE FUND'S RETURNS HAD BEEN COMPARED TO THE RUSSELL 2000 INDEX, BUT THE ADVISER BELIEVES THAT THE RUSSELL 2000 VALUE INDEX, BECAUSE OF ITS GREATER EMPHASIS ON SMALL U.S. COMPANIES WITH LOWER GROWTH RATES AND PRICE-TO-BOOK RATIOS, MORE ACCURATELY REFLECTS THE TYPE OF SECURITIES IN WHICH THE FUND INVESTS. FLEX SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Small Cap Value Equity Fund -3.67% 13.85% 13.07%* -------------------------------------------------------------------------------- Russell 2000 Value Index -1.49% 13.13% 11.41%* -------------------------------------------------------------------------------- Russell 2000 Index 21.26% 16.69% 15.09%* -------------------------------------------------------------------------------- * SINCE 8/31/94 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The previous index, the Russell 2000 Index, is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of the 2,000 smallest U.S. companies out of the 3,000 largest companies. The Russell 2000 Value Index is a widely-recognized, capitalization weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of companies in the Russell 2000 Index with lower growth rates and price-to-book ratios. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)* 2.00% * THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- FLEX SHARES Investment Advisory Fees 1.15% Distribution and Service (12b-1) Fees 1.00% Other Expenses 0.41% ----- Total Annual Fund Operating Expenses 2.56% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $459 $796 $1,360 $2,895 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $259 $796 $1,360 $2,895 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares are 1.15%, 0.75% and 2.31%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 22 PROSPECTUS TAX SENSITIVE GROWTH STOCK FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOALS Long-term capital growth with nominal dividend income -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. common stocks of growth companies -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies that have above average growth potential and uses a low portfolio turnover strategy to reduce capital gains distributions -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want to increase the value of their investment while minimizing taxable capital gains distributions -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Tax Sensitive Growth Stock Fund invests primarily in a diversified portfolio of common stocks of financially strong U.S. growth companies. Many of these companies have a history of stable or rising dividend payout policies. The Adviser attempts to minimize the impact of capital gains taxes on investment returns by using a low turnover rate (generally 50% or less) strategy, in conjunction with other tax management strategies. These strategies may lead to lower capital gains distributions and, therefore, lower capital gains taxes. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that common stocks of U.S. growth companies may underperform other segments of the equity market or the equity markets as a whole. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to December 1998, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Flex Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S FLEX SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Chart Omitted] Plot points are as follows: 21.04% 28.76% 31.73% 23.52% 1996 1997 1998 1999 BEST QUARTER WORST QUARTER 27.74% -9.96% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 0.00%. PROSPECTUS 23 TAX SENSITIVE GROWTH STOCK FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 500 INDEX. FLEX SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Tax Sensitive Growth Stock Fund 23.52% 26.25%* -------------------------------------------------------------------------------- S&P 500 Index 21.04% 26.39%* -------------------------------------------------------------------------------- * SINCE 12/31/95 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)* 2.00% * THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- FLEX SHARES Investment Advisory Fees 1.15% Distribution and Service (12b-1) Fees 1.00% Other Expenses 0.20% ----- Total Annual Fund Operating Expenses 2.35% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $438 $733 $1,255 $2,686 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $238 $733 $1,255 $2,686 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses are 1.15%, 0.96% and 2.31%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 24 PROSPECTUS VALUE INCOME STOCK FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOALS PRIMARY Current income SECONDARY Capital appreciation -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. common stocks -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify high dividend-paying, undervalued stocks -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who are looking for current income and capital appreciation with less volatility than the average stock fund -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Value Income Stock Fund invests primarily in common stocks and other equity securities of U.S. companies. In selecting investments for the Fund, the Adviser primarily chooses companies that have a market capitalization of at least $500 million and that have a history of paying regular dividends. The Adviser focuses on high dividend-paying stocks that trade below their historical value. The Adviser's "bottom-up" approach to stock selection emphasizes individual stocks over economic trends. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to February 1993, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Investor Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE PERIODS FROM FEBRUARY 1993 TO THE PRESENT REPRESENT THE PERFORMANCE OF THE FUND'S INVESTOR SHARES. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Chart Omitted] Plot points are as follows: -4.93% 39.30% 20.05% 10.86% 2.87% 35.50% 19.06% 26.57% 10.16% -3.31% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 BEST QUARTER WORST QUARTER 18.56% -14.86% (3/31/91) (9/30/90) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS -6.48%. PROSPECTUS 25 VALUE INCOME STOCK FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 500/BARRA VALUE INDEX. SINCE INVESTOR SHARES 1 YEAR 5 YEARS 10 YEARS INCEPTION -------------------------------------------------------------------------------- Value Income Stock Fund -3.31% 16.81% 14.71% 14.75%* -------------------------------------------------------------------------------- S&P 500/BARRA Value Index 12.72% 22.94% 15.37% 15.46%* -------------------------------------------------------------------------------- * SINCE 10/31/89 SINCE FLEX SHARES 1 YEAR 5 YEARS 10 YEARS INCEPTION -------------------------------------------------------------------------------- Value Income Stock Fund -3.99% 16.07% 14.44% 14.49%* -------------------------------------------------------------------------------- S&P 500/BARRA Value Index 12.72% 22.94% 15.37% 15.46%* -------------------------------------------------------------------------------- * SINCE 10/31/89 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500/BARRA Value Index is a widely-recognized index of the stocks in the S&P 500 Index that have lower price-to-book ratios. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00% * THIS SALES CHARGE VARIES DEPENDING ON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.80% 0.80% Distribution and Service (12b-1) Fees 0.33% 1.00% Other Expenses 0.15% 0.23% ----- ----- Total Annual Fund Operating Expenses 1.28% 2.03% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $500 $766 $1,051 $1,862 Flex Shares $406 $637 $1,093 $2,358 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $500 $766 $1,051 $1,862 Flex Shares $206 $637 $1,093 $2,358 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Investor Shares are 0.80%, 0.33% and 1.28%, respectively. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares are 0.80%, 0.99% and 2.02%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 26 PROSPECTUS MORE INFORMATION ABOUT RISK [INNERTUBE GRAPHIC OMITTED] MORE INFORMATION ABOUT RISK EQUITY RISK ALL FUNDS Equity securities include public and privately issued equity securities, common and preferred stocks, warrants, rights to subscribe to common stock and convertible securities, as well as instruments that attempt to track the price movement of equity indices. Investments in equity securities and equity derivatives in general are subject to market risks that may cause their prices to fluctuate over time. The value of securities convertible into equity securities, such as warrants or convertible debt, is also affected by prevailing interest rates, the credit quality of the issuer and any call provision. Fluctuations in the value of equity securities in which a mutual fund invests will cause a fund's net asset value to fluctuate. An investment in a portfolio of equity securities may be more suitable for long-term investors who can bear the risk of these share price fluctuations. FIXED INCOME RISK BALANCED FUND The market value of fixed income investments changes in response to interest rate changes and other factors. During periods of falling interest rates, the values of outstanding fixed income securities generally rise. Moreover, while securities with longer maturities tend to produce higher yields, the prices of longer maturity securities are also subject to greater market fluctuations as a result of changes in interest rates. In addition to these fundamental risks, different types of fixed income securities may be subject to the following additional risk: CREDIT RISK The possibility that an issuer will be unable to make timely payments of either principal or interest. FOREIGN SECURITY RISKS GROWTH AND INCOME FUND INTERNATIONAL EQUITY FUND INTERNATIONAL EQUITY INDEX FUND Investments in securities of foreign companies or governments can be more volatile than investments in U.S. companies or governments. Diplomatic, political, or economic developments, including nationalization or appropriation, could affect investments in foreign countries. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets. In addition, the value of securities denominated in foreign currencies, and of dividends from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign companies or governments generally are not subject to uniform accounting, auditing, and financial reporting standards comparable to those applicable to domestic U.S. companies or governments. Transaction costs are generally higher than those in the U.S. and expenses for custodial arrangements of foreign securities may be somewhat greater than typical expenses for custodial arrangements of similar U.S. securities. Some foreign governments levy withholding taxes against dividend and interest income. Although in some countries a portion of these taxes are recoverable, the non-recovered portion will reduce the income received from the securities comprising the portfolio. TRACKING ERROR RISK INTERNATIONAL EQUITY INDEX FUND Factors such as Fund expenses, imperfect correlation between the Funds' investments and those of their benchmarks, rounding of share prices, changes to the benchmark, regulatory policies, and leverage, may affect their ability to achieve perfect correlation. The magnitude of any tracking error may be affected by a higher portfolio turnover rate. Because an index is just a composite of the prices of the securities it represents rather than an actual portfolio of those securities, an index will have no expenses. As a result, a Fund, which will have expenses such as taxes, custody, management fees and other operational costs, and brokerage, may not achieve its investment objective of accurately correlating to an index. PROSPECTUS 27 MORE INFORMATION ABOUT FUND INVESTMENTS [MOUNTAINTOP GRAPHIC OMITTED] MORE INFORMATION ABOUT FUND INVESTMENTS This prospectus describes the Funds' primary strategies, and the Funds will normally invest in the types of securities described in this prospectus. However, in addition to the investments and strategies described in this prospectus, each Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). The investments and strategies described in this prospectus are those that we use under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, each Fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and short-term obligations. The Small Cap Value Equity Fund also may invest in investment grade fixed income securities and mid- to large-cap common stocks that would not ordinarily be consistent with a Fund's objective. A Fund will do so only if the Adviser believes that the risk of loss outweighs the opportunity for capital gains or higher income. Of course, a Fund cannot guarantee that it will achieve its investment goal. [MAGNIFIER GRAPHIC OMITTED] INVESTMENT ADVISER The investment adviser (the "Adviser") makes investment decisions for the Funds and continuously reviews, supervises and administers each Fund's respective investment program. The Board of Trustees supervises the Adviser and establishes policies that the Adviser must follow in its management activities. Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Funds. As of July 1, 2000, Trusco had approximately $47 billion in assets under management. For the fiscal period ended May 31, 2000, the Adviser received advisory fees of: BALANCED FUND 0.85% CAPITAL APPRECIATION FUND 1.06% CORE EQUITY FUND 1.03% E-COMMERCE OPPORTUNITY FUND 0.96% GROWTH AND INCOME FUND 0.90% INTERNATIONAL EQUITY FUND 1.25% INTERNATIONAL EQUITY INDEX FUND 0.79% MID-CAP EQUITY FUND 1.07% SMALL CAP GROWTH STOCK FUND 1.12% SMALL CAP VALUE EQUITY FUND 1.12% TAX SENSITIVE GROWTH STOCK FUND 1.09% VALUE INCOME STOCK FUND 0.80% The Adviser may use its affiliates as brokers for Fund transactions. For periods prior to January 1, 2000, STI Capital Management, N.A. ("STI"), a subsidiary of SunTrust Banks, Inc. served as investment adviser to the Balanced Fund, Capital Appreciation Fund, International Equity Fund, Mid-Cap Equity Fund, Small Cap Value Equity Fund, and Value Income Stock Fund. On January 1, 2000, SunTrust Bank (formerly SunTrust Bank, Atlanta), a subsidiary of SunTrust Banks, Inc. succeeded STI as the investment adviser to those Funds. On July 1, 2000 SunTrust Banks, Inc. reorganized its money management units, including those of SunTrust Bank, into Trusco Capital Management, Inc. As a result, Trusco now serves as the investment adviser to each STI Classic Fund. PORTFOLIO MANAGERS The Balanced Fund is co-managed by Mr. Robert J. Rhodes, CFA, Mr. Earl L. Denney, CFA, and Mr. Dave E. West, CFA. Mr. Rhodes manages the equity portion of the Fund. Mr. Denney and Mr. West co-manage the fixed-income portion of the Fund. Mr. Rhodes has also managed the Core Equity Fund since it began operating in September 1999 and the Capital Appreciation Fund since June 2000. Mr. Rhodes is an Executive Vice President and head of the Equity Funds group at Trusco. Mr. Rhodes has been employed by Trusco since 1973 and was Director of Research at Trusco from 1980 to 2000. Mr. Rhodes has more than 27 years of investment experience. Mr. West has 28 PROSPECTUS INVESTMENT ADVISER AND PORTFOLIO MANAGERS served as a Managing Director of STI and has worked there since 1985. In January 2000 he was named Managing Director of SunTrust Bank, and is now a Managing Director of Trusco. Mr. West has more than 14 years of investment experience. Mr. Denney has served as Managing Director of STI since 1983. In January 2000, he was named Managing Director of SunTrust Bank and is now a Managing Director of Trusco. Mr. Denney has more than 21 years of investment experience. Mr. Alan S. Kelley has served as a Vice President of Trusco since July 2000. He has managed the E-Commerce Opportunity Fund since it began operating in September 1999. Prior to joining Trusco, Mr. Kelley served as a Portfolio Manager with SunTrust Bank, Atlanta from 1995 to 1999. He has more than 7 years of investment experience. Mr. Jeffrey E. Markunas, CFA, has served as Lead Portfolio Manager of the Growth and Income Fund since it began operating in September 1992. From 1992 until July 2000, he served as Senior Vice President and Director of Equity Management for Crestar Asset Management Company. Additionally, he was named Senior Vice President of Trusco in January 1999, and Managing Director in July 2000. Mr. Markunas has more than 17 years of investment experience. The International Equity Index Fund is managed by Mr. Chad Deakins, CFA, and co-managed Mr. Robert J. Rhodes, CFA. Mr. Deakins serves as a Vice President of Trusco and has worked there since 1996. He has co-managed the International Equity Index Fund since February 1999. Mr. Deakins has also managed the International Equity Fund since May 2000. Prior to joining Trusco, Mr. Deakins worked at SunTrust Bank. He has more than 6 years of investment experience. Mr. Rhodes is an Executive Vice President and head of the Equity Funds group at Trusco. He has been employed by Trusco since 1973, and was Director of Research at Trusco from 1980 to 2000. Mr. Rhodes has co-managed the International Equity Index Fund since it began operating in June 1994. Mr. Rhodes has more than 27 years of investment experience. Mr. John Hamlin has served as a Vice President of Trusco since July 2000, after serving as a Portfolio Manager of STI since March 1999. He has managed the Mid-Cap Equity Fund since April 1999. Prior to joining STI, Mr. Hamlin served as Portfolio Manager at Phoenix Investment Counsel, Inc. from 1992 to 1999. He has more than 11 years of investment experience. Mr. Mark D. Garfinkel, CFA, has served as a Portfolio Manager of Trusco since 1994. He has managed the Small Cap Growth Stock Fund since it began operating in October 1998. He has more than 13 years of investment experience. Mr. Brett Barner, CFA, has served as a Vice President of Trusco since July 2000, after serving as a Managing Director of STI since 1994. He has managed the Small Cap Value Equity Fund since it began operating in January 1997. He has more than 16 years of investment experience. Mr. Jonathan Mote, CFA, CFP, has served as a Portfolio Manager of Trusco since August 1998. He has managed the Tax Sensitive Growth Stock Fund since it began operating in December 1998. Prior to joining Trusco, Mr. Mote served as a Portfolio Manager with SunTrust Banks. He has more than 15 years of investment experience. The Value Income Stock Fund is co-managed by Mr. Mills Riddick, CFA, and Mr. Dan Lewis. Mr. Riddick has served as a Managing Director of Trusco since July 2000, after serving as a Managing Director of STI since 1994. He has managed the Value Income Stock Fund since April 1995. Mr. Riddick has more than 18 years of investment experience. Mr. Lewis has served as a Portfolio Manager of Trusco since July 2000, after serving as a Portfolio Manager for STI since 1993. He has been an analyst of the Value Income Stock Fund since 1995. He has more than 9 years of investment experience. PROSPECTUS 29 PURCHASING, SELLING AND EXCHANGING FUND SHARES [HANDSHAKE GRAPHIC OMITTED] PURCHASING, SELLING AND EXCHANGING FUND SHARES This section tells you how to purchase, sell (sometimes called "redeem") and exchange Investor Shares and Flex Shares of the Funds. HOW TO PURCHASE FUND SHARES A SunTrust Securities Investment Consultant can assist you in opening a brokerage account which will be used for all transactions regarding the purchase of STI Classic Funds. Once your securities account is established, you may buy shares of the Funds by: [bullet] Mail [bullet] Telephone (1-800-874-4770) [bullet] Wire [bullet] Automated Clearing House (ACH) You may also buy shares through Investment Representatives of certain correspondent banks of SunTrust Banks, Inc. (SunTrust) and other financial institutions that are authorized to place transactions in Funds shares for their customers. Please contact your financial institution directly and follow its procedures for Fund share transactions. Your institution may charge a fee for its services, in addition to the fees charged by a Fund. You will also generally have to address your correspondence or questions regarding a Fund to your institution. A Fund may reject any purchase order if it is determined that accepting the order would not be in the best interests of STI Classic Funds or its shareholders. WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange is open for business (a Business Day). The price per share (the offering price) will be the net asset value per share (NAV) next determined after the Funds receive your purchase order. Each Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, for you to receive the current Business Day's NAV for each Fund, generally the Funds must receive your purchase order before 4:00 p.m. Eastern time. FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES, AND OTHER FINANCIAL INSTITUTIONS YOU MAY HAVE TO TRANSMIT YOUR PURCHASE, SALE AND EXCHANGE REQUESTS TO SUNTRUST OR OTHER FINANCIAL INSTITUTIONS AT AN EARLIER TIME FOR YOUR TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS THE FINANCIAL INSTITUTION TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE, SELL OR EXCHANGE FUND SHARES, INCLUDING SPECIFIC SUNTRUST OR OTHER FINANCIAL INSTITUTIONS INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR FINANCIAL INSTITUTION DIRECTLY. HOW THE FUNDS CALCULATE NAV In calculating NAV, each Fund generally values its investment portfolio at market price. If market prices are unavailable or a Fund thinks that the market price is unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. Some Funds hold securities that are listed on foreign exchanges. These securities may trade on weekends or other days when the Funds do not calculate NAV. As a result, the market value of these Funds' investments may change on days when you cannot purchase or sell Fund shares. 30 PROSPECTUS PURCHASING, SELLING AND EXCHANGING FUND SHARES NET ASSET VALUE NAV for one Fund share is the value of that share's portion of the net assets of the Fund. MINIMUM PURCHASES To purchase shares for the first time, you must invest in any Fund at least: CLASS DOLLAR AMOUNT -------------------------------------------------------------------------------- Investor Shares $2,000 -------------------------------------------------------------------------------- Flex Shares $5,000 ($2,000 for retirement plans) -------------------------------------------------------------------------------- Your subsequent investments of shares of any Fund must be made in amounts of at least $1,000 or, if you pay by a statement coupon, $100. The Funds may accept investments of smaller amounts for either class of shares at its discretion. FUNDLINK FUNDLINK is a telephone activated service that allows you to transfer money quickly and easily between the STI Classic Funds and your SunTrust bank account(s). To use FUNDLINK, you must first contact your SunTrust Bank Investment Consultant and complete the FUNDLINK application and authorization agreements. Once you have signed up to use FUNDLINK, simply call SunTrust at 1-800-874-4770 to complete all of your purchase and redemption transactions. SYSTEMATIC INVESTMENT PLAN If you have a checking or savings account with a SunTrust affiliate bank, you may purchase shares of either class automatically through regular deductions from your account. With a $500 minimum initial investment, you may begin regularly-scheduled investment from $50 to $100,000 once or twice a month. If you are buying Flex Shares, you should plan on investing at least $5,000 per Fund during the first two years. The Distributor may close your account if you do not meet this minimum investment requirement at the end of two years. [DOLLAR GRAPHIC OMITTED] SALES CHARGES FRONT-END SALES CHARGES -- INVESTOR SHARES The offering price of Investor Shares is the NAV next calculated after a Fund receives your request, plus the front-end sales charge. The amount of any front-end sales charge included in your offering price varies, depending on the amount of your investment: YOUR SALES CHARGE YOUR SALES CHARGE AS A PERCENTAGE OF AS A PERCENTAGE OF IF YOUR INVESTMENT IS: OFFERING PRICE YOUR NET INVESTMENT -------------------------------------------------------------------------------- LESS THAN $100,000 3.75% 3.90% -------------------------------------------------------------------------------- $100,000 BUT LESS THAN $250,000 3.25% 3.36% -------------------------------------------------------------------------------- $250,000 BUT LESS THAN $1,000,000 2.50% 2.56% -------------------------------------------------------------------------------- $1,000,000 AND OVER 1.50% 1.52% -------------------------------------------------------------------------------- WAIVER OF FRONT-END SALES CHARGE -- INVESTOR SHARES The front-end sales charge will be waived on Investor Shares purchased: [bullet] through reinvestment of dividends and distributions; [bullet] through a SunTrust Securities, Inc. asset allocation account; [bullet] by persons repurchasing shares they redeemed within the last 60 days (see Repurchase of Investor Shares); [bullet] by employees, and members of their immediate family, of SunTrust and its affiliates; [bullet] by persons reinvesting distributions from qualified employee benefit retirement plans and rollovers from individual retirement accounts ("IRAs") previously with the Trust department of a bank affiliated with SunTrust; [bullet] by persons investing an amount less than or equal to the value of an account distribution when an account for which a bank affiliated with SunTrust acted in a fiduciary, administrative, custodial or investment advisory capacity is closed; or [bullet] through dealers, retirement plans, asset allocation programs and financial institutions that, under their dealer agreements with the Distributor or otherwise, do not receive any portion of the front-end sales charge. PROSPECTUS 31 PURCHASING, SELLING AND EXCHANGING FUND SHARES REPURCHASE OF INVESTOR SHARES You may repurchase any amount of Investor Shares of any Fund at NAV (without the normal front-end sales charge), up to the limit of the value of any amount of Investor Shares (other than those which were purchased with reinvested dividends and distributions) that you redeemed within the past 60 days. In effect, this allows you to reacquire shares that you may have had to redeem, without re-paying the front-end sales charge. To exercise this privilege, the Funds must receive your purchase order within 60 days of your redemption. IN ADDITION, YOU MUST NOTIFY THE FUND WHEN YOU SEND IN YOUR PURCHASE ORDER THAT YOU ARE REPURCHASING SHARES. REDUCED SALES CHARGES -- INVESTOR SHARES RIGHTS OF ACCUMULATION. In calculating the appropriate sales charge rate, this right allows you to add the value of the Investor Shares you already own to the amount that you are currently purchasing. The Funds will combine the value of your current purchases with the current value of any Investor Shares you purchased previously for (i) your account, (ii) your spouse's account, (iii) a joint account with your spouse, or (iv) your minor children's trust or custodial accounts. A fiduciary purchasing shares for the same fiduciary account, trust or estate may also use this right of accumulation. The Funds will only consider the value of Investor Shares purchased previously that were sold subject to a sales charge. To be entitled to a reduced sales charge based on shares already owned, you must ask us for the reduction at the time of purchase. You must provide the Funds with your account number(s) and, if applicable, the account numbers for your spouse and/or children (and provide the children's ages). The Fund may amend or terminate this right of accumulation at any time. LETTER OF INTENT. You may purchase Investor Shares at the sales charge rate applicable to the total amount of the purchases you intend to make over a 13-month period. In other words, a Letter of Intent allows you to purchase Investor Shares of a Fund over a 13-month period and receive the same sales charge as if you had purchased all the shares at the same time. The Funds will only consider the value of Investor Shares sold subject to a sales charge. As a result, shares of the Investor Shares purchased with dividends or distributions will not be included in the calculation. To be entitled to a reduced sales charge based on shares you intend to purchase over the 13-month period, you must send the Funds a Letter of Intent. In calculating the total amount of purchases you may include in your Letter purchases made up to 90 days before the date of the Letter. The 13-month period begins on the date of the first purchase, including those purchases made in the 90-day period before the date of the Letter. Please note that the purchase price of these prior purchases will not be adjusted. You are not legally bound by the terms of your Letter of Intent to purchase the amount of your shares stated in the Letter. The Letter does, however, authorize the Fund to hold in escrow 3.75% of the total amount you intend to purchase. If you do not complete the total intended purchase at the end of the 13-month period, the Fund's transfer agent will redeem the necessary portion of the escrowed shares to make up the difference between the reduced rate sales charge (based on the amount you intended to purchase) and the sales charge that would normally apply (based on the actual amount you purchased). COMBINED PURCHASE/QUANTITY DISCOUNT PRIVILEGE. When calculating the appropriate sales charge rate, the Fund will combine same day purchases of Investor Shares (that are subject to a sales charge) made by you, your spouse and your minor children (under age 21). This combination also applies to Investor Shares you purchase with a Letter of Intent. CONTINGENT DEFERRED SALES CHARGES -- FLEX SHARES You do not pay a sales charge when you purchase Flex Shares. The offering price of Flex Shares is simply the next calculated NAV. But if you sell your shares within the first year after your purchase, you will pay a contingent deferred sales charge (CDSC) equal to 2.00% for either (1) the NAV of the shares at the time of purchase, or (2) NAV of the shares next calculated after the Fund receives your sale request, whichever is less. The sales charge does not apply to shares you purchase through reinvestment of dividends or distributions. So, you never pay a 32 PROSPECTUS PURCHASING, SELLING AND EXCHANGING FUND SHARES deferred sales charge on any increase in your investment above the initial offering price. This sales charge does not apply to exchanges of Flex Shares of one Fund for Flex Shares of another Fund. The contingent deferred sales charge will be waived if you sell your Flex Shares for the following reasons: [bullet] to make certain withdrawals from a retirement plan (not including IRAs); [bullet] because of death or disability; [bullet] for certain payments under the Systematic Withdrawal Plan (which is discussed later); or [bullet] for exchanges from Trust or Investor Shares to Flex Shares where the total accumulated period from the original date of purchase is at least one year. OFFERING PRICE OF FUND SHARES The offering price of Investor Shares is the NAV next calculated after the transfer agent receives your request, plus the front-end sales load. The offering price of Flex Shares is simply the next calculated NAV. HOW TO SELL YOUR FUND SHARES If you own your shares through a brokerage account with SunTrust Securities, you may sell (sometimes called "redeem") your shares on any Business Day by contacting SunTrust Securities directly by mail or telephone at 1-800-874-4770. The minimum amount for telephone redemptions is $1,000. If you own your shares through an account with a broker or other institution, contact that broker or institution to sell your shares. Your broker or institution may charge a fee for its services, in addition to the fees charged by the Fund. If you would like to sell $25,000 or more of your shares, please notify the Fund in writing and include a signature guarantee by a bank or other financial institution (a notarized signature is not sufficient). The sale price of each share will be the next NAV determined after the Fund receives your request less, in the case of Flex Shares, any applicable deferred sales charge. SYSTEMATIC WITHDRAWAL PLAN If you have at least $10,000 in your account, you may use the systematic withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual or annual automatic withdrawals of at least $50 from any Fund. The proceeds of each withdrawal will be mailed to you by check or, if you have a checking or savings account with a SunTrust affiliates bank, electronically transferred to your account. RECEIVING YOUR MONEY Normally, the Funds will send your sale proceeds within five Business Days after the Funds receive your request. Your proceeds can be wired to your bank account (subject to a $7.00 fee) or sent to you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK OR THROUGH ACH, REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 DAYS FROM YOUR DATE OF PURCHASE). REDEMPTIONS IN KIND The Funds generally pay sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Funds' remaining shareholders) the Funds might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. INVOLUNTARY SALES OF YOUR SHARES If your account balance drops below the required minimum you may be required to sell your shares. The account balance minimums are: CLASS DOLLAR AMOUNT -------------------------------------------------------------------------------- Investor Shares $2,000 -------------------------------------------------------------------------------- Flex Shares $5,000 -------------------------------------------------------------------------------- PROSPECTUS 33 PURCHASING, SELLING AND EXCHANGING FUND SHARES But, the Funds will always give you at least 60 days written notice to give you time to add to your account and avoid the sale of your shares. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES A Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. HOW TO EXCHANGE YOUR SHARES You may exchange your shares on any Business Day by contacting SunTrust Securities or your financial institution by mail or telephone. Exchange requests must be for an amount of at least $1,000. The exchange privilege is not intended as a vehicle for short-term trading. Excessive exchange activity may interfere with Fund management and may have an adverse effect on all shareholders. In order to limit excessive exchange activity and in other circumstances where it is in the best interests of a Fund, all Funds reserve the right to revise or terminate the exchange privilege, limit the amount or number of exchanges or reject any exchange. Currently, you may exchange your shares up to four times during a calendar year. If you exchange your shares more than four times during a year, you may be charged a $10.00 fee for each additional exchange. You will be notified before any fee is charged. IF YOU RECENTLY PURCHASED SHARES BY CHECK, OR THROUGH ACH, YOU MAY NOT BE ABLE TO EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 DAYS FROM YOUR DATE OF PURCHASE). This exchange privilege may be changed or canceled at any time upon 60 days' notice. EXCHANGES When you exchange shares, you are really selling your shares and buying other Fund shares. So, your sale price and purchase price will be based on the NAV next calculated after the Fund receives your exchange requests. INVESTOR SHARES You may exchange Investor Shares of any Fund for Investor Shares of any other Fund. If you exchange shares that you purchased without a sales charge or with a lower sales charge into a Fund with a sales charge or with a higher sales charge, the exchange is subject to an incremental sales charge (E.G., the difference between the lower and higher applicable sales charges). If you exchange shares into a Fund with the same, lower or no sales charge there is no incremental sales charge for the exchange. For purposes of computing the CDSC applicable to Flex Shares, the length of time you have owned your shares will be measured from the original date of purchase and will not be affected by any exchange. FLEX SHARES You may exchange Flex Shares of any Fund for Flex Shares of any other Fund. Again, the CDSC will be computed as of the original date of purchase. TELEPHONE TRANSACTIONS Purchasing, selling and exchanging Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believes to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. DISTRIBUTION OF FUND SHARES Each Fund has adopted a distribution plan that allows the Fund to pay distribution and service fees for the sale and distribution of its shares, and for services provided to shareholders. Because these fees are paid out of a Fund's assets continuously, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. 34 PROSPECTUS DIVIDENDS, DISTRIBUTIONS AND TAXES Distribution fees, as a percentage of average daily net assets are as follows: FOR INVESTOR SHARES -------------------------------------------------------------------------------- BALANCED FUND 0.28% CAPITAL APPRECIATION FUND 0.68% GROWTH AND INCOME FUND 0.25% INTERNATIONAL EQUITY FUND 0.33% INTERNATIONAL EQUITY INDEX FUND 0.38% MID-CAP EQUITY FUND 0.43% SMALL CAP GROWTH STOCK FUND 0.50% VALUE INCOME STOCK FUND 0.33% For Flex Shares the maximum distribution fee is 1.00% of the average daily net assets of each Fund. The Distributor may, from time to time in its sole discretion, institute one or more promotional incentive programs for dealers, which will be paid for by the Distributor from any sales charge it receives or from any other source available to it. Under any such program, the Distributor may provide cash or non-cash compensation as recognition for past sales or encouragement for future sales that may include the following: merchandise, travel expenses, prizes, meals, and lodgings, and gifts that do not exceed $100 per year, per individual. DIVIDENDS AND DISTRIBUTIONS Each Fund distributes its income as follows: QUARTERLY -------------------------------------------------------------------------------- BALANCED FUND CAPITAL APPRECIATION FUND CORE EQUITY FUND E-COMMERCE OPPORTUNITY FUND GROWTH AND INCOME FUND MID-CAP EQUITY FUND SMALL CAP GROWTH STOCK FUND SMALL CAP VALUE EQUITY FUND TAX SENSITIVE GROWTH STOCK FUND VALUE INCOME STOCK FUND ANNUALLY -------------------------------------------------------------------------------- INTERNATIONAL EQUITY FUND INTERNATIONAL EQUITY INDEX FUND Each Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Fund in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Fund receives your written notice. To cancel your election, simply send the Fund written notice. TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Funds have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from a Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE OR EXCHANGE OF FUND SHARES IS A TAXABLE EVENT. The International Equity Fund and International Equity Index Fund may be able to pass along a tax credit for foreign income taxes they pay. Each Fund will notify you if it gives you the credit. MORE INFORMATION ABOUT TAXES IS IN THE SAI. PROSPECTUS 35 FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS The tables that follow present performance information about Investor Shares and Flex Shares of each Fund. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. This information for each Fund, except the Growth and Income Fund for the periods ended prior to May 31, 1999, have been audited by Arthur Andersen LLP, independent public accountants. The financial highlights for the Growth and Income Fund for the periods ended prior to May 31, 1999 have been audited by Deloitte & Touche LLP, independent public accountants. The reports of Arthur Andersen, along with each Fund's financial statements, appears in the annual report that accompanies the SAI. You can obtain the annual report, which contains more performance information, at no charge by calling 1-800-428-6970. For the Periods Ended May 31, For a Share Outstanding Throughout the Periods
NET REALIZED NET ASSET NET AND DISTRIBUTIONS VALUE INVESTMENT UNREALIZED FROM NET DISTRIBUTIONS NET ASSET BEGINNING INCOME GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN (+) ---------- ---------- --------------- ------------- ------------- --------- --------- ------------- BALANCED FUND ------------- Investor Shares 2000 .......... $13.32 $ 0.29 $ 0.31 $(0.25) $(0.24) $13.43 4.66% 1999 .......... 13.14 0.24 1.10 (0.24) (0.92) 13.32 10.70 1998 .......... 11.99 0.28 2.19 (0.29) (1.03) 13.14 21.72 1997 .......... 11.60 0.29 1.48 (0.29) (1.09) 11.99 16.27 1996 .......... 10.30 0.30 1.41 (0.30) (0.11) 11.60 16.88 Flex Shares 2000 .......... $13.17 $ 0.17 $ 0.33 $(0.16) $(0.24) $13.27 3.88% 1999 .......... 13.02 0.16 1.07 (0.16) (0.92) 13.17 9.84 1998 .......... 11.90 0.20 2.16 (0.21) (1.03) 13.02 20.85 1997 .......... 11.53 0.22 1.45 (0.21) (1.09) 11.90 15.40 1996(1) ....... 10.36 0.24 1.29 (0.25) (0.11) 11.53 15.58 ------------------------- CAPITAL APPRECIATION FUND ------------------------- Investor Shares 2000 .......... $16.53 $(0.11) $ 1.41 $ -- $(0.92) $16.91 8.29% 1999 .......... 16.43 (0.05) 2.70 -- (2.55) 16.53 17.20 1998 .......... 15.06 (0.01) 3.95 -- (2.57) 16.43 28.71 1997 .......... 14.89 0.03 3.10 (0.02) (2.94) 15.06 23.74 1996 .......... 12.17 0.03 3.32 (0.04) (0.59) 14.89 28.18 Flex Shares 2000 .......... $16.18 $(0.24) $ 1.43 $ -- $(0.92) $16.45 7.77% 1999 .......... 16.22 (0.09) 2.60 -- (2.55) 16.18 16.50 1998 .......... 14.96 (0.04) 3.87 -- (2.57) 16.22 28.12 1997 .......... 14.84 (0.01) 3.07 -- (2.94) 14.96 23.24 1996(2) ....... 12.20 0.02 3.26 (0.05) (0.59) 14.84 27.48 ---------------- CORE EQUITY FUND ---------------- Flex Shares 2000(3) ....... $10.63 $(0.04) $ 0.47 $ -- $ -- $11.06 4.05% --------------------------- E-COMMERCE OPPORTUNITY FUND --------------------------- Flex Shares 2000(3) ....... $18.23 $(0.07) $(2.32) $ -- $ -- $15.81 (13.13)%
RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME (LOSS) TO RATIO OF INVESTMENT AVERAGE NET AVERAGE NET NET ASSETS EXPENSES TO INCOME (LOSS) ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO END OF AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE ----------- ----------- ------------- ----------------- ----------------- --------- ------------- BALANCED FUND ------------- Investor Shares 2000 .......... $ 9,627 1.27% 2.07% 1.51% 1.83% 182% 1999 .......... 14,962 1.27 1.89 1.43 1.73 179 1998 .......... 8,313 1.26 2.21 1.59 1.88 154 1997 .......... 6,012 1.25 2.58 1.64 2.19 197 1996 .......... 4,896 1.25 2.70 1.89 2.06 155 Flex Shares 2000 .......... $ 64,322 2.03% 1.33% 2.18% 1.18% 182% 1999 .......... 73,526 2.03 1.13 2.15 1.01 179 1998 .......... 27,625 2.02 1.41 2.23 1.20 154 1997 .......... 6,067 2.01 1.84 2.45 1.40 197 1996(1) ....... 3,131 2.00 1.85 2.97 0.88 155 ------------------------- CAPITAL APPRECIATION FUND ------------------------- Investor Shares 2000 .......... $251,421 1.82% (0.55)% 1.98% (0.71)% 129% 1999 .......... 311,120 1.82 (0.30) 1.96 (0.44) 147 1998 .......... 271,044 1.81 (0.03) 2.01 (0.23) 194 1997 .......... 218,660 1.80 0.19 2.02 (0.03) 141 1996 .......... 191,078 1.80 0.24 2.08 (0.04) 156 Flex Shares 2000 .......... $128,159 2.29% (1.03)% 2.39% (1.13)% 129% 1999 .......... 162,100 2.29 (0.86) 2.38 (0.95) 147 1998 .......... 106,670 2.26 (0.46) 2.37 (0.57) 194 1997 .......... 36,753 2.27 (0.29) 2.43 (0.45) 141 1996(2) ....... 10,969 2.27 (0.29) 2.68 (0.70) 156 ---------------- CORE EQUITY FUND ---------------- Flex Shares 2000(3) ....... $ 4,347 2.25% (1.39)% 2.70% (1.84)% 44% --------------------------- E-COMMERCE OPPORTUNITY FUND --------------------------- Flex Shares 2000(3) ....... $ 20,201 2.25% (1.65)% 2.40% (1.80)% 250% (+) Returns are for the period indicated and have not been annualized. Total return figures do not include applicable sales loads. (1) Commenced operations on June 14, 1995. All ratios for the period have been annualized. (2) Commenced operations on June 1, 1995. All ratios for the period have been annualized. (3) Commenced operations on January 24, 2000. All ratios for the period have been annualized. Amounts designated as "--" are either $0 or rounded to $0.
36 PROSPECTUS FINANCIAL HIGHLIGHTS For the Periods Ended May 31, (unless otherwise indicated) For a Share Outstanding Throughout the Periods
NET REALIZED NET ASSET NET AND DISTRIBUTIONS VALUE INVESTMENT UNREALIZED FROM NET DISTRIBUTIONS NET ASSET BEGINNING INCOME GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN (+) ---------- ---------- --------------- ------------- ------------- --------- --------- -------------------------- GROWTH AND INCOME FUND (A) -------------------------- Investor Shares 2000 .......... $16.21 $ 0.09 $ 0.55 $(0.08) $(1.12) $15.65 3.92% 1999(5) ....... 15.21 0.04 1.99 (0.03) (1.00) 16.21 14.31 For the years ended November 30: 1998 .......... 16.64 0.10 1.66 (0.10) (3.09) 15.21 13.69 1997 .......... 13.47 0.13 3.25 (0.14) (0.07) 16.64 25.42 1996 .......... 11.66 0.17 2.39 (0.16) (0.59) 13.47 22.63 1995 .......... 10.78 0.25 2.62 (0.26) (1.73) 11.66 28.71 Flex Shares 2000 .......... $16.10 $ -- $ 0.51 $ -- $(1.12) $15.49 3.11% 1999(5) ....... 15.14 (0.01) 1.97 -- (1.00) 16.10 13.85 For the years ended November 30: 1998 .......... 16.59 (0.01) 1.64 -- (3.08) 15.14 12.78 1997 .......... 13.44 0.04 3.23 (0.05) (0.07) 16.59 24.63 1996 .......... 11.64 0.09 2.38 (0.08) (0.59) 13.44 21.81 1995 (6) ...... 11.11 0.12 1.62 (0.14) (1.07) 11.64 15.78 ------------------------- INTERNATIONAL EQUITY FUND ------------------------- Investor Shares 2000 .......... $12.89 $(0.11) $ 1.37 $(0.02) $(1.66) $12.47 10.15% 1999 .......... 14.92 (0.09) (1.10) -- (0.84) 12.89 (7.82) 1998 .......... 13.58 0.02 2.64 -- (1.32) 14.92 21.39 1997 .......... 11.38 (0.01) 2.56 -- (0.35) 13.58 22.85 1996(4) ....... 10.44 0.04 0.90 -- -- 11.38 9.00 Flex Shares 2000 .......... $12.58 $(0.32) $ 1.46 $ -- $(1.66) $12.06 9.38% 1999 .......... 14.68 (0.29) (0.97) -- (0.84) 12.58 (8.48) 1998 .......... 13.47 0.07 2.46 -- (1.32) 14.68 20.54 1997 .......... 11.37 (0.04) 2.49 -- (0.35) 13.47 21.98 1996(4) ....... 10.44 0.02 0.91 -- -- 11.37 8.91 ------------------------------- INTERNATIONAL EQUITY INDEX FUND ------------------------------- Investor Shares 2000 .......... $11.70 $(0.11) $ 2.32 $ -- $(0.11) $13.80 18.86% 1999 .......... 13.20 (0.11) 0.98 (0.18) (2.19) 11.70 7.33 1998 .......... 11.26 0.16 2.53 (0.07) (0.68) 13.20 25.25 1997 .......... 10.88 0.03 0.72 (0.07) (0.30) 11.26 7.12 1996 .......... 10.20 0.05 0.85 (0.13) (0.09) 10.88 8.90 Flex Shares 2000 .......... $11.73 $ 0.08 $ 2.04 $ -- $(0.11) $13.74 18.04% 1999 .......... 13.17 (0.15) 0.94 (0.04) (2.19) 11.73 6.68 1998 .......... 11.24 0.17 2.44 -- (0.68) 13.17 24.50 1997 .......... 10.87 (0.05) 0.72 -- (0.30) 11.24 6.41 1996(7) ....... 10.24 -- 0.82 (0.10) (0.09) 10.87 8.32
RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME (LOSS) TO RATIO OF INVESTMENT AVERAGE NET AVERAGE NET NET ASSETS EXPENSES TO INCOME (LOSS) ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO END OF AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE ----------- ----------- ------------- ----------------- ----------------- --------- -------------------------- GROWTH AND INCOME FUND (A) -------------------------- Investor Shares 2000 .......... $42,666 1.18% 0.58% 1.31% 0.45% 53% 1999(5) ....... 36,958 1.08 0.54 1.17 0.45 31 For the years ended November 30: 1998 .......... 34,434 1.03 0.63 1.18 0.48 71 1997 .......... 28,112 1.03 0.89 1.18 0.74 100 1996 .......... 17,997 1.03 1.35 1.18 1.20 82 1995 .......... 12,633 1.03 2.14 1.18 1.99 175 Flex Shares 2000 .......... $62,462 1.93% (0.14)% 2.18% (0.39)% 53% 1999(5) ....... 35,163 1.83 (0.21) 1.97 (0.35) 31 For the years ended November 30: 1998 .......... 25,656 1.78 (0.13) 2.03 (0.38) 71 1997 .......... 13,269 1.73 0.15 2.09 (0.20) 100 1996 .......... 5,131 1.68 0.71 2.03 0.36 82 1995 (6) ...... 2,086 1.68 1.13 2.03 0.78 175 ------------------------- INTERNATIONAL EQUITY FUND ------------------------- Investor Shares 2000 .......... $10,462 1.83% 0.33% 1.95% 0.21% 179% 1999 .......... 14,145 1.83 0.30 1.93 0.20 161 1998 .......... 17,383 1.82 0.24 1.91 0.15 108 1997 .......... 10,674 1.81 0.18 2.05 (0.06) 139 1996(4) ....... 3,448 1.81 1.73 3.14 0.40 113 Flex Shares 2000 .......... $10,891 2.53% (0.38)% 2.74% (0.59)% 179% 1999 .......... 17,103 2.53 (0.40) 2.84 (0.71) 161 1998 .......... 21,164 2.52 (0.46) 2.58 (0.52) 108 1997 .......... 8,375 2.51 (0.27) 3.03 (0.79) 139 1996(4) ....... 953 2.51 1.08 5.86 (2.27) 113 ------------------------------- INTERNATIONAL EQUITY INDEX FUND ------------------------------- Investor Shares 2000 .......... $ 4,563 1.47% 0.07% 1.79% (0.25)% 9% 1999 .......... 4,909 1.47 0.25 1.66 0.06 32 1998 .......... 7,141 1.46 0.50 1.84 0.12 1 1997 .......... 5,592 1.45 0.28 1.88 (0.15) 2 1996 .......... 5,597 1.45 0.48 2.06 (0.13) 30 Flex Shares 2000 .......... $ 5,853 2.12% (0.36)% 2.61% (0.85)% 9% 1999 .......... 1,465 2.12 (0.30) 2.57 (0.75) 32 1998 .......... 1,469 2.11 (0.03) 3.52 (1.44) 1 1997 .......... 900 2.10 (0.39) 3.69 (1.98) 2 1996(7) ....... 917 2.10 (0.24) 4.14 (2.28) 30 (+) Returns are for the period indicated and have not been annualized. Total return figures do not include applicable sales loads. (4) Commenced operations on January 2, 1996. All ratios for the period have been annualized. (5) Commenced operations on May 31, 1999. All ratios for the period have been annualized. (6) Commenced operations on April 19, 1995. All ratios for the period have been annualized. (7) Commenced operations on June 8, 1995. All ratios for the period have been annualized. (A) On May 24, 1999, the CrestFunds Value Fund exchanged all of its assets and certain liabilities for shares of the Growth and Income Fund. The CrestFunds Value Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. Amounts designated as "--" are either $0 or rounded to $0.
PROSPECTUS 37 FINANCIAL HIGHLIGHTS For the Periods Ended May 31, (unless otherwise indicated) For a Share Outstanding Throughout the Periods
NET REALIZED NET ASSET NET AND DISTRIBUTIONS VALUE INVESTMENT UNREALIZED FROM NET DISTRIBUTIONS NET ASSET BEGINNING INCOME GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN (+) ---------- ---------- --------------- ------------- ------------- --------- --------- ------------------- MID-CAP EQUITY FUND -------------------- Investor Shares 2000 .......... $12.50 $(0.19) $ 2.37 $ -- $(0.86) $13.82 18.55% 1999 .......... 13.67 (0.06) 0.08 -- (1.19) 12.50 1.17 1998 .......... 13.17 (0.03) 2.49 -- (1.96) 13.67 20.56 1997 .......... 12.74 (0.03) 1.69 (0.01) (1.22) 13.17 13.76 1996 .......... 10.99 0.03 2.62 (0.03) (0.87) 12.74 24.93 Flex Shares 2000 .......... $12.17 $(0.22) $ 2.26 $ -- $(0.86) $13.35 17.87% 1999 .......... 13.42 (0.14) 0.08 -- (1.19) 12.17 0.56 1998 .......... 13.04 (0.04) 2.38 -- (1.96) 13.42 19.80 1997 .......... 12.69 (0.07) 1.64 -- (1.22) 13.04 13.06 1996(8) ....... 11.13 -- 2.45 (0.02) (0.87) 12.69 23.00 --------------------------- SMALL CAP GROWTH STOCK FUND --------------------------- Investor Shares 2000(9) ....... $16.46 $(0.07) $ 1.88 $ -- $ -- $18.27 11.00% Flex Shares 2000 .......... $14.46 $(0.04) $ 3.77 $ -- $(0.19) $18.00 25.95% 1999(10) ...... 10.00 (0.19) 4.67 -- (0.02) 14.46 44.78 --------------------------- SMALL CAP VALUE EQUITY FUND --------------------------- Flex Shares 2000 .......... $ 9.65 $ -- $(0.54) $(0.01) $ -- $ 9.10 (5.65)% 1999 .......... 12.80 0.01 (2.53) (0.02) (0.61) 9.65 (19.52) 1998(11) ...... 11.28 0.03 2.17 (0.06) (0.62) 12.80 22.29 ------------------------------- TAX SENSITIVE GROWTH STOCK FUND ------------------------------- Flex Shares 2000 .......... $29.85 $(0.16) $ 2.96 $ -- $ -- $32.65 9.38% 1999(12) ...... 25.52 (0.04) 4.37 -- -- 29.85 16.97 ----------------------- VALUE INCOME STOCK FUND ----------------------- Investor Shares 2000 .......... $12.81 $ 0.19 $(1.48) $(0.18) $(0.99) $10.35 (10.83)% 1999 .......... 13.87 0.19 1.02 (0.20) (2.07) 12.81 10.71 1998 .......... 13.68 0.20 2.62 (0.21) (2.42) 13.87 22.71 1997 .......... 13.13 0.25 2.32 (0.26) (1.76) 13.68 21.69 1996 .......... 11.58 0.30 2.71 (0.30) (1.16) 13.13 27.39 Flex Shares 2000 .......... $12.68 $ 0.08 $(1.44) $(0.09) $(0.99) $10.24 (11.50)% 1999 .......... 13.75 0.10 1.01 (0.11) (2.07) 12.68 9.91 1998 .......... 13.61 0.12 2.57 (0.13) (2.42) 13.75 21.76 1997 .......... 13.08 0.18 2.29 (0.18) (1.76) 13.61 20.91 1996(13) ...... 11.59 0.26 2.65 (0.26) (1.16) 13.08 26.52
RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME TO RATIO OF INVESTMENT AVERAGE NET AVERAGE NET NET ASSETS EXPENSES TO INCOME (LOSS) ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO END OF AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE ----------- ----------- ------------- ----------------- ----------------- --------- ------------------- MID-CAP EQUITY FUND -------------------- Investor Shares 2000 .......... $ 14,513 1.62% (0.43)% 1.81% (0.62)% 131% 1999 .......... 19,230 1.62 (0.90) 1.76 (1.04) 76 1998 .......... 24,930 1.61 (0.75) 1.84 (0.98) 129 1997 .......... 20,245 1.60 (0.21) 1.85 (0.46) 152 1996 .......... 17,971 1.60 0.25 1.96 (0.11) 116 Flex Shares 2000 .......... $ 14,588 2.22% (1.05)% 2.44% (1.27)% 131% 1999 .......... 15,804 2.22 (1.52) 2.48 (1.78) 76 1998 .......... 19,042 2.21 (1.37) 2.47 (1.63) 129 1997 .......... 10,120 2.20 (0.85) 2.58 (1.23) 152 1996(8) ....... 5,029 2.20 (0.37) 3.04 (1.21) 116 --------------------------- SMALL CAP GROWTH STOCK FUND --------------------------- Investor Shares 2000(9) ....... $ 39,865 1.55% (1.26)% 1.79% (1.50)% 110% Flex Shares 2000 .......... $ 23,228 2.25% (1.92)% 2.42% (2.09)% 110% 1999(10) ...... 6,158 2.25 (1.50) 3.19 (1.73) 75 --------------------------- SMALL CAP VALUE EQUITY FUND --------------------------- Flex Shares 2000 .......... $ 8,596 2.27% 0.21% 2.56% (0.08)% 65% 1999 .......... 19,465 2.27 0.21 2.55 (0.07) 63 1998(11) ...... 40,613 2.06 0.01 2.35 (0.28) 55 ------------------------------- TAX SENSITIVE GROWTH STOCK FUND ------------------------------- Flex Shares 2000 .......... $290,595 2.25% (0.91)% 2.35% (1.01)% 30% 1999(12) ...... 75,875 2.25 (0.80) 2.48 (1.03) 18 ----------------------- VALUE INCOME STOCK FUND ----------------------- Investor Shares 2000 .......... $104,178 1.28% 1.64% 1.28% 1.64% 62% 1999 .......... 194,312 1.28 1.55 1.28 1.55 69 1998 .......... 210,591 1.27 1.47 1.27 1.47 99 1997 .......... 165,999 1.30 2.01 1.31 2.00 105 1996 .......... 130,597 1.30 2.47 1.37 2.40 134 Flex Shares 2000 .......... $ 84,563 2.02% 0.91% 2.03% 0.90% 62% 1999 .......... 167,000 2.02 0.81 2.03 0.80 69 1998 .......... 180,530 2.01 0.78 2.01 0.78 99 1997 .......... 73,466 2.00 1.33 2.03 1.30 105 1996(13) ...... 26,298 2.00 1.72 2.15 1.57 134 (+) Returns are for the period indicated and have not been annualized. Total return figures do not include applicable sales loads. (8) Commenced operations on June 5, 1995. All ratios for the period have been annualized. (9) Commenced operations on December 12, 1999. All ratios for the period have been annualized. (10) Commenced operations on October 8, 1998. All ratios for the period have been annualized. (11) Commenced operations on June 5, 1997. All ratios for the period have been annualized. (12) Commenced operations on December 15, 1998. All ratios for the period have been annualized. (13) Commenced operations on June 1, 1995. All ratios for the period have been annualized. Amounts designated as "--" are either $0 or rounded to $0.
38 PROSPECTUS NOTES PROSPECTUS 39 NOTES 40 PROSPECTUS NOTES (THIS PAGE INTENTIONALLY LEFT BLANK) 42 PROSPECTUS HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS INVESTMENT ADVISER Trusco Capital Management, Inc. 50 Hurt Plaza Suite 1400 Atlanta, Georgia 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 2000, includes detailed information about the STI Classic Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list each Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends and their impact on Fund performance. The reports also contain detailed financial information about the Funds. TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION: BY TELEPHONE: Call 1-800-428-6970 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, Pennsylvania 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the EDGAR Database on the SEC's website ("HTTP://WWW.SEC.GOV"). You may review and copy documents at the SEC Public Reference Room in Washington, DC (for information on the operation of the Public Reference Room, call 202-942-8090). You may request documents by mail from the SEC, upon payment of a duplicating fee, by writing to: Securities and Exchange Commission, Public Reference Section, Washington, DC 20549-0102. You may also obtain this information, upon payment of a duplicating fee, by e-mailing the SEC at the following address: PUBLICINFO@SEC.GOV. The STI Classic Funds' Investment Company Act registration number is 811-06557. XXXXXX/XX-XX STI CLASSIC FUNDS-BOND AND MONEY MARKET FUNDS-TRUST SHARES PROSPECTUS OCTOBER 1, 2000 BOND FUNDS FLORIDA TAX-EXEMPT BOND FUND GEORGIA TAX-EXEMPT BOND FUND INVESTMENT GRADE BOND FUND INVESTMENT GRADE TAX-EXEMPT BOND FUND LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND MARYLAND MUNICIPAL BOND FUND SHORT-TERM BOND FUND SHORT-TERM U.S. TREASURY SECURITIES FUND U.S. GOVERNMENT SECURITIES FUND VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND VIRGINIA MUNICIPAL BOND FUND MONEY MARKET FUNDS PRIME QUALITY MONEY MARKET FUND TAX-EXEMPT MONEY MARKET FUND U.S. GOVERNMENT SECURITIES MONEY MARKET FUND U.S.TREASURY MONEY MARKET FUND VIRGINIA TAX-FREE MONEY MARKET FUND (FORMERLY TAX-FREE MONEY MARKET FUND) INVESTMENT ADVISER TO THE FUNDS: TRUSCO CAPITAL MANAGEMENT, INC. (the "Adviser") [STI Logo Omitted] THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PROSPECTUS ABOUT THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Trust Shares of the Bond and Money Market Funds that you should know before investing. Please read this prospectus and keep it for future reference. THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN THAT IS COMMON TO EACH OF THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE: 2 FLORIDA TAX-EXEMPT BOND FUND 4 GEORGIA TAX-EXEMPT BOND FUND 6 INVESTMENT GRADE BOND FUND 8 INVESTMENT GRADE TAX-EXEMPT BOND FUND 10 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND 12 MARYLAND MUNICIPAL BOND FUND 14 SHORT-TERM BOND FUND 16 SHORT-TERM U.S. TREASURY SECURITIES FUND 18 U.S. GOVERNMENT SECURITIES FUND 20 VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND 22 VIRGINIA MUNICIPAL BOND FUND 24 PRIME QUALITY MONEY MARKET FUND 26 TAX-EXEMPT MONEY MARKET FUND 28 U.S. GOVERNMENT SECURITIES MONEY MARKET FUND 30 U.S. TREASURY MONEY MARKET FUND 32 VIRGINIA TAX-FREE MONEY MARKET FUND 34 MORE INFORMATION ABOUT RISK 35 MORE INFORMATION ABOUT FUND INVESTMENTS 35 INVESTMENT ADVISER AND PORTFOLIO MANAGERS 37 PURCHASING AND SELLING FUND SHARES 39 DIVIDENDS, DISTRIBUTIONS AND TAXES 40 FINANCIAL HIGHLIGHTS 46 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS -------------------------------------------------------------------------------- [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING? [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION [CHART GRAPHIC OMITTED] WHAT IS AN INDEX? [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES [MOUNTAINTOP GRAPHIC OMITTED] MORE INFORMATION ABOUT FUND INVESTMENTS [MAGNIFIER GRAPHIC OMITTED] INVESTMENT ADVISER [HANDSHAKE GRAPHIC OMITTED] PURCHASING AND SELLING FUND SHARES -------------------------------------------------------------------------------- OCTOBER 1, 2000 PROSPECTUS 1 RISK/RETURN INFORMATION COMMON TO THE FUNDS Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. Each Fund has its own investment goal and strategies for reaching that goal. The Adviser invests Fund assets in a way that it believes will help a Fund achieve its goal. Still, investing in each Fund involves risk and there is no guarantee that a Fund will achieve its goal. The Adviser's judgments about the markets, the economy or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job the Adviser does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. The value of your investment in a Fund (other than a money market fund) is based on the market prices of the securities the Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, may be greater or lesser depending on the types of securities a Fund owns and the markets in which they trade. The effect on a Fund of a change in the value of a single security will depend on how widely the Fund diversifies its holdings. 2 PROSPECTUS FLORIDA TAX-EXEMPT BOND FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Current income exempt from federal income taxes for Florida residents with shares themselves expected to be exempt from the Florida intangible personal property tax -------------------------------------------------------------------------------- INVESTMENT FOCUS Florida municipal securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to invest more Fund assets in undervalued sectors and less in overvalued ones -------------------------------------------------------------------------------- INVESTOR PROFILE Florida residents who want income exempt from federal income taxes -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Florida Tax-Exempt Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal income taxes, and the shares themselves are expected to be exempt from the Florida intangible personal property tax. Issuers of these securities can be located in Florida, Puerto Rico and other U.S. territories and possessions. In addition, up to 20% of the Fund's assets may be invested in securities subject to the alternative minimum tax or in certain taxable debt securities. In selecting investments for the Fund, the Adviser tries to limit risk as much as possible. Based on the Adviser's analysis of municipalities, credit risk, market trends and investment cycles, the Adviser attempts to invest more of the Fund's assets in undervalued market sectors and less in overvalued sectors. The Adviser also tries to identify and invest in municipal issuers with improving credit and avoid those with deteriorating credit. The Adviser anticipates that the Fund's average weighted maturity will range from 6 to 25 years. Under certain circumstances, such as a national financial emergency or a temporary decline in availability of Florida obligations, up to 20% of the Fund's assets may be invested in securities subject to the Florida intangible personal property tax and/or securities that generate income subject to federal personal income taxes. These securities may include short-term municipal securities outside Florida or certain taxable fixed income securities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund's concentration of investments in securities of issuers located in Florida subjects the Fund to economic and government policies within Florida. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1995 15.85% 1996 3.94% 1997 7.82% 1998 6.24% 1999 -2.31% BEST QUARTER WORST QUARTER 6.18% -2.30% (3/31/95) (6/30/99) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 4.20%. PROSPECTUS 3 FLORIDA TAX-EXEMPT BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX AND THE LIPPER FLORIDA MUNICIPAL DEBT FUNDS AVERAGE. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Florida Tax-Exempt Bond Fund -2.31% 6.15% 4.92%* -------------------------------------------------------------------------------- Lehman Brothers 10-Year Municipal Bond Index -1.24% 7.12% 4.90%** -------------------------------------------------------------------------------- Lipper Florida Municipal Debt Funds Average -4.35% 5.90% 3.52%** -------------------------------------------------------------------------------- * SINCE 1/25/94 ** SINCE 1/31/94 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers 10-Year Municipal Bond Index is a widely-recognized index of long-term investment grade tax-exempt bonds. The Index includes general obligation bonds, revenue bonds, insured bonds and prefunded bonds with maturities between 8 and 12 years. The Index represents various market sectors and geographic locations. The Lipper Florida Municipal Debt Funds Average is a composite index of mutual funds with investment goals similar to the Fund's goals. It reports the average return of the Florida intermediate-term municipal bond mutual funds tracked by Lipper Analytical Services, Inc. The number of funds in the Average varies. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.65% Other Expenses 0.13% ----- Total Annual Fund Operating Expenses 0.78% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $80 $249 $433 $966 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.60% and 0.73%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 4 PROSPECTUS GEORGIA TAX-EXEMPT BOND FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Current income exempt from federal and state income taxes for Georgia residents without undue risk -------------------------------------------------------------------------------- INVESTMENT FOCUS Georgia municipal securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to invest more Fund assets in undervalued sectors and less in overvalued ones -------------------------------------------------------------------------------- INVESTOR PROFILE Georgia residents who want income exempt from federal and state income taxes -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Georgia Tax-Exempt Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal and Georgia income taxes. Issuers of these securities can be located in Georgia, Puerto Rico and other U.S. territories and possessions. In addition, up to 20% of the Fund's assets may be invested in securities subject to the alternative minimum tax or in certain taxable debt securities. In selecting investments for the Fund, the Adviser tries to limit risk as much as possible. Based on the Adviser's analysis of municipalities, credit risk, market trends and investment cycles, the Adviser attempts to invest more of the Fund's assets in undervalued market sectors and less in overvalued sectors. The Adviser tries to diversify the Fund's holdings within Georgia. The Adviser also tries to identify and invest in municipal issuers with improving credit and avoid those with deteriorating credit. The Adviser anticipates that the Fund's average weighted maturity will range from 6 to 25 years. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund's concentration of investments in securities of issuers located in Georgia subjects the Fund to economic and government policies within Georgia. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1995 13.51% 1996 3.53% 1997 8.17% 1998 5.79% 1999 -2.26% BEST QUARTER WORST QUARTER 5.02% -2.30% (3/31/95) (6/30/99) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 3.17%. PROSPECTUS 5 GEORGIA TAX-EXEMPT BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX AND THE LIPPER GEORGIA MUNICIPAL DEBT FUNDS AVERAGE. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Georgia Tax-Exempt Bond Fund -2.26% 5.62% 3.80%* -------------------------------------------------------------------------------- Lehman Brothers 10-Year Municipal Bond Index -1.24% 7.12% 4.90%** -------------------------------------------------------------------------------- Lipper Georgia Municipal Debt Funds Average -4.51% 6.04% 3.39%** -------------------------------------------------------------------------------- * SINCE 1/18/94 ** SINCE 1/31/94 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers 10-Year Municipal Bond Index is a widely-recognized index of long-term investment grade tax-exempt bonds. The Index includes general obligation bonds, revenue bonds, insured bonds and prefunded bonds with maturities between 8 and 12 years. The Index represents various market sectors and geographic locations. The Lipper Georgia Municipal Debt Funds Average is a composite index of mutual funds with investment goals similar to the Fund's goals. It reports the average return of the Georgia intermediate-term municipal bond mutual funds tracked by Lipper Analytical Services, Inc. The number of funds in the Average varies. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.65% Other Expenses 0.12% ----- Total Annual Fund Operating Expenses 0.77% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $79 $246 $428 $954 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.60% and 0.72%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 6 PROSPECTUS INVESTMENT GRADE BOND FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High total return through current income and capital appreciation, while preserving the principal amount invested -------------------------------------------------------------------------------- INVESTMENT FOCUS Investment grade U.S. government and corporate debt securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify relatively inexpensive securities in a selected market index -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want to receive income from their investment, as well as an increase in the value of the investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Investment Grade Bond Fund invests primarily in investment grade corporate debt securities, U.S. Treasury obligations and mortgage-backed securities. In selecting investments for the Fund, the Adviser tries to minimize risk while attempting to outperform selected market indices. Currently, the Adviser's selected index is the Lehman Brothers U.S. Government/Credit Index, a widely-recognized, unmanaged index of investment grade government and corporate debt securities. The Adviser seeks to invest more in portions of the Index that seem relatively inexpensive, and less in those that seem expensive. The Adviser allocates the Fund's investments among various market sectors based on the Adviser's analysis of historical data, yield information and credit ratings. The Adviser anticipates that the Fund's average weighted maturity will range from 4 to 10 years. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. Mortgage-backed securities are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage- backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1993 10.84% 1994 -3.32% 1995 17.80% 1996 2.34% 1997 9.08% 1998 9.19% 1999 -1.53% BEST QUARTER WORST QUARTER 6.11% -2.67% (6/30/95) (3/31/94) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 0.45%. PROSPECTUS 7 INVESTMENT GRADE BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN BROTHERS U.S. GOVERNMENT/CREDIT INDEX, LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX AND THE LIPPER INTERMEDIATE INVESTMENT GRADE DEBT FUNDS AVERAGE. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Investment Grade Bond Fund -1.53% 7.17% 6.07%* -------------------------------------------------------------------------------- Lehman Brothers U.S. Government/Credit Index -2.15% 7.60% 6.38%** -------------------------------------------------------------------------------- Lehman Brothers U.S. Aggregate Bond Index -0.83% 7.73% 6.40%** -------------------------------------------------------------------------------- Lipper Intermediate Investment Grade Debt Funds Average -1.31% 6.79% 5.81%** -------------------------------------------------------------------------------- * SINCE 7/16/92 ** SINCE 7/31/92 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers U.S. Government/Credit Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, corporate debt backed by the U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least 1 year. The Lehman Brothers U.S. Aggregate Bond Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index that combines the Lehman Brothers U.S. Government/Credit Index and the Lehman Brothers Mortgage-Backed Securities Index. The Lehman Brothers U.S. Government/ Credit Index consists of U.S. government obligations and corporate debt securities. The Lehman Brothers Mortgage-Backed Securities Index consists of mortgage-backed securities rated AAA. The Lehman Brothers U.S. Aggregate Bond Index includes fixed income securities rated investment grade (BBB) or higher, with maturities of at least one year. The securities in the Index have outstanding par values of at least $100 million for U. S. government obligations and $25 million for the others. The Lipper Intermediate Investment Grade Debt Funds Average is a composite of mutual funds with investment goals similar to the Fund's goals. It reports the average return of the intermediate term investment grade bond mutual funds tracked by Lipper Analytical Services, Inc. The number of funds in the Average varies. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.74% Other Expenses 0.10% ----- Total Annual Fund Operating Expenses 0.84% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $86 $268 $466 $1,037 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.72% and 0.82%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 8 PROSPECTUS INVESTMENT GRADE TAX-EXEMPT BOND FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High total return through (i) current income that is exempt from federal income taxes and (ii) capital appreciation, while preserving the principal amount invested -------------------------------------------------------------------------------- INVESTMENT FOCUS Investment grade municipal securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to invest more Fund assets in undervalued sectors and less in overvalued ones -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want to receive tax-free current income and an increase in the value of their investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Investment Grade Tax-Exempt Bond Fund invests primarily in investment grade tax-exempt obligations, like municipal securities. The issuers of these securities may be located in any U.S. state, territory or possession. In addition, up to 20% of the Fund may be invested in securities subject to the alternative minimum tax or in certain taxable debt securities. In selecting investments for the Fund, the Adviser tries to limit risk as much as possible. Based on the Adviser's analysis of municipalities, credit risk, market trends and investment cycles, the Adviser attempts to invest more of the Fund's assets in undervalued market sectors and less in overvalued sectors. The Adviser also tries to identify and invest in municipal issuers with improving credit and avoid those with deteriorating credit. The Adviser anticipates that the Fund's average weighted maturity will range from 4 to 10 years. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1994 -0.32% 1995 14.97% 1996 5.52% 1997 7.79% 1998 7.06% 1999 -0.26% BEST QUARTER WORST QUARTER 6.07% -3.14% (3/31/95) (3/31/94) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 4.03%. PROSPECTUS 9 INVESTMENT GRADE TAX-EXEMPT BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN BROTHERS 5-YEAR MUNICIPAL BOND INDEX AND THE LIPPER INTERMEDIATE MUNICIPAL DEBT FUNDS AVERAGE. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Investment Grade Tax-Exempt Bond Fund -0.26% 6.91% 5.55%* -------------------------------------------------------------------------------- Lehman Brothers 5-Year Municipal Bond Index 0.74% 5.71% 4.50%** -------------------------------------------------------------------------------- Lipper Intermediate Municipal Debt Funds Average -1.65% 5.55% 4.19%** -------------------------------------------------------------------------------- * SINCE 10/21/93 ** SINCE 10/31/93 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers 5-Year Municipal Bond Index is a widely-recognized index of intermediate investment grade tax-exempt bonds. The Index includes general obligation bonds, revenue bonds, insured bonds and prefunded bonds with maturities between 4 and 6 years. The Lipper Intermediate Municipal Debt Funds Average is a composite of mutual funds with investment goals similar to the Fund's goals. It reports the average return of intermediate term municipal bond mutual funds tracked by Lipper Analytical Services, Inc. The number of funds in the Average varies. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.74% Other Expenses 0.09% ----- Total Annual Fund Operating Expenses 0.83% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $85 $265 $460 $1,025 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.71%% and 0.80%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 10 PROSPECTUS LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital -------------------------------------------------------------------------------- INVESTMENT FOCUS Mortgage-backed securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify securities that are less prone to prepayment risk -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors who want to receive income from their investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Limited-Term Federal Mortgage Securities Fund invests primarily in U.S. government agency mortgage-backed securities, such as Fannie Mae, GNMA and collateralized mortgage obligations. These securities typically have an effective maturity from 1 to 5 years. In selecting investments for the Fund, the Adviser tries to identify securities that the Adviser expects to perform well in rising and falling markets. The Adviser also attempts to reduce the risk that the underlying mortgages are prepaid by focusing on securities that it believes are less prone to this risk. For example, Fannie Mae or GNMA securities that were issued years ago may be less prone to prepayment risk because there have been many opportunities for prepayment, but few have occurred. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that mortgage-backed securities may underperform other segments of the fixed income market or the fixed income markets as a whole. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. Mortgage-backed securities are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1995 12.14% 1996 4.53% 1997 6.74% 1998 6.90% 1999 1.25% BEST QUARTER WORST QUARTER 4.05% -0.29% (3/31/95) (6/30/99) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.61%. PROSPECTUS 11 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE MERRILL LYNCH 1-5 YEAR U.S. TREASURIES/AGENCIES INDEX AND THE MERRILL LYNCH 1-5 YEAR U.S. TREASURY INDEX. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Limited-Term Federal Mortgage Securities Fund 1.25% 6.26% 5.65%* -------------------------------------------------------------------------------- Merrill Lynch 1-5 Year U.S. Treasuries/Agencies Index 2.11% 6.78% 6.22%** -------------------------------------------------------------------------------- Merrill Lynch 1-5 Year U.S. Treasury Index 2.04% 6.78% 6.22%** -------------------------------------------------------------------------------- * SINCE 6/6/94 ** SINCE 5/31/94 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Merrill Lynch 1-5 Year U.S. Treasuries/ Agencies Index includes U.S. government and agency bonds that have a minimum issue size of $150 million. The current market value of the Index is $1.2 trillion with duration of 2.1 years and yield to maturity of 6.4%. The Merrill Lynch 1-5 Year U.S. Treasury Index is a widely-recognized, capitalization-weighted companies with larger market capitalization have more influence than those with smaller market capitalizations index of U.S. Treasury securities with maturities of 1 year or greater and no more than 5 years. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.65% Other Expenses 0.14% ----- Total Annual Fund Operating Expenses 0.79% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $81 $252 $439 $978 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.60% and 0.74%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 12 PROSPECTUS MARYLAND MUNICIPAL BOND FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income exempt from federal and Maryland income tax, consistent with preservation of capital -------------------------------------------------------------------------------- INVESTMENT FOCUS Maryland municipal securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to invest in investment grade municipal securities -------------------------------------------------------------------------------- INVESTOR PROFILE Maryland residents who want income exempt from federal and state income taxes -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Maryland Municipal Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal and Maryland income taxes. Issuers of these securities can be located in Maryland, Puerto Rico and other U.S. territories and possessions. In selecting investments for the Fund, the Adviser tries to limit risk by buying investment grade securities. There are no limits on the Fund's average weighted maturity or on the remaining maturities of individual securities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund's concentration of investments in securities of issuers located in Maryland subjects the Fund to economic and government policies within Maryland. The Fund is non-diversified, which means that it may invest in the securities of relatively few issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, and may experience increased volatility due to its investments in those securities. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1997 8.78% 1998 5.87% 1999 -3.33% BEST QUARTER WORST QUARTER 3.58% -1.52% (6/30/97) (9/30/99) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 4.26%. PROSPECTUS 13 MARYLAND MUNICIPAL BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN BROTHERS GENERAL OBLIGATION BOND INDEX. TRUST SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Maryland Municipal Bond Fund -3.33% 2.84%* -------------------------------------------------------------------------------- Lehman Brothers General Obligation Bond Index -1.51% 4.67%** -------------------------------------------------------------------------------- * SINCE 3/1/96 ** SINCE 2/29/96 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers General Obligation Bond Index is a widely-recognized index of general obligation securities issued in the last 5 years with maturities of over 1 year. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.65% Other Expenses 0.15% ----- Total Annual Fund Operating Expenses 0.80% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $82 $255 $444 $990 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.57% and 0.72%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 14 PROSPECTUS SHORT-TERM BOND FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital -------------------------------------------------------------------------------- INVESTMENT FOCUS Investment grade U.S. government and corporate debt securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Low -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify securities that offer a comparably better return than similar securities for a given level of credit risk -------------------------------------------------------------------------------- INVESTOR PROFILE Income oriented investors who are willing to accept increased risk for the possibility of returns greater than money market investing -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Short-Term Bond Fund invests primarily in a diversified portfolio of short- to medium-term investment grade U.S. Treasury, corporate debt, mortgage-backed and asset-backed securities. The Fund expects that it will normally maintain an average weighted maturity of approximately 3 years. In selecting investments for the Fund, the Adviser attempts to identify securities that offer a comparably better investment return for a given level of credit risk. For example, short-term bonds generally have better returns than money market instruments, with a fairly modest increase in credit risk and/or volatility. The Adviser manages the Fund from a total return perspective. That is, the Adviser makes day-to-day investment decisions for the Fund with a view towards maximizing returns. The Adviser analyzes yields, market sectors and credit risk in an effort to identify attractive investments with the best risk/reward trade-off. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. Mortgage-backed and asset-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans or underlying assets such as truck and auto loans, leases and credit card receivables. Mortgage-backed and asset-backed securities are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loan, receivables or other assets underlying these securities. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed or asset-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in the market place. When interest rates fall, however, mortgage-backed and asset-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayment or prepayment of the underlying asset that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed or asset-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1994 -0.07% 1995 11.77% 1996 3.90% 1997 6.78% 1998 6.84% 1999 0.92% BEST QUARTER WORST QUARTER 3.76% -0.58% (6/30/95) (3/31/94) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.83%. PROSPECTUS 15 SHORT-TERM BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE SALOMON 1-3 YEAR TREASURY/GOVERNMENT SPONSORED/CORPORATE INDEX. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Short-Term Bond Fund 0.92% 5.98% 4.97%* -------------------------------------------------------------------------------- Salomon 1-3 Year Treasury/Government Sponsored/Corporate Index 3.29% 6.56% 5.41%** -------------------------------------------------------------------------------- * SINCE 3/15/93 ** SINCE 2/28/93 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Salomon 1-3 Year Treasury/Government Sponsored/Corporate Index is a widely-recognized index of U.S. Treasury securities, government agency obligations, and corporate debt securities rated at least investment grade (BBB). The securities in the Index have maturities of 1 year or greater and less than 3 years. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.65% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 0.76% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $78 $243 $422 $942 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.60% and 0.71%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 16 PROSPECTUS SHORT-TERM U.S. TREASURY SECURITIES FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital -------------------------------------------------------------------------------- INVESTMENT FOCUS Short-term U.S. Treasury securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Low -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify Treasury securities with maturities that offer a comparably better return potential and yield than either shorter maturity or longer maturity securities for a given level of interest rate risk -------------------------------------------------------------------------------- INVESTOR PROFILE Income oriented investors who are willing to accept increased risk for the possibility of returns greater than money market investing -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Short-Term U.S. Treasury Securities Fund invests exclusively in short-term U.S. Treasury securities (those with remaining maturities of 3 years or less). The Fund intends to maintain an average weighted maturity from 1 to 2 years. The Fund offers investors the opportunity to capture the advantage of investing in short-term bonds over money market instruments. Generally, short-term bonds offer a comparably better return than money market instruments, with a modest increase in interest rate risk. The Adviser manages the Fund from a total return perspective. That is, the Adviser makes day-to-day investment decisions for the Fund with a view toward maximizing returns and yield. The Adviser tries to select those U.S. Treasury securities that offer the best risk/reward trade-off. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that short-term U.S. Treasury securities may underperform other segments of the fixed income market or the fixed income markets as a whole. Although the Fund's U.S. Treasury securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1994 1.41% 1995 8.58% 1996 4.52% 1997 5.86% 1998 6.24% 1999 2.71% BEST QUARTER WORST QUARTER 2.61% -0.10% (3/31/95) (3/31/94) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.49%. PROSPECTUS 17 SHORT-TERM U.S. TREASURY SECURITIES FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE SALOMON 1-3 YEAR TREASURY INDEX AND THE SALOMON 6 MONTH TREASURY BILL INDEX. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Short-Term U.S. Treasury Securities Fund 2.71% 5.56% 4.71%* -------------------------------------------------------------------------------- Salomon 1-3 Year Treasury Index 3.06% 6.48% 5.31%** -------------------------------------------------------------------------------- Salomon 6 Month Treasury Bill Index 4.80% 5.33% 4.93%** -------------------------------------------------------------------------------- * SINCE 3/15/93 ** SINCE 2/28/93 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Salomon 1-3 Year Treasury Index is a widely-recognized index of U.S. Treasury securities with maturities of one year or greater and less than three years. The Salomon 6 Month Treasury Bill Index is a widely-recognized index of the 6 month U.S. Treasury Bills. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.65% Other Expenses 0.14% ----- Total Annual Fund Operating Expenses 0.79% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $81 $252 $439 $978 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.59% and 0.73%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 18 PROSPECTUS U.S. GOVERNMENT SECURITIES FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital -------------------------------------------------------------------------------- INVESTMENT FOCUS Mortgage-backed securities and U.S. Treasury obligations -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Low to moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without adding undue risk -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors who want to receive income from their investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The U.S. Government Securities Fund invests primarily in U.S. government debt securities, such as mortgage-backed securities and U.S. Treasury obligations. In an attempt to provide a consistently high dividend without adding undue risk, the Fund focuses its investments in mortgage-backed securities. The average maturity of the Fund's portfolio will typically range from 7 to 14 years. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that U.S. government debt securities may underperform other segments of the fixed income market or the fixed income markets as a whole. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. Mortgage-backed securities are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1995 17.33% 1996 2.55% 1997 8.94% 1998 8.16% 1999 -0.97% BEST QUARTER WORST QUARTER 5.89% -2.24% (6/30/95) (3/31/96) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 3.82%. PROSPECTUS 19 U.S. GOVERNMENT SECURITIES FUND THIS TABLE COMPARES THE FUND'S AVERAGE TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE MERRILL LYNCH GOVERNMENT/MORTGAGE INDEX AND THE LEHMAN BROTHERS INTERMEDIATE U.S. GOVERNMENT BOND INDEX. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- U.S. Government Securities Fund -0.97% 7.02% 6.14%* -------------------------------------------------------------------------------- Merrill Lynch Government/ Mortgage Index -0.70% 7.67% 6.90%** -------------------------------------------------------------------------------- Lehman Brothers Intermediate U.S. Government Bond Index 0.50% 6.93% 6.26%** -------------------------------------------------------------------------------- * SINCE 8/1/94 ** SINCE 7/31/94 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Merrill Lynch Government/Mortgage Index is a synthetic index created by combining, at their respective market weights (i) the Merrill Lynch Government Master Index, which is a widely-recognized index comprised of U.S. Treasury securities and U.S. government agency securities with a maturity of at least 1 year; and (ii) the Merrill Lynch Mortgage Master Index, which is a widely-recognized index comprised of mortgage-backed securities including 15 and 30 year single family mortgages in addition to aggregated pooled mortgages. The Lehman Brothers Intermediate U.S. Government Bond Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, and corporate debt backed by the U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least 1 year. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.74% Other Expenses 0.10% ----- Total Annual Fund Operating Expenses 0.84% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $86 $268 $466 $1,037 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.71% and 0.81%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 20 PROSPECTUS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income exempt from federal and Virginia income tax, consistent with preservation of capital -------------------------------------------------------------------------------- INVESTMENT FOCUS Virginia municipal securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Low -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to limit risk by investing in investment grade municipal securities with an intermediate average maturity -------------------------------------------------------------------------------- INVESTOR PROFILE Virginia residents who want income exempt from federal and state income taxes -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Virginia Intermediate Municipal Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal and Virginia income taxes. Issuers of these securities can be located in Virginia, Puerto Rico and other U.S. territories and possessions. In selecting investments for the Fund, the Adviser tries to limit risk by buying investment grade securities. The Adviser also considers stability and growth of principal. The Adviser expects that the Fund's average weighted maturity will range from 5 to 10 years but there is no limit on the maturities of individual securities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund is non-diversified, which means that it may invest in the securities of relatively few issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, and may experience increased volatility due to its investments in those securities. The Fund's concentration of investments in securities of issuers located in Virginia subjects the Fund to economic and government policies within Virginia. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1994 -6.45% 1995 14.25% 1996 2.95% 1997 7.25% 1998 5.22% 1999 -2.34% BEST QUARTER WORST QUARTER 5.99% -6.80% (3/31/95) (3/31/94) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 3.18%. PROSPECTUS 21 VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN BROTHERS 5-YEAR GENERAL OBLIGATION BOND INDEX AND THE LEHMAN BROTHERS GENERAL OBLIGATION BOND INDEX. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Virginia Intermediate Municipal Bond Fund -2.34% 5.33% 4.16%* -------------------------------------------------------------------------------- Lehman Brothers 5-Year General Obligation Bond Index 0.72% 5.80% 5.13%** -------------------------------------------------------------------------------- Lehman Brothers General Obligation Bond Index -1.51% 6.82% 5.78%** -------------------------------------------------------------------------------- * SINCE 1/11/93 ** SINCE 12/31/92 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers 5-Year General Obligation Bond Index is a widely-recognized index of municipal bonds with maturities ranging from 4 to 6 years. The Index represents various market sectors and geographic locations. The Lehman Brothers General Obligation Bond Index is a widely-recognized index of general obligation securities issued in the last 5 years with maturities of over 1 year. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.65% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 0.76% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $78 $243 $422 $942 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 22 PROSPECTUS VIRGINIA MUNICIPAL BOND FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income exempt from federal and Virginia income taxes, consistent with preservation of capital -------------------------------------------------------------------------------- INVESTMENT FOCUS Virginia municipal securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to invest in investment grade municipal securities -------------------------------------------------------------------------------- INVESTOR PROFILE Virginia residents who want income exempt from federal and state income taxes -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Virginia Municipal Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal and Virginia income taxes. Issuers of these securities can be located in Virginia, Puerto Rico and other U.S. territories and possessions. In selecting investments for the Fund, the Adviser tries to limit risk by buying investment grade securities. There are no limits on the Fund's average weighted maturity or on the remaining maturities of individual securities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund is non-diversified, which means that it may invest in the securities of relatively few issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, and may experience increased volatility due to its investments in those securities. The Fund's concentration of investments in securities of issuers located in Virginia subjects the Fund to economic and government policies within Virginia. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR. [Bar Chart Omitted] Plot points are as follows: 1996 1.68% 1997 8.82% 1998 5.85% 1999 -4.86% BEST QUARTER WORST QUARTER 3.41% -2.73% (6/30/97) (3/31/96) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 4.41%. PROSPECTUS 23 VIRGINIA MUNICIPAL BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN BROTHERS GENERAL OBLIGATION BOND INDEX. TRUST SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Virginia Municipal Bond Fund -4.86% 4.15%* -------------------------------------------------------------------------------- Lehman Brothers General Obligation Bond Index -1.51% 5.79%** -------------------------------------------------------------------------------- * SINCE 4/4/95 ** SINCE 3/31/95 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers General Obligation Bond Index is a widely-recognized index of general obligation securities issued in the last 5 years with maturities of over 1 year. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.65% Other Expenses 0.14% ----- Total Annual Fund Operating Expenses 0.79% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $81 $252 $439 $978 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 24 PROSPECTUS PRIME QUALITY MONEY MARKET FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital and liquidity -------------------------------------------------------------------------------- INVESTMENT FOCUS Money market instruments -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify money market instruments with the most attractive risk/return trade-off -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors who want to receive current income -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Prime Quality Money Market Fund invests exclusively in high quality U.S. money market instruments and foreign money market instruments denominated in U.S. dollars. In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk. The Adviser analyzes maturity, yields, market sectors and credit risk. Investments are made in money market instruments with the most attractive risk/return trade-off. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1993 2.77% 1994 3.77% 1995 5.47% 1996 4.99% 1997 5.15% 1998 5.10% 1999 4.74% BEST QUARTER WORST QUARTER 1.37% 0.68% (6/30/95) (6/30/93) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.83%. PROSPECTUS 25 PRIME QUALITY MONEY MARKET FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE IMONEYNET, INC. FIRST TIER AVERAGE. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Prime Quality Money Market Fund 4.74% 5.09% 4.45%* -------------------------------------------------------------------------------- iMoneyNet, Inc. First Tier Average 4.57% 4.97% 4.33%** -------------------------------------------------------------------------------- * SINCE 6/8/92 ** SINCE 5/31/92 To obtain more information about the Fund's yield, call 1-800-814-3397. [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN AVERAGE? -------------------------------------------------------------------------------- An average is a composite of mutual funds with similar investment goals. The iMoneyNet, Inc. First Tier Average is a widely-recognized composite of money market funds which invest in securities rated in the highest category by at least two recognized rating agencies. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.65% Other Expenses 0.10% ----- Total Annual Fund Operating Expenses 0.75% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $77 $240 $417 $930 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.54% and 0.64%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 26 PROSPECTUS TAX-EXEMPT MONEY MARKET FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current interest income exempt from federal income taxes, while preserving capital and liquidity -------------------------------------------------------------------------------- INVESTMENT FOCUS Municipal money market instruments -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without added risk by analyzing credit quality -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors who want to receive current tax-exempt income from their investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Tax-Exempt Money Market Fund invests substantially all of its assets in money market instruments issued by municipalities and issuers that pay income exempt from federal income taxes. In selecting investments for the Fund, the Adviser analyzes the credit quality and structure of each security to minimize risk. The Adviser actively manages the Fund's average maturity based on current interest rates and the Adviser's outlook of the market. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1993 2.02% 1994 2.47% 1995 3.48% 1996 3.06% 1997 3.23% 1998 3.02% 1999 2.80% BEST QUARTER WORST QUARTER 0.92% 0.45% (6/30/95) (3/31/93) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 1.76%. PROSPECTUS 27 TAX-EXEMPT MONEY MARKET FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE IMONEYNET, INC. TAX-FREE STOCKBROKER & GENERAL PURPOSE AVERAGE. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Tax-Exempt Money Market Fund 2.80% 3.12% 2.82%* -------------------------------------------------------------------------------- iMoneyNet Inc. Tax-Free Stockbroker & General Purpose Average 2.70% 3.00% 2.71%** -------------------------------------------------------------------------------- * SINCE 6/8/92 ** SINCE 5/31/92 To obtain more information about the Fund's yield, call 1-800-814-3397. [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN AVERAGE? -------------------------------------------------------------------------------- An average is a composite of mutual funds with similar investment goals. The iMoneyNet, Inc. Tax-Free Stockbroker & General Purpose Average is a widely-recognized composite of money market funds which invest in short-term municipal securities, the income of which is exempt from federal taxation. [GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.55% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 0.66% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $67 $211 $368 $822 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.45% and 0.56%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 28 PROSPECTUS U.S. GOVERNMENT SECURITIES MONEY MARKET FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital and liquidity -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. Treasury and government agency securities, and repurchase agreements -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without adding undue risk by analyzing yields -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors who want to receive current income -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The U.S. Government Securities Money Market Fund invests exclusively in U.S. Treasury obligations, obligations issued or guaranteed as to principal and interest by agencies or instrumentalities of the U.S. government, and repurchase agreements involving these securities, and shares of registered money market funds that invest in the foregoing. In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk by analyzing yields. The Adviser actively manages the maturity of the Fund and its portfolio to maximize the Fund's yield based on current market interest rates and the Adviser's outlook on the market. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1993 2.67% 1994 3.64% 1995 5.39% 1996 4.81% 1997 4.99% 1998 4.88% 1999 4.41% BEST QUARTER WORST QUARTER 1.36% 0.65% (6/30/95) (6/30/93) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.65%. PROSPECTUS 29 U.S. GOVERNMENT SECURITIES MONEY MARKET FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE IMONEYNET, INC. U.S. GOVERNMENT & AGENCY AVERAGE. PREVIOUSLY, THE FUND'S RETURNS HAD BEEN COMPARED TO THE IMONEYNET, INC. U.S. TREASURY & REPO AVERAGE, BUT THE ADVISER BELIEVES THAT THE IMONEYNET, INC. U.S. GOVERNMENT & AGENCY AVERAGE, BECAUSE OF ITS INCLUSION OF MONEY MARKET FUNDS THAT INVEST IN SECURITIES OF GOVERNMENT AGENCIES AND INSTRUMENTALITIES, MORE ACCURATELY REFLECTS THE TYPE OF SECURITIES IN WHICH THE FUND INVESTS. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- U.S. Government Securities Money Market Fund 4.41% 4.90% 4.28%* -------------------------------------------------------------------------------- iMoneyNet, Inc. U.S. Government & Agency Average 4.52% 4.89% 4.26%** -------------------------------------------------------------------------------- iMoneyNet, Inc. U.S. Treasury & Repo Average 4.36% 4.82% 4.20%** -------------------------------------------------------------------------------- * SINCE 6/8/92 ** SINCE 5/31/92 To obtain more information about the Fund's yield, call 1-800-814-3397. [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN AVERAGE? -------------------------------------------------------------------------------- An average is a composite of mutual funds with similar investment goals. The previous index, the iMoneyNet, Inc. U.S. Treasury & Repo Average, is a widely- recognized composite of money market funds which invest in U.S. Treasury securities and repurchase agreements backed by these securities. The iMoneyNet, Inc. U.S. Government & Agency Average is a widely-recognized composite of all money market funds which invest in U.S. Treasury Bills, repurchase agreements or securities issued by agencies of the U.S. government. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.65% Other Expenses 0.09% ----- Total Annual Fund Operating Expenses 0.74% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $76 $237 $411 $918 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.56% and 0.65%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 30 PROSPECTUS U.S. TREASURY MONEY MARKET FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while maintaining liquidity -------------------------------------------------------------------------------- INVESTMENT FOCUS Money market instruments issued and guaranteed by the U.S. Treasury -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Investing in U.S. Treasury obligations and repurchase agreements -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors who want to receive current income from their investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The U.S. Treasury Money Market Fund invests solely in U.S. Treasury obligations and repurchase agreements that are collateralized by obligations issued or guaranteed by the U.S. Treasury. The Fund limits its investments so as to obtain the highest investment quality rating by a nationally recognized statistical rating organization (Standard and Poor's Corporation, AAA). The Fund will maintain an average maturity of 90 days or less, and will only acquire securities that have a remaining maturity of 397 days or less. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. Although the Fund's U.S. Treasury securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1990 7.86% 1991 5.75% 1992 3.40% 1993 2.51% 1994 3.50% 1995 5.33% 1996 4.77% 1997 4.93% 1998 4.82% 1999 4.38% BEST QUARTER WORST QUARTER 1.92% 0.61% (6/30/90) (12/31/93) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.60%. PROSPECTUS 31 U.S. TREASURY MONEY MARKET FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE IMONEYNET, INC. U.S. TREASURY & REPO AVERAGE. TRUST SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- U.S. Treasury Money Market Fund 4.38% 4.85% 4.71% 5.30%* -------------------------------------------------------------------------------- iMoneyNet, Inc. U.S. Treasury & Repo Average 4.36% 4.82% N/A N/A -------------------------------------------------------------------------------- * SINCE 2/18/87 To obtain more information about the Fund's yield, call 1-800-814-3397. [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN AVERAGE? -------------------------------------------------------------------------------- An average is a composite of mutual funds with similar investment goals. The iMoneyNet, Inc. U.S. Treasury & Repo Average is a widely-recognized composite of money market funds which invest in U.S. Treasury securities and repurchase agreements backed by these securities. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.65% Other Expenses 0.09% ----- Total Annual Fund Operating Expenses 0.74% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $76 $237 $411 $918 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.56% and 0.65%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 32 PROSPECTUS VIRGINIA TAX-FREE MONEY MARKET FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income exempt from federal and Virginia income taxes, while preserving capital and liquidity -------------------------------------------------------------------------------- INVESTMENT FOCUS Virginia municipal money market instruments -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without added risk by analyzing credit quality -------------------------------------------------------------------------------- INVESTOR PROFILE Virginia residents who want to receive current income exempt from federal and state income taxes -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Virginia Tax-Free Money Market Fund invests substantially all of its assets in money market instruments issued by municipalities and issuers that pay income exempt from federal and Virginia income taxes. Issuers of these securities can be located in Virginia, Puerto Rico and other U.S. territories and possessions. In selecting investments for the Fund, the Adviser analyzes the credit quality and structure of each security to minimize risk. The Adviser actively manages the Fund's average maturity based on current interest rates and the Adviser's outlook of the market. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. The Fund's concentration of investments in securities of issuers located in Virginia subjects the Fund to economic and government policies within Virginia. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1990 5.86% 1991 4.55% 1992 2.86% 1993 1.84% 1994 2.18% 1995 3.28% 1996 3.11% 1997 3.08% 1998 2.93% 1999 2.81% BEST QUARTER WORST QUARTER 1.47% 0.43% (6/30/90) (3/31/94) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 1.77%. PROSPECTUS 33 VIRGINIA TAX-FREE MONEY MARKET FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE IMONEYNET, INC. TAX-FREE STOCKBROKER & GENERAL PURPOSE AVERAGE. TRUST SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Virginia Tax-Free Money Market Fund 2.81% 3.04% 3.24% 3.39%* -------------------------------------------------------------------------------- iMoneyNet, Inc. Tax-Free Stockbroker & General Purpose Average 2.70% 3.00% 3.14% 3.29%** -------------------------------------------------------------------------------- * SINCE 6/15/89 ** SINCE 5/31/89 To obtain more information about the Fund's yield, call 1-800-814-3397. [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN AVERAGE? -------------------------------------------------------------------------------- An average is a composite of mutual funds with similar investment goals. The iMoneyNet, Inc. Tax-Free Stockbroker & General Purpose Average is a widely-recognized composite of money market funds which invest in short-term municipal securities, the income of which is exempt from federal taxation. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.40% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 0.51% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $52 $164 $285 $640 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 34 PROSPECTUS MORE INFORMATION ABOUT RISK [INNERTUBE GRAPHIC OMITTED] MORE INFORMATION ABOUT RISK FIXED INCOME RISK FLORIDA TAX-EXEMPT BOND FUND GEORGIA TAX-EXEMPT BOND FUND INVESTMENT GRADE BOND FUND INVESTMENT GRADE TAX-EXEMPT BOND FUND LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND MARYLAND MUNICIPAL BOND FUND SHORT-TERM BOND FUND SHORT-TERM U.S. TREASURY SECURITIES FUND U.S. GOVERNMENT SECURITIES FUND VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND VIRGINIA MUNICIPAL BOND FUND TAX EXEMPT MONEY MARKET FUND VIRGINIA TAX-FREE MONEY MARKET FUND The market value of fixed income investments changes in response to interest rate changes and other factors. During periods of falling interest rates, the values of outstanding fixed income securities generally rise. Moreover, while securities with longer maturities tend to produce higher yields, the prices of longer maturity securities are also subject to greater market fluctuations as a result of changes in interest rates. In addition to these fundamental risks, different types of fixed income securities may be subject to the following additional risks: CREDIT RISK FLORIDA TAX-EXEMPT BOND FUND GEORGIA TAX-EXEMPT BOND FUND INVESTMENT GRADE BOND FUND INVESTMENT GRADE TAX-EXEMPT BOND FUND MARYLAND MUNICIPAL BOND FUND SHORT-TERM BOND FUND VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND VIRGINIA MUNICIPAL BOND FUND TAX EXEMPT MONEY MARKET FUND VIRGINIA TAX-FREE MONEY MARKET FUND The possibility that an issuer will be unable to make timely payments of either principal or interest. MUNICIPAL ISSUER RISK FLORIDA TAX-EXEMPT BOND FUND GEORGIA TAX-EXEMPT BOND FUND INVESTMENT GRADE TAX-EXEMPT BOND FUND MARYLAND MUNICIPAL BOND FUND TAX-EXEMPT MONEY MARKET FUND VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND VIRGINIA MUNICIPAL BOND FUND VIRGINIA TAX-FREE MONEY MARKET FUND There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes to the financial condition or credit rating of municipal issuers may also adversely affect the value of the Fund's municipal securities. Constitutional or legislative limits on borrowing by municipal issuers may result in reduced supplies of municipal securities. Moreover, certain municipal securities are backed only by a municipal issuer's ability to levy and collect taxes. In addition, the Fund's concentration of investments in issuers located in a single state makes the Fund more susceptible to adverse political or economic developments affecting that state. The Fund also may be riskier than mutual funds that buy securities of issuers in numerous states. REGIONAL RISK FLORIDA TAX-EXEMPT BOND FUND GEORGIA TAX-EXEMPT BOND FUND MARYLAND MUNICIPAL BOND FUND VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND VIRGINIA MUNICIPAL BOND FUND VIRGINIA TAX-FREE MONEY MARKET FUND To the extent that the Fund's investments are concentrated in a specific geographic region, the Fund may be subject to the political and other developments affecting that region. Regional economies are often closely interrelated, and political and economic developments affecting one region, country or state often affect other regions, countries or states, thus subjecting a Fund to additional risks. PROSPECTUS 35 MORE INFORMATION ABOUT FUND INVESTMENTS [MOUNTAINTOP GRAPHIC OMITTED] MORE INFORMATION ABOUT FUND INVESTMENTS This prospectus describes the Funds' primary strategies, and the Funds will normally invest in the types of securities described in this prospectus. However, in addition to the investments and strategies described in this prospectus, each Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). The investments and strategies described in this prospectus are those that the Funds use under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, each Bond Fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and short-term obligations that would not ordinarily be consistent with a Fund's objectives. In addition, the Florida Tax-Exempt Bond Fund, Georgia Tax-Exempt Bond Fund, Investment Grade Bond Fund, Investment Grade Tax-Exempt Bond Fund, Limited-Term Federal Mortgage Securities Fund, Short-Term Bond Fund, Short-Term U.S. Treasury Securities Bond Fund, Virginia Intermediate Municipal Bond Fund and the U.S. Government Securities Fund each may shorten its average weighted maturity to as little as 90 days. A Bond Fund will do so only if the Adviser believes that the risk of loss outweighs the opportunity for higher income. In addition, each Fund may change its investment goal without shareholder approval. Of course, a Fund cannot guarantee that it will achieve its investment goal. [MAGNIFYER GRAPHIC OMITTED] INVESTMENT ADVISER The Investment Adviser (the "Adviser") makes investment decisions for the Funds and continuously reviews, supervises and administers each Fund's respective investment program. The Board of Trustees supervises the Adviser and establishes policies that the Adviser must follow in its management activities. Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Funds. As of July 1, 2000, Trusco had approximately $47 billion in assets under management. For the fiscal period ended May 31, 2000, the Adviser received advisory fees of: FLORIDA TAX-EXEMPT BOND FUND 0.54% GEORGIA TAX-EXEMPT BOND FUND 0.54% INVESTMENT GRADE BOND FUND 0.67% INVESTMENT GRADE TAX-EXEMPT BOND FUND 0.68% LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND 0.53% MARYLAND MUNICIPAL BOND FUND 0.53% SHORT-TERM BOND FUND 0.56% SHORT-TERM U.S. TREASURY SECURITIES FUND 0.53% U.S. GOVERNMENT SECURITIES FUND 0.67% VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND 0.65% VIRGINIA MUNICIPAL BOND FUND 0.60% PRIME QUALITY MONEY MARKET FUND 0.50% TAX-EXEMPT MONEY MARKET FUND 0.41% U.S. GOVERNMENT SECURITIES MONEY MARKET FUND 0.54% U.S. TREASURY MONEY MARKET FUND 0.54% VIRGINIA TAX-FREE MONEY MARKET FUND 0.40% The Adviser may use its affiliates as brokers for fund transactions. For periods prior to January 1, 2000, STI Capital Management, N.A. ("STI"), a subsidiary of SunTrust Banks, Inc. served as Investment Adviser to the Florida Tax-Exempt Bond Fund, Investment Grade Bond Fund, Investment Grade Tax-Exempt Bond Fund and the Limited-Term Federal Mortgage Securities Fund. On January 1, 2000, SunTrust Bank (formerly SunTrust Bank, Atlanta), a subsidiary of SunTrust Banks, Inc. and the investment adviser of the Georgia Tax-Exempt Bond Fund, succeeded STI as the Investment Adviser to those Funds. On July 1, 2000, SunTrust Banks, Inc. reorganized its money management units, including those of SunTrust Bank, into Trusco Capital Management, Inc. As a result, Trusco now serves as the Investment Adviser to each STI Classic Fund. 36 PROSPECTUS INVESTMENT ADVISER AND PORTFOLIO MANAGERS PORTFOLIO MANAGERS Mr. Ronald Schwartz, CFA, has served as a Managing Director of Trusco since July 2000, after serving as a Managing Director of STI since 1988. He has managed the Florida Tax-Exempt Bond Fund since it began operating in January 1994, and the Investment Grade Tax-Exempt Bond Fund since it began operating in June 1992. He has had more than 19 years of investment experience. Ms. Gay Cash has served as a Vice President of Trusco since July 2000. She has managed the Georgia Tax-Exempt Bond Fund since it began operating in January 1994. Previously, she had served as First Vice President of SunTrust Bank, Atlanta since 1998, and had worked there since 1987. She has more than 21 years of experience. The Investment Grade Bond Fund and the Limited-Term Federal Mortgage Securities Fund are co-managed by Mr. L. Earl Denney, CFA, and Mr. Dave E. West, CFA. Mr. Denney has served as Managing Director of STI since 1983. In January 2000, Mr. Denney was named Managing Director of SunTrust Bank and is now Managing Director of Trusco. Mr. Denney has co-managed the Investment Grade Bond Fund since it began operating in June 1992 and has co-managed the Limited-Term Mortgage Securities Fund since it began operating in June 1994. Mr. Denney has more than 21 years of investment experience. Mr. West has served as a Managing Director of STI and has worked there since 1985. In January 2000, Mr. West was named Managing Director of SunTrust Bank and is now a Managing Director of Trusco. Mr. West has co-managed the Investment Grade Bond Fund since it began operating in June 1992 and has co-managed the Limited-Term Federal Mortgage Securities Fund since it began operating in June 1994. Mr. West has more than 14 years of investment experience. Mr. George E. Calvert, Jr. has served as Vice President of Trusco since 2000. He has managed the Maryland Municipal Bond Fund since 2000, the Virginia Municipal Bond Fund since 2000, and the Virginia Intermediate Municipal Bond Fund since 2000. Prior to joining Trusco, Mr. Calvert served as a fixed income trader from 1998 to 2000 for Tredegar Trust Company. He also served as Vice President, Investment Division, of Central Fidelity Bank from 1988 to 1998. Mr. Calvert has more than 27 years of investment experience. Ms. Agnes G. Pampush, CFA, has served as a Managing Director of Trusco since July 2000, after serving as a Vice President of Trusco since 1998. Ms. Pampush was employed by Trusco from 1988 to 1996, and rejoined the firm in 1998. She has managed the Short-Term Bond Fund since February 1999. She has more than 18 years of investment experience. Mr. David S. Yealy has served as a Managing Director of Trusco since July 2000. He has managed the Prime Quality Money Market Fund since it began operating in June 1992, the Short-Term U.S. Treasury Securities Fund since July 1996, and the U.S Treasury Money Market Fund since October 2000. Prior to July 2000, Mr. Yealy was a First Vice President of Trusco and has worked there since 1991. He has more than 15 years of investment experience. Mr. Neil J. Powers, CFA, joined Trusco in 1997 and serves as a Managing Director. He has managed the U.S. Government Securities Fund since 2000. Prior to joining Trusco, Mr. Powers worked at Putnam Investments, from 1986 to 1997, where he managed multi-sector bond funds and separately managed institutional accounts. He has more than 16 years of investment experience. Mr. Robert S. Bowman, CFA, has served as a Vice President of Trusco since January 1999. He has managed the Virginia Tax-Free Money Market Fund since May 1995, the Tax-Exempt Money Market Fund since July 2000 and the U.S. Government Securities Money Market Fund since October 2000. Prior to joining Trusco, Mr. Bowman served as an assistant trader from 1994 to 1995 and Vice President of Crestar Asset Management Company since 1995. He has more than 6 years of investment experience. PROSPECTUS 37 PURCHASING AND SELLING FUND SHARES [HANDSHAKE GRAPHIC OMITTED] PURCHASING AND SELLING FUND SHARES This section tells you how to purchase and sell (sometimes called "redeem") Trust Shares of the Funds. HOW TO PURCHASE FUND SHARES The Funds offer Trust Shares only to financial institutions or intermediaries, including subsidiaries of SunTrust Banks, Inc. (SunTrust), for their own or their customers' accounts for which they act as fiduciary, agent, investment adviser, or custodian. As a result, you, as a customer of a financial institution may purchase Trust Shares through accounts made with financial institutions and potentially through the Investor's Advantage Account (an asset allocation account available through SunTrust Securities, Inc.). Trust Shares will be held of record by (in the name of) your financial institution. Depending upon the terms of your account, however, you may have, or be given, the right to vote your Trust Shares. The Funds may reject any purchase order if it is determined that accepting the order would not be in the best interests of STI Classic Funds or its shareholders. WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange is open for business (a Business Day). But you may not purchase shares of the Money Market Funds on federal holidays. The price per share (the offering price) will be the net asset value per share (NAV) next determined after the Funds receive your purchase order. Each Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, for you to receive the current Business Day's NAV for each Fund (except the Money Market Funds), generally the Funds must receive your purchase order before 4:00 p.m. Eastern time. Each Money Market Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time.) So, for you to be eligible to receive dividends declared on the day you submit your purchase order, the Money Market Funds must generally receive your order before 11:00 a.m. Eastern time for the Tax-Exempt Money Market Fund, before 12:00 p.m. Eastern time for the Virginia Tax-Free Money Market Fund or before 3:00 p.m. Eastern time for the Prime Quality Money Market and U.S. Government Securities Money Market Funds. Also each Money Market Fund must receive federal funds (readily available funds) before 4:00 p.m. Eastern time. Otherwise, your purchase order will be effective the following Business Day, as long as each Money Market Fund receives federal funds before calculating its NAV the following day. FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES, AND OTHER FINANCIAL INSTITUTIONS YOU MAY HAVE TO TRANSMIT YOUR PURCHASE AND SALE REQUESTS TO SUNTRUST OR OTHER FINANCIAL INSTITUTIONS AT AN EARLIER TIME FOR YOUR TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS THE FINANCIAL INSTITUTION TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE OR SELL FUND SHARES, INCLUDING SPECIFIC SUNTRUST OR OTHER FINANCIAL INSTITUTIONS INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR FINANCIAL INSTITUTION DIRECTLY. 38 PROSPECTUS PURCHASING AND SELLING FUND SHARES HOW THE FUNDS CALCULATE NAV In calculating NAV, a Fund (except the Money Market Funds) generally values its investment portfolio at market price. In calculating NAV for each Money Market Fund, each Fund generally values its investment portfolio using the amortized cost valuation method, which is described in detail in the SAI. If market prices are unavailable or a Fund thinks that the market price or amortized cost valuation method is unreliable during certain market conditions or for other reasons, fair value prices may be determined in good faith using methods approved by the Board of Trustees. Each Money Market Fund expects its NAV to remain constant at $1.00 per share, although the Fund cannot guarantee this. NET ASSET VALUE NAV for one Fund share is the value of that share's portion of the net assets of the Fund. HOW TO SELL YOUR FUND SHARES You may sell (sometimes called "redeem") your shares on any Business Day by contacting SunTrust or your financial institution. SunTrust or your financial institution will give you information about how to sell your shares including any specific cut-off times required. Holders of Trust Shares may sell shares by following the procedures established when they opened their account or accounts with the Funds or with their financial institution or intermediary. The sale price of each share will be the next NAV determined after the Funds receive your request. Redemption orders must be received by the Money Market Funds on a Business Day before 11:00 a.m. Eastern time for the Tax-Exempt Money Market Fund, 12:00 p.m. Eastern Time for the Virginia Tax-Free Money Market Fund or 3:00 p.m. Eastern time for the Prime Quality, U.S. Treasury and U.S. Government Securities Money Market Funds. Orders received after these times will be executed the following Business Day. RECEIVING YOUR MONEY Normally, the Funds will send your sales proceeds within five Business Days after the Funds receive your request, but it may take up to seven days. REDEMPTIONS IN KIND The Funds generally pay sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) the Funds might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES A Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. TELEPHONE TRANSACTIONS Purchasing and selling Fund shares over the telephone is extremely convenient, but not without risk. Although the Funds have certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Funds are not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believe to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. PROSPECTUS 39 DIVIDENDS, DISTRIBUTIONS AND TAXES DIVIDENDS AND DISTRIBUTIONS Each Fund declares dividends daily and pays these dividends monthly. Each Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Funds in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Funds receive your written notice. To cancel your election, simply send the Funds written notice. TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Funds have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from a Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE OR EXCHANGE OF FUND SHARES IS A TAXABLE EVENT. The Florida Tax-Exempt Bond Fund, Georgia Tax-Exempt Bond Fund, Investment Grade Tax-Exempt Bond Fund, Maryland Municipal Bond Fund, Tax-Exempt Money Market Fund, Virginia Intermediate Municipal Bond Fund, Virginia Municipal Bond Fund and Virginia Tax-Free Money Market Fund intend to distribute federally tax-exempt income. Each Fund may invest a portion of its assets in securities that generate taxable income for federal or state income taxes. Income exempt from federal tax may be subject to state and local taxes. Any capital gains distributed by these Funds may be taxable. MORE INFORMATION ABOUT TAXES IS IN THE SAI. 40 PROSPECTUS FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS The tables that follow present performance information about Trust Shares of each Fund. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. This information for each Fund, except the Maryland Municipal Bond Fund, Virginia Tax-Free Money Market Fund, U.S. Treasury Money Market Fund, Virginia Intermediate Municipal Bond Fund and Virginia Municipal Bond Fund for the periods ended prior to May 31, 1999, has been audited by Arthur Andersen LLP, independent public accountants. The financial highlights for the Maryland Municipal Bond Fund, Virginia Tax-Free Money Market Fund, U.S. Treasury Money Market Fund, Virginia Intermediate Municipal Bond Fund, and Virginia Municipal Bond Fund for the periods ended prior to May 31, 1999 have been audited by Deloitte & Touche LLP, independent public accountants. The report of Arthur Andersen LLP, along with each Fund's financial statements, appears in the annual report that accompanies the SAI. You can obtain the annual report, which contains more performance information, at no charge by calling 1-800-428-6970. For the Periods Ended May 31, (unless otherwise noted) For a Share Outstanding Throughout the Periods.
NET REALIZED NET ASSET AND DISTRIBUTIONS VALUE NET UNREALIZED FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD INCOME ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN (+) --------- ---------- -------------- ------------- ------------- --------- ---------- ---------------------------- FLORIDA TAX-EXEMPT BOND FUND ---------------------------- Trust Shares 2000 $10.59 $ 0.44 $(0.49) $(0.44) $(0.04) $10.06 (0.48)% 1999 10.72 0.42 (0.02) (0.42) (0.11) 10.59 3.72 1998 10.28 0.44 0.45 (0.44) (0.01) 10.72 8.77 1997 10.06 0.46 0.25 (0.46) (0.03) 10.28 7.22 1996 10.18 0.46 (0.07) (0.46) (0.05) 10.06 3.87 ---------------------------- GEORGIA TAX-EXEMPT BOND FUND ---------------------------- Trust Shares 2000 $10.03 $ 0.40 $(0.49) $(0.40) $(0.04) $ 9.50 (0.90)% 1999 10.11 0.39 (0.06) (0.39) (0.02) 10.03 3.33 1998 9.73 0.41 0.39 (0.41) (0.01) 10.11 8.37 1997 9.56 0.42 0.22 (0.42) (0.05) 9.73 6.79 1996 9.63 0.43 (0.05) (0.43) (0.02) 9.56 3.89 -------------------------- INVESTMENT GRADE BOND FUND -------------------------- Trust Shares 2000 $10.36 $ 0.61 $(0.78) $(0.61) $ -- $ 9.58 (1.76)% 1999 10.65 0.56 (0.11) (0.56) (0.18) 10.36 4.25 1998 10.16 0.60 0.49 (0.60) -- 10.65 10.92 1997 10.07 0.60 0.09 (0.60) -- 10.16 6.99 1996 10.26 0.60 (0.19) (0.60) -- 10.07 4.02 ------------------------------------- INVESTMENT GRADE TAX-EXEMPT BOND FUND ------------------------------------- Trust Shares 2000 $11.10 $ 0.43 $(0.29) $(0.43) $(0.14) $10.67 1.41% 1999 11.40 0.43 0.10 (0.43) (0.40) 11.10 4.67 1998 11.22 0.44 0.50 (0.44) (0.32) 11.40 8.57 1997 11.10 0.44 0.33 (0.44) (0.21) 11.22 7.13 1996 11.28 0.45 0.19 (0.45) (0.37) 11.10 5.82 ---------------------------------------------- LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND --------------------------------------------- Trust Shares 2000 $ 9.94 $ 0.55 $(0.32) $(0.55) $ -- $ 9.62 2.33% 1999 10.12 0.54 (0.06) (0.54) (0.12) 9.94 4.75 1998 10.02 0.58 0.11 (0.58) (0.01) 10.12 7.12 1997 9.99 0.58 0.04 (0.58) (0.01) 10.02 6.43 1996 10.11 0.62 (0.14) (0.60) -- 9.99 4.84
RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME TO RATIO OF INVESTMENT AVERAGE NET AVERAGE NET NET ASSETS EXPENSES TO INCOME ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO END OF AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE ----------- ----------- ------------- ----------------- ----------------- --------- ---------------------------- FLORIDA TAX-EXEMPT BOND FUND ---------------------------- Trust Shares 2000 $ 93,040 0.67% 4.25% 0.78% 4.14% 88% 1999 118,609 0.67 3.90 0.77 3.80 72 1998 93,939 0.66 4.16 0.80 4.02 69 1997 50,487 0.65 4.48 0.80 4.33 135 1996 30,790 0.65 4.49 0.88 4.26 63 ---------------------------- GEORGIA TAX-EXEMPT BOND FUND ---------------------------- Trust Shares 2000 $ 81,160 0.67% 4.13% 0.77% 4.03% 19% 1999 87,452 0.67 3.87 0.78 3.76 12 1998 62,363 0.66 4.09 0.81 3.94 7 1997 39,732 0.65 4.31 0.81 4.15 15 1996 22,950 0.65 4.36 0.89 4.12 60 -------------------------- INVESTMENT GRADE BOND FUND -------------------------- Trust Shares 2000 $ 998,596 0.77% 6.05% 0.84% 5.98% 202% 1999 1,149,068 0.77 5.25 0.85 5.17 221 1998 793,488 0.76 5.67 0.86 5.57 109 1997 633,646 0.75 5.89 0.85 5.79 298 1996 599,514 0.75 5.81 0.87 5.69 184 ------------------------------------- INVESTMENT GRADE TAX-EXEMPT BOND FUND ------------------------------------- Trust Shares 2000 $ 117,384 0.77% 3.98% 0.83% 3.92% 226% 1999 154,123 0.77 3.75 0.87 3.65 224 1998 146,606 0.76 3.83 0.88 3.71 378 1997 139,144 0.75 3.96 0.86 3.85 489 1996 124,507 0.75 4.01 0.89 3.87 514 ---------------------------------------------- LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND --------------------------------------------- Trust Shares 2000 $ 125,355 0.67% 5.60% 0.79% 5.48% 384% 1999 135,256 0.67 5.28 0.77 5.18 379 1998 137,488 0.66 5.75 0.77 5.64 163 1997 123,903 0.65 5.81 0.78 5.68 133 1996 73,370 0.65 6.04 0.84 5.85 83 (+) Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. Amounts designated as "--" are either $0 or round to $0.
PROSPECTUS 41 FINANCIAL HIGHLIGHTS
NET REALIZED NET ASSET AND DISTRIBUTIONS VALUE NET UNREALIZED FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD INCOME ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN (+) --------- ---------- -------------- ------------- ------------- --------- ---------- -------------------------------- MARYLAND MUNICIPAL BOND FUND (A) -------------------------------- Trust Shares 2000 $10.06 $ 0.42 $(0.60) $(0.42) $ -- $ 9.46 (1.78)% 1999(1) 10.22 0.20 (0.15) (0.20) (0.01) 10.06 0.48 For the years ended November 30: 1998 9.95 0.42 0.27 (0.42) -- 10.22 7.03 1997 9.76 0.43 0.19 (0.43) -- 9.95 6.50 1996(2) 10.00 0.31 (0.24) (0.31) -- 9.76 1.07 -------------------- SHORT-TERM BOND FUND -------------------- Trust Shares 2000 $ 9.91 $ 0.53 $(0.25) $(0.53) $(0.01) $ 9.65 2.87% 1999 10.05 0.51 (0.10) (0.52) (0.03) 9.91 4.06 1998 9.90 0.55 0.16 (0.55) (0.01) 10.05 7.31 1997 9.86 0.53 0.07 (0.53) (0.03) 9.90 6.30 1996 9.98 0.54 (0.10) (0.54) (0.02) 9.86 4.45 ---------------------------------------- SHORT-TERM U.S. TREASURY SECURITIES FUND ---------------------------------------- Trust Shares 2000 $ 9.95 $ 0.46 $(0.10) $(0.46) $ -- $ 9.85 3.75% 1999 9.97 0.47 (0.02) (0.47) -- 9.95 4.59 1998 9.88 0.51 0.10 (0.52) -- 9.97 6.30 1997 9.84 0.51 0.04 (0.51) -- 9.88 5.76 1996 9.93 0.55 (0.09) (0.55) -- 9.84 4.73 ------------------------------- U.S. GOVERNMENT SECURITIES FUND ------------------------------- Trust Shares 2000 $10.28 $ 0.58 $(0.42) $(0.58) $ -- $ 9.86 1.63% 1999 10.46 0.59 (0.18) (0.59) -- 10.28 3.90 1998 10.02 0.61 0.44 (0.61) -- 10.46 10.76 1997 9.91 0.62 0.11 (0.62) -- 10.02 7.54 1996 10.27 0.62 (0.33) (0.62) (0.03) 9.91 2.77 --------------------------------------------- VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND (A) --------------------------------------------- Trust Shares 2000 $10.20 $ 0.43 $(0.57) $(0.43) $(0.05) $ 9.58 (1.31)% 1999(1) 10.44 0.21 (0.17) (0.21) (0.07) 10.20 0.42 For years ended November 30: 1998 10.31 0.45 0.17 (0.45) (0.04) 10.44 6.10 1997 10.22 0.46 0.09 (0.46) -- 10.31 5.55 1996 10.24 0.42 (0.02) (0.42) -- 10.22 4.01 -------------------------------- VIRGINIA MUNICIPAL BOND FUND (A) -------------------------------- Trust Shares 2000 $10.43 $ 0.45 $(0.78) $(0.45) $(0.01) $ 9.64 (3.18)% 1999(1) 10.68 0.22 (0.19) (0.22) (0.06) 10.43 0.27 For years ended November 30: 1998 10.44 0.47 0.27 (0.47) (0.03) 10.68 7.19 1997 10.28 0.48 0.17 (0.48) (0.01) 10.44 6.46 1996 10.40 0.47 (0.12) (0.47) -- 10.28 3.48
RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME TO RATIO OF INVESTMENT AVERAGE NET AVERAGE NET NET ASSETS EXPENSES TO INCOME ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO END OF AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE ----------- ----------- ------------- ----------------- ----------------- --------- -------------------------------- MARYLAND MUNICIPAL BOND FUND (A) -------------------------------- Trust Shares 2000 $ 26,176 0.68% 4.24% 0.80% 4.12% 14% 1999(1) 29,658 0.70 3.83 1.37 3.16 19 For the years ended November 30: 1998 19,115 0.62 4.11 1.15 3.58 12 1997 11,461 0.63 4.38 1.16 3.85 5 1996(2) 5,808 0.71 4.30 1.36 3.65 9 -------------------- SHORT-TERM BOND FUND -------------------- Trust Shares 2000 $ 180,402 0.67% 5.40% 0.76% 5.31% 70% 1999 209,904 0.67 5.12 0.77 5.02 108 1998 120,422 0.66 5.47 0.79 5.34 87 1997 89,701 0.65 5.37 0.78 5.24 118 1996 91,156 0.65 5.39 0.81 5.23 163 ---------------------------------------- SHORT-TERM U.S. TREASURY SECURITIES FUND ---------------------------------------- Trust Shares 2000 $ 72,570 0.67% 4.70% 0.79% 4.58% 50% 1999 56,027 0.67 4.69 0.78 4.58 57 1998 46,920 0.66 5.19 0.84 5.01 39 1997 21,988 0.65 5.23 0.92 4.96 93 1996 10,149 0.65 5.56 1.00 5.21 94 ------------------------------- U.S. GOVERNMENT SECURITIES FUND ------------------------------- Trust Shares 2000 $ 85,420 0.77% 5.77% 0.84% 5.70% 29% 1999 102,167 0.77 5.58 0.88 5.47 19 1998 34,899 0.76 5.93 0.92 5.77 14 1997 19,471 0.75 6.19 1.02 5.92 21 1996 10,277 0.75 6.05 1.25 5.55 83 --------------------------------------------- VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND (A) --------------------------------------------- Trust Shares 2000 $ 202,209 0.76% 4.35% 0.76% 4.35% 18% 1999(1) 240,083 0.84 4.12 1.18 3.78 19 For years ended November 30: 1998 243,606 0.79 4.33 0.97 4.15 24 1997 237,096 0.78 4.57 0.93 4.42 30 1996 243,137 0.78 4.35 0.93 4.20 25 -------------------------------- VIRGINIA MUNICIPAL BOND FUND (A) -------------------------------- Trust Shares 2000 $ 48,980 0.74% 4.53% 0.79% 4.48% 19% 1999(1) 31,939 0.76 4.20 1.30 3.66 7 For years ended November 30: 1998 29,252 0.69 4.41 1.10 4.00 28 1997 20,044 0.69 4.65 1.09 4.25 39 1996 15,911 0.71 4.61 1.11 4.21 24 (+) Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (1) For the six month period ended May 31, 1999. All ratios for the period have been annualized. (2) Commenced operations on March 1, 1996. All ratios for the period have been annualized. (A) On May 24, 1999, the CrestFunds Maryland Municipal Bond, CrestFunds Virginia Intermediate Municipal Bond and CrestFunds Virginia Municipal Bond Funds exchanged all of their assets and certain liabilities for shares of the Maryland Municipal Bond, Virginia Intermediate Municipal Bond and Virginia Municipal Bond Funds, respectively. The CrestFunds Maryland Municipal Bond, CrestFunds Virginia Intermediate Municipal Bond and CrestFunds Virginia Municipal Bond Funds are the accounting survivors in this transaction, and as a result, their basis of accounting for assets and liabilities and their operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. Amounts designated as "--" are either $0 or round to $0.
42 PROSPECTUS
NET ASSET DISTRIBUTIONS VALUE NET FROM NET NET ASSET BEGINNING INVESTMENT INVESTMENT VALUE END TOTAL OF PERIOD INCOME INCOME OF PERIOD RETURN (+) ------------- ------------ ------------- --------- ---------- -------------------------------- PRIME QUALITY MONEY MARKET FUND --------------------------------- Trust Shares 2000 $1.00 $ 0.05 $(0.05) $1.00 5.20% 1999 1.00 0.05 (0.05) 1.00 4.83 1998 1.00 0.05 (0.05) 1.00 5.22 1997 1.00 0.05 (0.05) 1.00 5.01 1996 1.00 0.05 (0.05) 1.00 5.25 ---------------------------- TAX-EXEMPT MONEY MARKET FUND ---------------------------- Trust Shares 2000 $1.00 $ 0.03 $(0.03) $1.00 3.19% 1999 1.00 0.03 (0.03) 1.00 2.81 1998 1.00 0.03 (0.03) 1.00 3.21 1997 1.00 0.03 (0.03) 1.00 3.09 1996 1.00 0.03 (0.03) 1.00 3.28 -------------------------------------------- U.S. GOVERNMENT SECURITIES MONEY MARKET FUND -------------------------------------------- Trust Shares 2000 $1.00 $ 0.05 $(0.05) $1.00 4.86% 1999 1.00 0.04 (0.04) 1.00 4.57 1998 1.00 0.05 (0.05) 1.00 5.04 1997 1.00 0.05 (0.05) 1.00 4.83 1996 1.00 0.05 (0.05) 1.00 5.14 ----------------------------------- U.S. TREASURY MONEY MARKET FUND (B) ----------------------------------- Trust Shares 2000 $1.00 $0.05 $(0.05) $1.00 4.81% 1999(1) 1.00 0.02 (0.02) 1.00 2.08 For the Year Ended November 30: 1998 1.00 0.05 (0.05) 1.00 4.89 1997 1.00 0.05 (0.05) 1.00 4.91 1996 1.00 0.05 (0.05) 1.00 4.80 --------------------------------------- VIRGINIA TAX-FREE MONEY MARKET FUND (B) --------------------------------------- Trust Shares 2000 $1.00 $ 0.03 $(0.03) $1.00 3.23% 1999(1) 1.00 0.01 (0.01) 1.00 1.27 For the Year Ended November 30: 1998 1.00 0.03 (0.03) 1.00 2.97% 1997 1.00 0.03 (0.03) 1.00 3.06 1996 1.00 0.03 (0.03) 1.00 3.14
RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME TO RATIO OF INVESTMENT AVERAGE NET AVERAGE NET NET ASSETS EXPENSES TO INCOME ASSETS (EXCLUDING ASSETS (EXCLUDING END OF AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) ------------ ----------- ----------- ----------------- ---------------- -------------------------------- PRIME QUALITY MONEY MARKET FUND --------------------------------- Trust Shares 2000 $3,311,229 0.60% 5.06% 0.75% 4.91% 1999 3,903,232 0.60 4.69 0.77 4.52 1998 1,880,229 0.59 5.10 0.77 4.92 1997 1,086,555 0.58 4.90 0.76 4.72 1996 1,050,800 0.58 5.11 0.78 4.91 ---------------------------- TAX-EXEMPT MONEY MARKET FUND ---------------------------- Trust Shares 2000 $ 755,858 0.52% 3.16% 0.66% 3.02% 1999 641,640 0.52 2.75 0.66 2.61 1998 448,023 0.51 3.14 0.67 2.98 1997 333,006 0.50 3.04 0.66 2.88 1996 273,613 0.50 3.23 0.68 3.05 -------------------------------------------- U.S. GOVERNMENT SECURITIES MONEY MARKET FUND -------------------------------------------- Trust Shares 2000 $ 468,568 0.63% 4.80% 0.74% 4.69% 1999 404,459 0.63 4.47 0.76 4.34 1998 377,490 0.62 4.92 0.78 4.76 1997 344,350 0.61 4.73 0.76 4.58 1996 325,493 0.61 5.02 0.78 4.85 ----------------------------------- U.S. TREASURY MONEY MARKET FUND (B) ----------------------------------- Trust Shares 2000 $ 723,277 0.63% 4.71% 0.74% 4.60% 1999(1) 760,833 0.68 4.10 0.83 3.95 For the Year Ended November 30: 1998 699,923 0.66 4.77 0.81 4.62 1997 632,381 0.65 4.82 0.80 4.67 1996 389,051 0.66 4.69 0.81 4.54 --------------------------------------- VIRGINIA TAX-FREE MONEY MARKET FUND (B) --------------------------------------- Trust Shares 2000 $ 245,243 0.51% 3.19% 0.51% 3.19% 1999(1) 270,431 0.67 2.51 0.82 2.36 For the Year Ended November 30: 1998 270,899 0.66% 2.92% 0.81% 2.77 1997 226,837 0.66 3.02 0.81 2.87 1996 182,320 0.66 2.88 0.81 2.73 (+) Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (1) For the six month period ended May 31, 1999. All ratios for the period have been annualized. (B) On May 24, 1999, the CrestFunds U.S Treasury Money and CrestFunds Tax-Free Money Funds exchanged all of their assets and certain liabilities for shares of the U.S. Treasury Money Market and Virginia Tax Free Money Market Funds. The CrestFunds U.S Treasury Money and CrestFunds Tax Free Money Funds are the accounting survivors in this transaction, and as a result, their basis of accounting for assets and liabilities and their operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. Amounts designated as "--" are either $0 or round to $0.
PROSPECTUS 43 NOTES 44 PROSPECTUS NOTES (THIS PAGE INTENTIONALLY LEFT BLANK) 46 PROSPECTUS HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS INVESTMENT ADVISER Trusco Capital Management, Inc. 50 Hurt Plaza Suite 1400 Atlanta, Georgia 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 2000, includes detailed information about the STI Classic Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list each Fund's holdings and contain information from the Funds' managers about strategies, and recent market conditions and trends and their impact on Fund performance. The reports also contain detailed financial information about the Funds. TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION: BY TELEPHONE: Call 1-800-428-6970 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, Pennsylvania 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the EDGAR Database on the SEC's website ("HTTP://WWW.SEC.GOV"). You may review and copy documents at the SEC Public Reference Room in Washington, DC (for information on the operation of the Public Reference Room, call 202-942-8090). You may request documents by mail from the SEC, upon payment of a duplicating fee, by writing to: Securities and Exchange Commission, Public Reference Section, Washington, DC 20549-0102. You may also obtain this information, upon payment of a duplicating fee, by e-mailing the SEC at the following address: PUBLICINFO@SEC.GOV. The STI Classic Funds' Investment Company Act registration number is 811-06557. XXX-XXXX XXXXXX/XX-XX STI CLASSIC FUNDS-BOND FUNDS FLEX AND INVESTOR SHARES PROSPECTUS OCTOBER 1, 2000 FLORIDA TAX-EXEMPT BOND FUND GEORGIA TAX-EXEMPT BOND FUND HIGH INCOME FUND INVESTMENT GRADE BOND FUND INVESTMENT GRADE TAX-EXEMPT BOND FUND LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND MARYLAND MUNICIPAL BOND FUND SHORT-TERM BOND FUND SHORT-TERM U.S. TREASURY SECURITIES FUND U.S. GOVERNMENT SECURITIES FUND VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND VIRGINIA MUNICIPAL BOND FUND INVESTMENT ADVISER TO THE FUNDS: TRUSCO CAPITAL MANAGEMENT, INC. (the "Adviser") [STI Logo Omitted] THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PROSPECTUS ABOUT THIS PROSPECTUS CHOOSING INVESTOR OR FLEX SHARES The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Investor Shares and Flex Shares of the Bond Funds that you should know before investing. Please read this prospectus and keep it for future reference. Investor Shares and Flex Shares have different expenses and other characteristics, allowing you to choose the class that best suits your needs. You should consider the amount you want to invest, how long you plan to have it invested, and whether you plan to make additional investments. INVESTOR SHARES [bullet] Front-end sales charge [bullet] 12b-1 fees [bullet] $2,000 minimum initial investment FLEX SHARES [bullet] Contingent deferred sales charge [bullet] Higher 12b-1 fees [bullet] $5,000 minimum initial investment THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN THAT IS COMMON TO EACH OF THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE: 2 FLORIDA TAX-EXEMPT BOND FUND 4 GEORGIA TAX-EXEMPT BOND FUND 6 HIGH INCOME FUND 8 INVESTMENT GRADE BOND FUND 10 INVESTMENT GRADE TAX-EXEMPT BOND FUND 12 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND 14 MARYLAND MUNICIPAL BOND FUND 16 SHORT-TERM BOND FUND 18 SHORT-TERM U.S. TREASURY SECURITIES FUND 20 U.S. GOVERNMENT SECURITIES FUND 22 VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND 24 VIRGINIA MUNICIPAL BOND FUND 26 MORE INFORMATION ABOUT RISK 27 MORE INFORMATION ABOUT FUND INVESTMENTS 28 INVESTMENT ADVISER AND PORTFOLIO MANAGERS 29 PURCHASING, SELLING AND EXCHANGING FUND SHARES 34 DIVIDENDS, DISTRIBUTIONS AND TAXES 35 FINANCIAL HIGHLIGHTS 38 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS -------------------------------------------------------------------------------- [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING? [ARROW GRAPHIC OMITTED] PERFORMANCE INFORMATION [CHART GRAPHIC OMITTED] WHAT IS AN INDEX? [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES [MOUNTAINTOP GRAPHIC OMITTED] MORE INFORMATION ABOUT FUND INVESTMENTS [MAGNIFIER GRAPHIC OMITTED] INVESTMENT ADVISER [HANDSHAKE GRAPHIC OMITTED] PURCHASING, SELLING AND EXCHANGING FUND SHARES [DOLLAR GRAPHIC OMITTED] SALES CHARGES -------------------------------------------------------------------------------- OCTOBER 1, 2000 PROSPECTUS 1 RISK/RETURN INFORMATION COMMON TO THE FUNDS Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. Each Fund has its own investment goal and strategies for reaching that goal. The Adviser invests Fund assets in a way that it believes will help a Fund achieve its goal. Still, investing in each Fund involves risk and there is no guarantee that a Fund will achieve its goal. The Adviser's judgments about the markets, the economy or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job the Adviser does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. The value of your investment in a Fund is based on the market prices of the securities the Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, may be greater or lesser depending on the types of securities a Fund owns and the markets in which they trade. The effect on a Fund of a change in the value of a single security will depend on how widely the Fund diversifies its holdings. 2 PROSPECTUS FLORIDA TAX-EXEMPT BOND FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Current income exempt from federal income taxes for Florida residents with shares themselves expected to be exempt from the Florida intangible personal property tax -------------------------------------------------------------------------------- INVESTMENT FOCUS Florida municipal securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to invest more Fund assets in undervalued sectors and less in overvalued ones -------------------------------------------------------------------------------- INVESTOR PROFILE Florida residents who want income exempt from federal income taxes -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Florida Tax-Exempt Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal income taxes, and the shares themselves are expected to be exempt from the Florida intangible personal property tax. Issuers of these securities can be located in Florida, Puerto Rico and other U.S. territories and possessions. In addition, up to 20% of the Fund's assets may be invested in securities subject to the alternative minimum tax or in certain taxable debt securities. In selecting investments for the Fund, the Adviser tries to limit risk as much as possible. Based on the Adviser's analysis of municipalities, credit risk, market trends and investment cycles, the Adviser attempts to invest more of the Fund's assets in undervalued market sectors and less in overvalued sectors. The Adviser also tries to identify and invest in municipal issuers with improving credit and avoid those with deteriorating credit. The Adviser anticipates that the Fund's average weighted maturity will range from 6 to 25 years. Under certain circumstances, such as a national financial emergency or a temporary decline in availability of Florida obligations, up to 20% of the Fund's assets may be invested in securities subject to the Florida intangible personal property tax and/or securities that generate income subject to federal personal income taxes. These securities may include short-term municipal securities outside Florida or certain taxable fixed income securities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund's concentration of investments in securities of issuers located in Florida subjects the Fund to economic and government policies within Florida. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Graph Omitted] Plot points are as follows: 1995 15.70% 1996 3.73% 1997 7.60% 1998 5.94% 1999 -2.41% BEST QUARTER WORST QUARTER 6.13% -2.35% (3/31/95) (6/30/99) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 4.09%. PROSPECTUS 3 FLORIDA TAX-EXEMPT BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX AND THE LIPPER FLORIDA MUNICIPAL DEBT FUNDS AVERAGE. INVESTOR SHARES 1 YEAR 5 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Florida Tax-Exempt Bond Fund -2.41% 5.95%* 4.72%* -------------------------------------------------------------------------------- Lehman Brothers 10-Year Municipal Bond Index -1.24% 7.12% 4.90%** -------------------------------------------------------------------------------- Lipper Florida Municipal Dept Funds Average -4.35% 5.90% 3.52%** -------------------------------------------------------------------------------- * SINCE 1/18/94 ** SINCE 1/31/94 FLEX SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Florida Tax-Exempt Bond Fund -2.97% 3.98%* -------------------------------------------------------------------------------- Lehman Brothers 10-Year Municipal Bond Index -1.24% 5.48%** -------------------------------------------------------------------------------- Lipper Florida Municipal Dept Funds Average -4.35% 4.05%** -------------------------------------------------------------------------------- * SINCE 6/1/95 ** SINCE 5/31/95 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers 10-Year Municipal Bond Index is a widely-recognized index of long-term investment grade tax-exempt bonds. The Index includes general obligation bonds, revenue bonds, insured bonds and prefunded bonds with maturities between 8 and 12 years, and represents various market sectors and geographic locations. The Lipper Florida Municipal Debt Funds Average is a composite index of mutual funds with investment goals similar to the Fund's goals. It reports the average return of the Florida intermediate-term municipal bond mutual funds tracked by Lipper Analytical Services, Inc. The number of funds in the Average varies. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00% * THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.65% 0.65% Distribution and Service (12b-1) Fees 0.18% 1.00% Other Expenses 0.53% 0.24% ----- ----- Total Annual Fund Operating Expenses 1.36% 1.89% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $508 $790 $1,092 $1,949 Flex Shares $398 $594 $1,024 $2,212 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $508 $790 $1,092 $1,949 Flex Shares $198 $594 $1,021 $2,212 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Investor Shares are 0.60%, 0.13% and 0.92%, respectively. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares are 0.60%, 0.58% and 1.42%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 4 PROSPECTUS GEORGIA TAX-EXEMPT BOND FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Current income exempt from federal and state income taxes for Georgia residents without undue risk -------------------------------------------------------------------------------- INVESTMENT FOCUS Georgia municipal securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to invest more Fund assets in undervalued sectors and less in overvalued ones -------------------------------------------------------------------------------- INVESTOR PROFILE Georgia residents who want income exempt from federal and state income taxes -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Georgia Tax-Exempt Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal and Georgia income taxes. Issuers of these securities can be located in Georgia, Puerto Rico and other U.S. territories and possessions. In addition, up to 20% of the Fund's assets may be invested in securities subject to the alternative minimum tax or in certain taxable debt securities. In selecting investments for the Fund, the Adviser tries to limit risk as much as possible. Based on the Adviser's analysis of municipalities, credit risk, market trends and investment cycles, the Adviser attempts to invest more of the Fund's assets in undervalued market sectors and less in overvalued sectors. The Adviser tries to diversify the Fund's holdings within Georgia. The Adviser also tries to identify and invest in municipal issuers with improving credit and avoid those with deteriorating credit. The Adviser anticipates that the Fund's average weighted maturity will range from 6 to 25 years. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund's concentration of investments in securities of issuers located in Georgia subjects the Fund to economic and government policies within Georgia. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Graph Omitted] Plot points are as follows: 1995 13.13% 1996 3.43% 1997 7.96% 1998 5.47% 1999 -2.49% BEST QUARTER WORST QUARTER 4.84% -2.35% (3/31/95) (6/30/99) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 3.06%. PROSPECTUS 5 GEORGIA TAX-EXEMPT BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999 TO THOSE OF THE LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX AND THE LIPPER GEORGIA MUNICIPAL DEBT FUNDS AVERAGE. INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Georgia Tax-Exempt Bond Fund -2.49% 5.37%* 3.60%* -------------------------------------------------------------------------------- Lehman Brothers 10-Year Municipal Bond Index -1.24% 7.12% 4.90%** -------------------------------------------------------------------------------- Lipper Georgia Municipal Dept Funds Average -4.51% 6.04% 3.39%** -------------------------------------------------------------------------------- * SINCE 1/19/94 ** SINCE 1/31/94 FLEX SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Georgia Tax-Exempt Bond Fund -2.93% 3.55%* -------------------------------------------------------------------------------- Lehman Brothers 10-Year Municipal Bond Index -1.24% 5.48%** -------------------------------------------------------------------------------- Lipper Georgia Municipal Dept Funds Average -4.51% 4.22%** -------------------------------------------------------------------------------- * SINCE 6/6/95 ** SINCE 5/31/95 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers 10-Year Municipal Bond Index is a widely-recognized index of long-term investment grade tax-exempt bonds. The Index includes general obligation bonds, revenue bonds, insured bonds and prefunded bonds with maturities between 8 and 12 years. The Index represents various market sectors and geographic locations. The Lipper Georgia Municipal Debt Funds Average is a composite index of mutual funds with investment goals similar to the Fund's goals. It reports the average return of the Georgia intermediate-term municipal bond mutual funds tracked by Lipper Analytical Services, Inc. The number of funds in the Average varies. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00% * THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.65% 0.65% Distribution and Service (12b-1) Fees 0.18% 1.00% Other Expenses 0.57% 0.30% ----- ----- Total Annual Fund Operating Expenses 1.40% 1.95% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $510 $796 $1,102 $1,970 Flex Shares $399 $597 $1,026 $2,222 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $510 $796 $1,102 $1,970 Flex Shares $199 $597 $1,026 $2,222 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Investor Shares are 0.60%, 0.00% and 0.92%, respectively. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares are 0.60%, 0.52% and 1.42%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 6 PROSPECTUS HIGH INCOME FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOALS PRIMARY High current income SECONDARY Total return -------------------------------------------------------------------------------- INVESTMENT FOCUS High yield corporate, government, and other debt instruments of U.S. and non U.S. issuers -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY High -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify lower-rated securities offering high current income of issuers generating adequate cash flow to meet their obligations -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who seek high current income and who are willing to accept greater share price volatility through investment in high yield, below investment grade debt instruments -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The High Income Fund invests primarily in a diversified portfolio of higher yielding, lower rated income producing securities of U.S. and non-U.S. issuers. The Fund will invest at least 65%, and may invest up to 100%, of its assets in securities rated as "non-investment grade" by Moody's Investor Services, Inc. or by Standard & Poor's Rating Services or in unrated securities if, in the Adviser's opinion, they are of comparable quality. Such securities are commonly known as "junk bonds" and offer greater risks than investment grade bonds (i.e. rated BBB- or above by S&P or Baa3 or above by Moody's). In selecting debt securities for the Fund the Adviser seeks out companies with good fundamentals and performing prospects that are currently out of favor with investors. The primary basis for security selection is the potential income offered by the security relative to the Adviser's assessment of the issuer's ability to generate the cash flow required to meet its obligation. The Adviser employs a "bottom-up" approach, identifying investment opportunities based on the underlying financial and economic fundamentals of the specific issuer. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. High yield securities involve greater risks of default or downgrade and are more volatile than investment grade securities. Junk bonds involve greater risk of default or price declines than investment grade securities due to actual or perceived changes in an issuer's creditworthiness. In addition, issuers of junk bonds may be more susceptible than other issuers to economic downturns. Junk bonds are subject to the risk that the issuer may not be able to pay interest or dividends and ultimately to repay principal upon maturity. Discontinuation of these payments could substantially adversely affect the market value of the security. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. These various risks will be even greater for investments in emerging market countries since political turmoil and rapid changes in economic conditions are more likely to occur in these countries. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to March 28, 2000 represent the performance of the ESC Strategic Income Fund, the Fund's predecessor. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S FLEX SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Graph Omitted] Plot points are as follows: 1995 14.91% 1996 5.84% 1997 5.05% 1998 4.43% 1999 1.28% BEST QUARTER WORST QUARTER 6.79% -2.24% (3/31/95) (9/30/99) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS -8.49%. PROSPECTUS 7 HIGH INCOME FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN BROTHERS U.S. CORPORATE HIGH YIELD BOND INDEX. FLEX SHARES 1 YEAR 5 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- High Income Fund 1.28% 6.21% 5.20%* -------------------------------------------------------------------------------- Lehman Brothers U.S. Corporate High Yield Bond Index 2.40% 9.31% 8.49%** -------------------------------------------------------------------------------- *SINCE 5/4/94 **SINCE 4/30/94 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers U.S. Corporate High Yield Bond Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index which covers the universe of fixed rate, non-investment grade debt. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)* 2.00% * THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN 1 YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)* -------------------------------------------------------------------------------- FLEX SHARES Investment Advisory Fees 0.80% Distribution and Service (12b-1) Fees 1.00% Other Expenses 0.44% ---- Total Annual Fund Operating Expenses 2.24% * ANNUAL FUND OPERATING EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES OF THE FUND. -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Flex Shares $427 $700 $1,200 $2,575 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Flex Shares $227 $700 $1,200 $2,575 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses are 0.65%, 0.31% and 1.40%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 8 PROSPECTUS INVESTMENT GRADE BOND FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High total return through current income and capital appreciation, while preserving the principal amount invested -------------------------------------------------------------------------------- INVESTMENT FOCUS Investment grade U.S. government and corporate debt securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify relatively inexpensive securities in a selected market index -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want to receive income from their investment, as well as an increase in the value of the investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Investment Grade Bond Fund invests primarily in investment grade corporate debt securities, U.S. Treasury obligations and mortgage-backed securities. In selecting investments for the Fund, the Adviser tries to minimize risk while attempting to outperform selected market indices. Currently, the Adviser's selected index is the Lehman Brothers U.S. Government/Credit Index, a widely-recognized, unmanaged index of investment grade government and corporate debt securities. The Adviser seeks to invest more in portions of the Index that seem relatively inexpensive, and less in those that seem expensive. The Adviser allocates the Fund's investments among various market sectors based on the Adviser's analysis of historical data, yield information and credit ratings. The Adviser anticipates that the Fund's average weighted maturity will range from 4 to 10 years. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. Mortgage-backed securities are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Graph Omitted] Plot points are as follows: 1993 10.42% 1994 -3.57% 1995 17.26% 1996 1.93% 1997 8.64% 1998 8.79% 1999 -1.93% BEST QUARTER WORST QUARTER 6.02% -2.67% (6/30/95) (3/31/94) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 0.24%. PROSPECTUS 9 INVESTMENT GRADE BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN BROTHERS U.S. GOVERNMENT/CREDIT INDEX, THE LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX AND THE LIPPER INTERMEDIATE INVESTMENT GRADE DEBT FUNDS AVERAGE. SINCE INVESTOR SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- Investment Grade Bond Fund -1.93% 6.74% 5.76%* -------------------------------------------------------------------------------- Lehman Brothers U.S. Government/Credit Index -2.15% 7.60% 6.79%** -------------------------------------------------------------------------------- Lehman Brothers U.S. Aggregate Bond Index -0.83% 7.73% 6.73%** -------------------------------------------------------------------------------- Lipper Intermediate Investment Grade Debt Funds Average -1.31% 6.79% 6.26%** -------------------------------------------------------------------------------- *SINCE 6/11/92 **SINCE 5/31/92 FLEX SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Investment Grade Bond Fund -2.38% 4.62%* -------------------------------------------------------------------------------- Lehman Brothers U.S. Government/Credit Index -2.15% 5.90%** -------------------------------------------------------------------------------- Lehman Brothers U.S. Aggregate Bond Index -0.83% 6.10%** -------------------------------------------------------------------------------- Lipper Intermediate Investment Grade Debt Funds Average -1.31% 5.31%** -------------------------------------------------------------------------------- *SINCE 6/7/95 **SINCE 5/31/95 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers U.S. Government/Credit Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, corporate debt backed by the U.S. government, fixed rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least 1 year. The Lehman Brothers U.S. Aggregate Bond Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index that combines the Lehman Brothers U.S. Government/Credit Index and the Lehman Brothers Mortgage-Backed Securities Index. The Lehman Brothers U.S. Government/Credit Index consists of U.S. government obligations and corporate debt securities. The Lehman Brothers Mortgage-Backed Securities Index consists of mortgage-backed securities rated AAA. The Lehman Brothers U.S. Aggregate Bond Index includes fixed income securities rated investment grade (BBB) or higher, with maturities of at least one year. The securities in the Index have outstanding par values of at least $100 million for U.S. government obligations and $25 million for the others. The Lipper Intermediate Investment Grade Debt Funds Average is a composite of mutual funds with investment goals similar to the Fund's goals. It reports the average return of the intermediate term investment grade bond mutual funds tracked by Lipper Analytical Services, Inc. The number of funds in the Average varies. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00% * THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.74% 0.74% Distribution and Service (12b-1) Fees 0.43% 1.00% Other Expenses 0.20% 0.25% ----- ----- Total Annual Fund Operating Expenses 1.37% 1.99% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $509 $793 $1,097 $1,960 Flex Shares $402 $624 $1,073 $2,317 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $509 $793 $1,097 $1,960 Flex Shares $202 $624 $1,073 $2,317 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Investor Shares are 0.72%, 0.30% and 1.22%, respectively. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares are 0.72%, 0.74% and 1.71%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 10 PROSPECTUS INVESTMENT GRADE TAX-EXEMPT BOND FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High total return through (i) current income that is exempt from federal income taxes and (ii) capital appreciation, while preserving the principal amount invested -------------------------------------------------------------------------------- INVESTMENT FOCUS Investment grade municipal securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to invest more Fund assets in undervalued sectors and less in overvalued ones -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want to receive tax-free current income and an increase in the value of their investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Investment Grade Tax-Exempt Bond Fund invests primarily in investment grade tax-exempt obligations, like municipal securities. The issuers of these securities may be located in any U.S. state, territory or possession. In addition, up to 20% of the Fund may be invested in securities subject to the alternative minimum tax or in certain taxable debt securities. In selecting investments for the Fund, the Adviser tries to limit risk as much as possible. Based on the Adviser's analysis of municipalities, credit risk, market trends and investment cycles, the Adviser attempts to invest more of the Fund's assets in undervalued market sectors and less in overvalued sectors. The Adviser also tries to identify and invest in municipal issuers with improving credit and avoid those with deteriorating credit. The Adviser anticipates that the Fund's average weighted maturity will range from 4 to 10 years. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Graph Omitted] Plot points are as follows: 1993 14.35% 1994 -0.60% 1995 14.51% 1996 4.99% 1997 7.36% 1998 6.73% 1999 -0.75% BEST QUARTER WORST QUARTER 5.87% -3.14% (3/31/95) (3/31/94) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 3.81%. PROSPECTUS 11 INVESTMENT GRADE TAX-EXEMPT BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN BROTHERS 5-YEAR MUNICIPAL BOND INDEX AND THE LIPPER INTERMEDIATE MUNICIPAL DEBT FUNDS AVERAGE. SINCE INVESTOR SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- Investment Grade Tax-Exempt Bond Fund -0.75% 6.46% 6.64%* -------------------------------------------------------------------------------- Lehman Brothers 5-Year Municipal Bond Index 0.74% 5.71% 5.42%** -------------------------------------------------------------------------------- Lipper Intermediate Municipal Debt Funds Average -1.65% 5.55% 5.32%** -------------------------------------------------------------------------------- *SINCE 6/9/92 **SINCE 5/31/92 FLEX SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Investment Grade Tax- Exempt Bond Fund -1.20% 4.65%* -------------------------------------------------------------------------------- Lehman Brothers 5-Year Municipal Bond Index 0.74% 4.76%** -------------------------------------------------------------------------------- Lipper Intermediate Municipal Debt Funds Average -1.65% 4.35%** -------------------------------------------------------------------------------- *SINCE 6/1/95 **SINCE 5/31/95 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers 5-Year Municipal bond Index is a widely-recognized index of intermediate investment grade tax-exempt bonds. The Index includes general obligation bonds, revenue bonds, insured bonds and prefunded bonds with maturities between 4 and 6 years. The Lipper Intermediate Municipal Debt Funds Average is a composite of mutual funds with investment goals similar to the Fund's goals. It reports the average return of the intermediate term municipal bond mutual funds tracked by Lipper Analytical Services, Inc. The number of funds in the Average varies. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00% * THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.74% 0.74% Distribution and Service (12b-1) Fees 0.43% 1.00% Other Expenses 0.16% 0.21% ----- ----- Total Annual Fund Operating Expenses 1.33% 1.95% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $505 $781 $1,076 $1,916 Flex Shares $398 $612 $1,052 $2,225 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $505 $781 $1,076 $1,916 Flex Shares $198 $612 $1,052 $2,225 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Investor Shares are 0.71%, 0.35% and 1.22%, respectively. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares are 0.71%, 0.78% and 1.70%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 12 PROSPECTUS LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital -------------------------------------------------------------------------------- INVESTMENT FOCUS Mortgage-backed securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify securities that are less prone to prepayment risk -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors who want to receive income from their investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Limited-Term Federal Mortgage Securities Fund invests primarily in U.S. government agency mortgage-backed securities, such as Fannie Mae, GNMA and collateralized mortgage obligations. These securities typically have an effective maturity from 1 to 5 years. In selecting investments for the Fund, the Adviser tries to identify securities that the Adviser expects to perform well in rising and falling markets. The Adviser also attempt to reduce the risk that the underlying mortgages are prepaid by focusing on securities that it believes are less prone to this risk. For example, Fannie Mae or GNMA securities that were issued years ago may be less prone to prepayment risk because there have been many opportunities for prepayment, but few have occurred. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that mortgage-backed securities may underperform other segments of the fixed income market or the fixed income markets as a whole. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. Mortgage-backed securities are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Chart Omitted] Plot points are as follows: 1995 12.02% 1996 4.29% 1997 6.37% 1998 6.73% 1999 0.96% BEST QUARTER WORST QUARTER 4.01% -0.26% (3/31/95) (6/30/99) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.36%. PROSPECTUS 13 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE MERRILL LYNCH 1-5 YEAR U.S. TREASURIES/AGENCIES INDEX AND THE MERRILL LYNCH 1-5 YEAR U.S. TREASURY INDEX. SINCE INVESTOR SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- Limited-Term Federal Mortgage Securities Fund 0.96% 6.01% 5.56%* -------------------------------------------------------------------------------- Merrill Lynch 1-5 Year U.S. Treasuries/Agencies Index 2.11% 6.78% 6.18%** -------------------------------------------------------------------------------- Merrill Lynch 1-5 Year U.S. Treasury Index 2.04% 6.78% 6.17%** -------------------------------------------------------------------------------- * SINCE 7/18/94 ** SINCE 7/31/94 FLEX SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Limited-Term Federal Mortgage Securities Fund 0.66% 4.60%* -------------------------------------------------------------------------------- Merrill Lynch 1-5 Year U.S. Treasuries/Agencies Index 2.11% 5.78%** -------------------------------------------------------------------------------- Merrill Lynch 1-5 Year U.S. Treasury Index 2.04% 5.77%** -------------------------------------------------------------------------------- * SINCE 6/7/95 ** SINCE 5/31/95 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Merrill Lynch 1-5 Year U.S Treasuries/Agencies Index includes U.S. government and agency bonds that have a minimum issue size of $150 million. The current market value of the Index is $1.29 trillion with duration of 2.1 years and yield to maturity of 6.4%. The Merrill Lynch 1-5 Year U.S. Treasury Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of U.S. Treasury securities with maturities of 1 year or greater and no more than 5 years. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 2.50% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00% * THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.65% 0.65% Distribution and Service (12b-1) Fees 0.23% 1.00% Other Expenses 0.81% 0.73% ----- ----- Total Annual Fund Operating Expenses 1.69% 2.38% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $418 $769 $1,145 $2,198 Flex Shares $441 $742 $1,270 $2,716 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $418 $769 $1,145 $2,198 Flex Shares $241 $742 $1,270 $2,716 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Investor Shares are 0.60%, 0.00% and 0.96%, respectively. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares are 0.60%, 0.00% and 1.31%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 14 PROSPECTUS MARYLAND MUNICIPAL BOND FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income exempt from federal and Maryland income tax, consistent with preservation of capital -------------------------------------------------------------------------------- INVESTMENT FOCUS Maryland municipal securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to invest in investment grade municipal securities -------------------------------------------------------------------------------- INVESTOR PROFILE Maryland residents who want income exempt from federal and state income taxes -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Maryland Municipal Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal and Maryland income taxes. Issuers of these securities can be located in Maryland, Puerto Rico and other U.S. territories and possessions. In selecting investments for the Fund, the Adviser tries to limit risk by buying investment grade securities. There are no limits on the Fund's average weighted maturity or on the remaining maturities of individual securities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund's concentration of investments in securities of issuers located in Maryland subjects the Fund to economic and government policies of Maryland. The Fund is non-diversified, which means that it may invest in the securities of relatively few issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, and may experience increased volatility due to its investments in those securities. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S FLEX SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Chart Omitted] Plot points are as follows: 1997 7.90% 1998 4.91% 1999 -4.17% BEST QUARTER WORST QUARTER 3.35% -1.74% (6/30/97) (9/30/99) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 3.78%. PROSPECTUS 15 MARYLAND MUNICIPAL BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN BROTHERS GENERAL OBLIGATION BOND INDEX. FLEX SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Maryland Municipal Bond Fund -4.17% 3.28%* -------------------------------------------------------------------------------- Lehman Brothers General Obligation Bond Index -1.51% 5.31%** -------------------------------------------------------------------------------- * SINCE 4/25/96 ** SINCE 4/30/96 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers General Obligation Bond Index is a widely-recognized index of general obligation securities issued in the last 5 years with maturities of over 1 year. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)* 2.00% * THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- FLEX SHARES Investment Advisory Fees 0.65% Distribution and Service (12b-1) Fees 1.00% Other Expenses 0.30% ----- Total Annual Fund Operating Expenses 1.95% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Flex Shares $398 $612 $1,052 $2,275 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Flex Shares $198 $612 $1,052 $2,275 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares are 0.57%, 0.77% and 1.64%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 16 PROSPECTUS SHORT-TERM BOND FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital -------------------------------------------------------------------------------- INVESTMENT FOCUS Investment grade U.S. government and corporate debt securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Low -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify securities that offer a comparably better return than similar securities for a given level of credit risk -------------------------------------------------------------------------------- INVESTOR PROFILE Income oriented investors who are willing to accept increased risk for the possibility of returns greater than money market investing -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Short-Term Bond Fund invests primarily in a diversified portfolio of short- to medium-term investment grade U.S. Treasury, corporate debt, mortgage-backed and asset-backed securities. The Fund expects that it will normally maintain an average weighted maturity of approximately 3 years. In selecting investments for the Fund, the Adviser attempts to identify securities that offer a comparably better investment return for a given level of credit risk. For example, short-term bonds generally have better returns than money market instruments, with a fairly modest increase in credit risk and/or volatility. The Adviser manages the Fund from a total return perspective. That is, the Adviser makes day-to-day investment decisions for the Fund with a view towards maximizing returns. The Adviser analyzes yields, market sectors and credit risk in an effort to identify attractive investments with the best risk/reward trade-off. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. Mortgage-backed and asset-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans or underlying assets such as truck and auto loans, leases and credit card receivables. Mortgage-backed and asset-backed securities are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loan, receivables or other assets underlying these securities. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed or asset-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in the market place. When interest rates fall, however, mortgage-backed and asset-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayment or prepayment of the underlying asset that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed or asset-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Chart Omitted] Plot points are as follows: 1994 -0.33% 1995 11.68% 1996 3.66% 1997 6.46% 1998 6.73% 1999 0.76% BEST QUARTER WORST QUARTER 3.81% -0.63% (6/30/95) (3/31/94) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.72%. PROSPECTUS 17 SHORT-TERM BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE SALOMON 1-3 YEAR TREASURY/GOVERNMENT SPONSORED/CORPORATE INDEX. SINCE INVESTOR SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- Short-Term Bond Fund 0.76% 5.80% 4.70%* -------------------------------------------------------------------------------- Salomon 1-3 Year Treasury/ Government Sponsored/ Corporate Index 3.29% 6.56% 5.42%** -------------------------------------------------------------------------------- *SINCE 3/22/93 **SINCE 3/31/93 FLEX SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Short-Term Bond Fund 0.47% 4.50%* -------------------------------------------------------------------------------- Salomon 1-3 Year Treasury/ Government Sponsored/ Corporate Index 3.29% 5.80%** -------------------------------------------------------------------------------- *SINCE 6/20/95 **SINCE 6/30/95 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Salomon 1-3 Year Treasury/Government Sponsored/Corporate Index is a widely-recognized index of U.S. Treasury securities, government agency obligations, and corporate debt securities rated at least investment grade (BBB). The securities in the Index have maturities of 1 year or greater and less than 3 years. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 2.00% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00% * THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.65% 0.65% Distribution and Service (12b-1) Fees 0.23% 1.00% Other Expenses 0.87% 0.76% ----- ----- Total Annual Fund Operating Expenses 1.75% 2.41% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $374 $740 $1,130 $2,221 Flex Shares $444 $751 $1,285 $2,746 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $374 $740 $1,130 $2,221 Flex Shares $244 $751 $1,285 $2,746 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Investor Shares are 0.60%, 0.00% and 0.91%, respectively. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares are 0.60%, 0.00% and 1.26%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 18 PROSPECTUS SHORT-TERM U.S. TREASURY SECURITIES FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital -------------------------------------------------------------------------------- INVESTMENT FOCUS Short-term U.S. Treasury securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Low -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify Treasury securities with maturities that offer a comparably better return potential and yield than either shorter maturity or longer maturity securities for a given level of interest rate risk -------------------------------------------------------------------------------- INVESTOR PROFILE Income oriented investors who are willing to accept increased risk for the possibility of returns greater than money market investing -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Short-Term U.S. Treasury Securities Fund invests exclusively in short-term U.S. Treasury securities (those with remaining maturities of 3 years or less). The Fund intends to maintain an average weighted maturity from 1 to 2 years. The Fund offers investors the opportunity to capture the advantage of investing in short-term bonds over money market instruments. Generally, short-term bonds offer a comparably better return than money market instruments, with a modest increase in interest rate risk. The Adviser manages the Fund from a total return perspective. That is, the Adviser makes day-to-day investment decisions for the Fund with a view toward maximizing returns and yield. The Adviser tries to select those U.S. Treasury securities that offer the best risk/reward trade-off. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that short-term U.S. Treasury securities may underperform other segments of the fixed income market or the fixed income markets as a whole. Although the Fund's U.S. Treasury securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Chart Omitted] Plot points are as follows: 1994 1.28% 1995 8.39% 1996 4.38% 1997 5.70% 1998 6.09% 1999 2.55% BEST QUARTER WORST QUARTER 2.60% -0.13% (3/31/95) (3/31/94) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.40%. PROSPECTUS 19 SHORT-TERM U.S. TREASURY SECURITIES FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE SALOMON 1-3 YEAR TREASURY INDEX AND THE SALOMON 6 MONTH TREASURY BILL INDEX. SINCE INVESTOR SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- Short-Term U.S. Treasury Securities Fund 2.55% 5.40% 4.55%* -------------------------------------------------------------------------------- Salomon 1-3 Year Treasury Index 3.06% 6.48% 5.33%** -------------------------------------------------------------------------------- Salomon 6 Month Treasury Bill Index 4.80% 5.33% 4.95%** -------------------------------------------------------------------------------- *SINCE 3/18/93 **SINCE 3/31/93 FLEX SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Short-Term U.S. Treasury Securities Fund 2.33% 4.57%* -------------------------------------------------------------------------------- Salomon 1-3 Year Treasury Index 3.06% 5.72%** -------------------------------------------------------------------------------- Salomon 6 Month Treasury Bill Index 4.80% 5.26%** -------------------------------------------------------------------------------- *SINCE 6/22/95 **SINCE 6/30/95 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Salomon 1-3 Year Treasury Index is a widely-recognized index of U.S. Treasury securities with maturities of 1 year or greater and less than 3 years. The Salomon 6 Month Treasury Bill Index is a widely-recognized index of the 6 month U.S. Treasury Bills. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 1.00% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00% * THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.65% 0.65% Distribution and Service (12b-1) Fees 0.18% 1.00% Other Expenses 0.61% 0.39% ----- ----- Total Annual Fund Operating Expenses 1.44% 2.04% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $245 $551 $879 $1,807 Flex Shares $407 $640 $1,098 $2,369 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $245 $551 $879 $1,807 Flex Shares $207 $640 $1,098 $2,369 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Investor Shares are 0.59%, 0.00% and 0.86%, respectively. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares are 0.59%, 0.13% and 1.11%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 20 PROSPECTUS U.S. GOVERNMENT SECURITIES FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital -------------------------------------------------------------------------------- INVESTMENT FOCUS Mortgage-backed securities and U.S. Treasury obligations -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Low to moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without adding undue risk -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors who want to receive income from their investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The U.S. Government Securities Fund invests primarily in U.S. government debt securities, such as mortgage-backed securities and U.S. Treasury obligations. In an attempt to provide a consistently high dividend without adding undue risk, the Fund focuses its investments in mortgage-backed securities. The average maturity of the Fund's portfolio will typically range from 7 to 14 years. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that U.S. government debt securities may underperform other segments of the fixed income market or the fixed income markets as a whole. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. Mortgage-backed securities are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Chart Omitted] Plot points are as follows: 1995 16.95% 1996 2.08% 1997 8.60% 1998 7.74% 1999 -1.49% BEST QUARTER WORST QUARTER 5.81% -2.31% (6/30/95) (3/31/96) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 3.59%. PROSPECTUS 21 U.S. GOVERNMENT SECURITIES FUND THIS TABLE COMPARES THE FUND'S AVERAGE TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE MERRILL LYNCH GOVERNMENT/MORTGAGE INDEX AND THE LEHMAN BROTHERS INTERMEDIATE U.S. GOVERNMENT BOND INDEX. SINCE INVESTOR SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- U.S. Government Securities Fund -1.49% 6.59% 5.63%* -------------------------------------------------------------------------------- Merrill Lynch Government/ Mortgage Index -0.70% 7.67% 6.90%** -------------------------------------------------------------------------------- Lehman Brothers Intermediate U.S. Government Bond Index 0.50% 6.93% 6.32%** -------------------------------------------------------------------------------- * SINCE 6/6/94 ** SINCE 5/31/94 SINCE FLEX SHARES 1 YEAR INCEPTION -------------------------------------------------------------------------------- U.S. Government Securities Fund -1.94% 4.36%* -------------------------------------------------------------------------------- Merrill Lynch Government/ Mortgage Index -0.70% 6.10%** -------------------------------------------------------------------------------- Lehman Brothers Intermediate U.S. Government Bond Index 0.50% 5.72%** -------------------------------------------------------------------------------- * SINCE 6/7/95 ** SINCE 5/31/95 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Merrill Lynch Government/Mortgage Index is a synthetic index created by combining, at their respective market weights (i) the Merrill Lynch Government Master Index, which is a widely-recognized index, comprised of U.S. Treasury securities and U.S. government agency securities with a maturity of at least 1 year; and (ii) the Merrill Lynch Master Mortgage Index which is a widely-recognized index comprised of mortgage-backed securities including 15 and 30 year single family mortgages in addition to aggregated pooled mortgages. The Lehman Brothers Intermediate U.S. Government Bond Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, and corporate debt backed by the U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least 1 year. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None 2.00% * THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.74% 0.74% Distribution and Service (12b-1) Fees 0.38% 1.00% Other Expenses 0.78% 0.33% ----- ----- Total Annual Fund Operating Expenses 1.90% 2.07% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $561 $950 $1,363 $2,514 Flex Shares $410 $649 $1,114 $2,400 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $561 $950 $1,363 $2,514 Flex Shares $210 $649 $1,114 $2,400 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Investor Shares are 0.71%, 0.00% and 1.22%, respectively. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares are 0.71%, 0.69% and 1.73%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 22 PROSPECTUS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income exempt from federal and Virginia income tax, consistent with preservation of capital -------------------------------------------------------------------------------- INVESTMENT FOCUS Virginia municipal securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Low -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to limit risk by investing in investment grade municipal securities with an intermediate average maturity -------------------------------------------------------------------------------- INVESTOR PROFILE Virginia residents who want income exempt from federal and state income taxes -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Virginia Intermediate Municipal Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal and Virginia income taxes. Issuers of these securities can be located in Virginia, Puerto Rico and other U.S. territories and possessions. In selecting investments for the Fund, the Adviser tries to limit risk by buying investment grade securities. The Adviser also considers stability and growth of principal. The Adviser expects that the Fund's average weighted maturity will range from 5 to 10 years but there is no limit on the maturities of individual securities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund is non-diversified, which means that it may invest in the securities of relatively few issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, and may experience increased volatility due to its investments in those securities. The Fund's concentration of investments in securities of issuers located in Virginia subjects the Fund to economic and government policies of Virginia. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Chart Omitted] Plot points are as follows: 1994 -6.47% 1995 14.37% 1996 2.94% 1997 7.24% 1998 5.32% 1999 -2.43% BEST QUARTER WORST QUARTER 6.10% -6.72% (3/31/95) (3/31/94) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 3.27%. PROSPECTUS 23 VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN BROTHERS 5-YEAR GOVERNMENT OBLIGATION BOND INDEX AND THE LEHMAN BROTHERS GENERAL OBLIGATION BOND INDEX. SINCE INVESTOR SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- Virginia Intermediate Municipal Bond Fund -2.43% 5.34% 3.79%* -------------------------------------------------------------------------------- Lehman Brothers 5-Year Government Obligation Bond Index 0.72% 5.80% 4.89%** -------------------------------------------------------------------------------- Lehman Brothers General Obligation Bond Index -1.51% 6.82% 5.39%** -------------------------------------------------------------------------------- *SINCE 5/5/93 **SINCE 4/30/93 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers 5-Year Government Obligation Bond Index is a widely-recognized index of municipal bonds with maturities ranging from 4 to 6 years. The Index represents various market sectors and geographic locations. The Lehman Brothers General Obligation Bond Index is a widely-recognized index of general obligation securities issued in the last 5 years with maturities of over 1 year. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- INVESTOR SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 3.75% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value) None * THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES Investment Advisory Fees 0.65% Distribution and Service (12b-1) Fees 0.15% Other Expenses 0.29% ----- Total Annual Fund Operating Expenses 1.09% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $482 $709 $953 $1,654 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Investor Shares are 0.65%, 0.00% and 0.79%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 24 PROSPECTUS VIRGINIA MUNICIPAL BOND FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income exempt from federal and Virginia income taxes, consistent with preservation of capital -------------------------------------------------------------------------------- INVESTMENT FOCUS Virginia municipal securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to invest in investment grade municipal securities -------------------------------------------------------------------------------- INVESTOR PROFILE Virginia residents who want income exempt from federal and state income taxes -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Virginia Municipal Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal and Virginia income taxes. Issuers of these securities can be located in Virginia, Puerto Rico and other U.S. territories and possessions. In selecting investments for the Fund, the Adviser tries to limit risk by buying investment grade securities. There are no limits on the Fund's average weighted maturity or on the remaining maturities of individual securities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. The Fund is non-diversified, which means that it may invest in the securities of relatively few issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, and may experience increased volatility due to its investments in those securities. The Fund's concentration of investments in securities of issuers located in Virginia subjects the Fund to economic and government policies of Virginia. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S FLEX SHARES FROM YEAR TO YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* [Bar Chart Omitted] Plot points are as follows: 1996 0.81% 1997 7.91% 1998 4.83% 1999 -5.68% BEST QUARTER WORST QUARTER 3.18% -2.93% (6/30/97) (3/31/96) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 4.03%. PROSPECTUS 25 VIRGINIA MUNICIPAL BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN BROTHERS GENERAL OBLIGATION BOND INDEX. FLEX SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Virginia Municipal Bond Fund -5.68% 3.14%* -------------------------------------------------------------------------------- Lehman Brothers General Obligation Bond Index -1.51% 5.79%** -------------------------------------------------------------------------------- * SINCE 4/14/95 ** SINCE 3/31/95 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers General Obligation Bond Index is a widely-recognized index of general obligation securities issued in the last 5 years with maturities of over 1 year. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)* 2.00% * THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE AND DECREASES OVER TIME, DEPENDING ON HOW LONG YOU OWN YOUR SHARES. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- FLEX SHARES Investment Advisory Fees 0.65% Distribution and Service (12b-1) Fees 1.00% Other Expenses 0.43% ----- Total Annual Fund Operating Expenses 2.08% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Flex Shares $411 $652 $1,119 $2,410 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Flex Shares $211 $652 $1,119 $2,410 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares are 0.65%, 0.62% and 1.70%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 26 PROSPECTUS MORE INFORMATION ABOUT RISK [INNERTUBE GRAPHIC OMITTED] MORE INFORMATION ABOUT RISK FIXED INCOME RISK ALL FUNDS The market value of fixed income investments changes in response to interest rate changes and other factors. During periods of falling interest rates, the values of outstanding fixed income securities generally rise. Moreover, while securities with longer maturities tend to produce higher yields, the prices of longer maturity securities are also subject to greater market fluctuations as a result of changes in interest rates. In addition to these fundamental risks, different types of fixed income securities may be subject to the following additional risks: CREDIT RISK FLORIDA TAX-EXEMPT BOND FUND GEORGIA TAX-EXEMPT BOND FUND INVESTMENT GRADE BOND FUND INVESTMENT GRADE TAX-EXEMPT BOND FUND MARYLAND MUNICIPAL BOND FUND SHORT-TERM BOND FUND VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND VIRGINIA MUNICIPAL BOND FUND The possibility that an issuer will be unable to make timely payments of either principal or interest. MUNICIPAL ISSUER RISK FLORIDA TAX-EXEMPT BOND FUND GEORGIA TAX-EXEMPT BOND FUND INVESTMENT GRADE TAX-EXEMPT BOND FUND MARYLAND MUNICIPAL BOND FUND SHORT-TERM BOND FUND VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND VIRGINIA MUNICIPAL BOND FUND There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes to the financial condition or credit rating of municipal issuers may also adversely affect the value of the Fund's municipal securities. Constitutional or legislative limits on borrowing by municipal issuers may result in reduced supplies of municipal securities. Moreover, certain municipal securities are backed only by a municipal issuer's ability to levy and collect taxes. In addition, the Fund's concentration of investments in issuers located in a single state makes the Fund more susceptible to adverse political or economic developments affecting that state. The Fund also may be riskier than mutual funds that buy securities of issuers in numerous states. FOREIGN SECURITY RISKS HIGH INCOME FUND Investments in securities of foreign companies or governments can be more volatile than investments in U.S. companies or governments. Diplomatic, political, or economic developments, including nationalization or appropriation, could affect investments in foreign countries. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets. In addition, the value of securities denominated in foreign currencies, and of dividends from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign companies or governments generally are not subject to uniform accounting, auditing, and financial reporting standards comparable to those applicable to domestic U.S. companies or governments. Transaction costs are generally higher than those in the U.S. and expenses for custodial arrangements of foreign securities may be somewhat greater than typical expenses for custodial arrangements of similar U.S. securities. Some foreign governments levy withholding taxes against dividend and interest income. Although in some countries a portion of these taxes are recoverable, the non-recovered portion will reduce the income received from the securities comprising the portfolio. PROSPECTUS 27 MORE INFORMATION ABOUT FUND INVESTMENTS REGIONAL RISK FLORIDA TAX-EXEMPT BOND FUND GEORGIA TAX-EXEMPT BOND FUND MARYLAND MUNICIPAL BOND FUND VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND VIRGINIA MUNICIPAL BOND FUND To the extent that the Fund's investments are concentrated in a specific geographic region, the Fund may be subject to the political and other developments affecting that region. Regional economies are often closely interrelated, and political and economic developments affecting one region, country or state often affect other regions, countries or states, thus subjecting a Fund to additional risks. [MOUNTAINTOP GRAPHIC OMITTED] MORE INFORMATION ABOUT FUND INVESTMENTS This prospectus describes the Funds' primary strategies, and the Funds will normally invest in the types of securities described in this prospectus. However, in addition to the investments and strategies described in this prospectus, each Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). The investments and strategies described in this prospectus are those that the Funds use under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, each Fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and short-term obligations that would not ordinarily be consistent with a Fund's objectives. In addition, the Florida Tax-Exempt Bond Fund, Georgia Tax-Exempt Bond Fund, Investment Grade Bond Fund, Investment Grade Tax-Exempt Bond Fund, Limited-Term Federal Mortgage Securities Fund, Short-Term Bond Fund, Short-Term U.S. Treasury Securities Fund, Virginia Intermediate Municipal Bond Fund and the U.S. Government Securities Fund each may shorten its average weighted maturity to as little as 90 days. A Fund will do so only if the Adviser believes that the risk of loss outweighs the opportunity for higher income. Of course, a Fund cannot guarantee that it will achieve its investment goal. [MAGNIFIER GRAPHIC OMITTED] INVESTMENT ADVISER The Investment Adviser (the "Adviser") makes investment decisions for the Funds and continuously reviews, supervises and administers each Fund's respective investment program. The Board of Trustees supervises the Adviser and establishes policies that the Adviser must follow in its management activities. Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Funds. As of July 1, 2000, Trusco had approximately $47 billion in assets under management. For the fiscal period ended May 31, 2000, the Adviser received advisory fees of: FLORIDA TAX-EXEMPT BOND FUND 0.54% GEORGIA TAX-EXEMPT BOND FUND 0.54% HIGH INCOME FUND 0.00% INVESTMENT GRADE BOND FUND 0.67% INVESTMENT GRADE TAX-EXEMPT BOND FUND 0.68% LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND 0.53% MARYLAND MUNICIPAL BOND FUND 0.53% SHORT-TERM BOND FUND 0.56% SHORT-TERM U.S. TREASURY SECURITIES FUND 0.53% U.S. GOVERNMENT SECURITIES FUND 0.67% VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND 0.65% VIRGINIA MUNICIPAL BOND FUND 0.60% The Adviser may use its affiliates as brokers for Fund transactions. For periods prior to January 1, 2000, STI Capital Management, N.A. ("STI"), a subsidiary of SunTrust Banks, Inc. served as Investment Adviser to the Florida Tax-Exempt Bond Fund, Investment Grade Bond Fund, Investment Grade Tax-Exempt Bond Fund and the Limited-Term Federal Mortgage Securities Fund. On January 1, 2000, SunTrust Bank (formerly SunTrust Bank, Atlanta), a subsidiary of SunTrust Banks, Inc. and the Investment Adviser of the Georgia Tax-Exempt Bond Fund, succeeded STI as the Investment Adviser to those Funds. On July 1, 2000, SunTrust Banks, Inc. reorganized its money management units, including those of SunTrust Bank, into Trusco Capital Management, Inc. As a result, Trusco now serves as the Investment Adviser to each STI Classic Fund. 28 PROSPECTUS INVESTMENT ADVISER AND PORTFOLIO MANAGERS PORTFOLIO MANAGERS Mr. Ronald Schwartz, CFA, has served as a Managing Director of Trusco since July 2000, after serving as a Managing Director of STI since 1988. He has managed the Florida Tax-Exempt Bond Fund since it began operating in January 1994, and the Investment Grade Tax-Exempt Bond Fund since it began operating in June 1992. He has more than 19 years of investment experience. Ms. Gay Cash has served as a Vice President of Trusco since July 2000. She has managed the Georgia Tax-Exempt Bond Fund since it began operating in January 1994. Previously, she had served as First Vice President of SunTrust Bank, Atlanta since 1998, and had worked there since 1987. She has more than 21 years of experience. Ms. Agnes G. Pampush, CFA, has served as a Managing Director of Trusco since July 2000, after serving as a Vice President of Trusco since 1998. Ms. Pampush was employed by Trusco from 1988 to 1996, and rejoined the firm in 1998. She has managed the Short-Term Bond Fund since February 1999, and the High Income Fund since April 2000. She has more than 18 years of investment experience. The Investment Grade Bond Fund and the Limited-Term Federal Mortgage Securities Fund are co-managed by Mr. L. Earl Denney, CFA, and Mr. Dave E. West, CFA. Mr. Denney has served as Managing Director of STI since 1983. In January 2000 he was named Managing Director of SunTrust Bank and is now Managing Director of Trusco. Mr. Denney has co-managed the Investment Grade Bond Fund since it began operating in June 1992 and has co-managed the Limited-Term Mortgage Securities Fund since it began operating in June 1994. Mr. Denney has more than 21 years of investment experience. Mr. West has served as a Managing Director of STI and has worked there since 1985. In January 2000, Mr. West was named Managing Director of SunTrust Bank, and is now a Managing Director of Trusco. Mr. West has co- managed the Investment Grade Bond Fund since it began operating in June 1992 and has co-managed the Limited-Term Federal Mortgage Securities Fund since it began operating in June 1994. Mr. West has more than 14 years of investment experience. Mr. George E. Calvert, Jr. has served as Vice President of Trusco since 2000. He has managed the Maryland Municipal Bond Fund since 2000, the Virginia Municipal Bond Fund since 2000, and the Virginia Intermediate Municipal Bond Fund since 2000. Prior to joining Trusco, Mr. Calvert served as a fixed income trader from 1998 to 2000 for Tredegar Trust Company. He also served as Vice President, Investment Division, of Central Fidelity Bank from 1988 to 1998. Mr. Calvert has more than 27 years of investment experience. Mr. David S. Yealy has served as a Managing Director of Trusco since July 2000. He has managed the Short-Term U.S. Treasury Securities Fund since July 1996. Prior to July 2000, Mr. Yealy was a First Vice President of Trusco and has worked there since 1991. He has more than 15 years of investment experience. Mr. Neil J. Powers, CFA, joined Trusco in 1997 and serves as a Managing Director. He has managed the U.S. Government Securities Fund since 2000. Prior to joining Trusco, Mr. Powers worked at Putnam Investments, from 1986 to 1997, where he managed multi-sector bond funds and separately managed institutional accounts. He has more than 16 years of investment experience. [HANDSHAKE GRAPHIC OMITTED] PURCHASING, SELLING AND EXCHANGING FUND SHARES This section tells you how to purchase, sell (sometimes called "redeem") or exchange Investor Shares and Flex Shares of the Funds. HOW TO PURCHASE FUND SHARES A SunTrust Securities Investment Consultant can assist you in opening a brokerage account which will be used for all transactions regarding the purchase of STI Classic Funds. Once your account is established, you may buy shares of the Funds by: [bullet] Mail [bullet] Telephone (1-800-874-4770) [bullet] Wire [bullet] Automated Clearing House (ACH) PROSPECTUS 29 PURCHASING, SELLING AND EXCHANGING FUND SHARES You may also buy shares through investment representatives of certain correspondent banks of SunTrust Banks, Inc. (SunTrust) and other financial institutions that are authorized to place transactions in Fund shares for their customers. Please contact your financial institution directly and follow its procedures for Fund share transactions. Your broker or institution may charge a fee for its services, in addition to the fees charged by a Fund. You will also generally have to address your correspondence or questions regarding a Fund to your institution. A Fund may reject any purchase order if it is determined that accepting the order would not be in the best interests of STI Classic Funds or its shareholders. WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange is open for business (a Business Day). The price per share (the offering price) will be the net asset value per share (NAV) next determined after the Funds receive your purchase order. Each Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, for you to receive the current Business Day's NAV for each Fund, generally the Funds must receive your purchase order before 4:00 p.m. Eastern time. FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES, AND OTHER FINANCIAL INSTITUTIONS YOU MAY HAVE TO TRANSMIT YOUR PURCHASE, SALE AND EXCHANGE REQUESTS TO SUNTRUST OR OTHER FINANCIAL INSTITUTIONS AT AN EARLIER TIME FOR YOUR TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS THE FINANCIAL INSTITUTION TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE, SELL OR EXCHANGE FUND SHARES, INCLUDING SPECIFIC SUNTRUST OR OTHER FINANCIAL INSTITUTIONS INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR FINANCIAL INSTITUTION DIRECTLY. HOW THE FUNDS CALCULATE NAV In calculating NAV, a Fund generally values its investment portfolio at market price. If market prices are unavailable or a Fund thinks that they are unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. NET ASSET VALUE NAV for one Fund share is the value of that share's portion of the net assets of the Fund. MINIMUM PURCHASES To purchase shares for the first time, you must invest in any Fund at least: CLASS DOLLAR AMOUNT -------------------------------------------------------------------------------- Investor Shares $2,000 Flex Shares $5,000 ($2,000 for retirement plans) -------------------------------------------------------------------------------- Your subsequent investments in any Fund must be made in amounts of at least $1,000 or, if you pay by a statement coupon, $100. A Fund may accept investments of smaller amounts for either class of shares at its discretion. FUNDLINK FUNDLINK is a telephone activated service that allows you to transfer money quickly and easily between the STI Classic Funds and your SunTrust bank account(s). To use FUNDLINK, you must first contact your SunTrust Bank Investment Consultant and complete the FUNDLINK application and authorization agreements. Once you have signed up to use FUNDLINK, simply call SunTrust at 1-800-874-4770 to complete all of your purchase and redemption transactions. SYSTEMATIC INVESTMENT PLAN If you have a checking or savings account with a SunTrust affiliate bank, you may purchase shares of either class automatically through regular deductions from your account. With a $500 minimum initial investment, you may begin regularly-scheduled investments from $50 to $100,000 once or twice a 30 PROSPECTUS PURCHASING, SELLING AND EXCHANGING FUND SHARES month. If you are buying Flex Shares, you should plan on investing at least $5,000 per Fund during the first two years. The Distributor may close your account if you do not meet this minimum investment requirement at the end of two years. [DOLLAR GRAPHIC OMITTED] SALES CHARGES FRONT-END SALES CHARGES - INVESTOR SHARES The offering price of Investor Shares is the NAV next calculated after a Fund receives your request, plus the front-end sales charge. The amount of any front-end sales charge included in your offering price varies, depending on the amount of your investment: Florida Tax-Exempt Bond Fund Georgia Tax-Exempt Bond Fund Investment Grade Bond Fund Investment Grade Tax-Exempt Bond Fund U.S. Government Securities Fund Virginia Intermediate Municipal Bond Fund YOUR SALES CHARGE YOUR SALES CHARGE AS A PERCENTAGE OF AS A PERCENTAGE OF IF YOUR INVESTMENT IS: OFFERING PRICE YOUR NET INVESTMENT -------------------------------------------------------------------------------- Less than $100,000 3.75% 3.90% -------------------------------------------------------------------------------- $100,000 but less than $250,000 3.25% 3.36% -------------------------------------------------------------------------------- $250,000 but less than $1,000,000 2.50% 2.56% -------------------------------------------------------------------------------- $1,000,000 and over 1.50% 1.52% -------------------------------------------------------------------------------- Limited-Term Federal Mortgage Securities Fund YOUR SALES CHARGE YOUR SALES CHARGE AS A PERCENTAGE OF AS A PERCENTAGE OF IF YOUR INVESTMENT IS: OFFERING PRICE YOUR NET INVESTMENT -------------------------------------------------------------------------------- Less than $100,000 2.50% 2.50% -------------------------------------------------------------------------------- $100,000 but less than $250,000 1.75% 1.78% -------------------------------------------------------------------------------- $250,000 but less than $1,000,000 1.25% 1.27% -------------------------------------------------------------------------------- $1,000,000 and over None None -------------------------------------------------------------------------------- Short-Term Bond Fund YOUR SALES CHARGE YOUR SALES CHARGE AS A PERCENTAGE OF AS A PERCENTAGE OF IF YOUR INVESTMENT IS: OFFERING PRICE YOUR NET INVESTMENT -------------------------------------------------------------------------------- Less than $100,000 2.00% 2.04% -------------------------------------------------------------------------------- $100,000 but less than $250,000 1.50% 1.52% -------------------------------------------------------------------------------- $250,000 but less than $1,000,000 1.00% 1.01% -------------------------------------------------------------------------------- $1,000,000 and over None None -------------------------------------------------------------------------------- Short-Term U.S. Treasury Securities Fund YOUR SALES CHARGE YOUR SALES CHARGE AS A PERCENTAGE OF AS A PERCENTAGE OF IF YOUR INVESTMENT IS: OFFERING PRICE YOUR NET INVESTMENT -------------------------------------------------------------------------------- Less than $100,000 1.00% 1.01% -------------------------------------------------------------------------------- $100,000 but less than $250,000 0.79% 0.76% -------------------------------------------------------------------------------- $250,000 but less than $1,000,000 0.50% 0.50% -------------------------------------------------------------------------------- $1,000,000 and over None None -------------------------------------------------------------------------------- WAIVER OF FRONT-END SALES CHARGE - INVESTOR SHARES The front-end sales charge will be waived on Investor Shares purchased: [bullet] through reinvestment of dividends and distributions; [bullet] through a SunTrust Securities, Inc. asset allocation account; [bullet] by persons repurchasing shares they redeemed within the last 60 days (see Repurchase of Investor Shares); [bullet] by employees, and members of their immediate family, of SunTrust and its affiliates; [bullet] by persons reinvesting distributions from qualified employee benefit retirement plans and rollovers from individual retirement accounts ("IRAs") previously with the Trust department of a bank affiliated with SunTrust; PROSPECTUS 31 PURCHASING, SELLING AND EXCHANGING FUND SHARES [bullet] by persons investing an amount less than or equal to the value of an account distribution when an account for which a bank affiliated with SunTrust acted in a fiduciary, administrative, custodial or investment advisory capacity is closed; or [bullet] through dealers, retirement plans, asset allocation programs and financial institutions that, under their dealer agreements with the Distributor or otherwise, do not receive any portion of the front-end sales charge. REPURCHASE OF INVESTOR SHARES You may repurchase any amount of Investor Shares of any Fund at NAV (without the normal front-end sales charge), up to the limit of the value of any amount of Investor Shares (other than those which were purchased with reinvested dividends and distributions) that you redeemed within the past 60 days. In effect, this allows you to reacquire shares that you may have had to redeem, without re-paying the front-end sales charge. To exercise this privilege, the Funds must receive your purchase order within 60 days of your redemption. IN ADDITION, YOU MUST NOTIFY THE FUND WHEN YOU SEND IN YOUR PURCHASE ORDER THAT YOU ARE REPURCHASING SHARES. REDUCED SALES CHARGES - INVESTOR SHARES RIGHTS OF ACCUMULATION. In calculating the appropriate sales charge rate, this right allows you to add the value of the Investor Shares you already own to the amount that you are currently purchasing. The Funds will combine the value of your current purchases with the current value of any Investor Shares you purchased previously for (i) your account, (ii) your spouse's account, (iii) a joint account with your spouse, or (iv) your minor children's trust or custodial accounts. A fiduciary purchasing shares for the same fiduciary account, trust or estate may also use this right of accumulation. The Funds will only consider the value of Investor Shares purchased previously that were sold subject to a sales charge. To be entitled to a reduced sales charge based on shares already owned, you must ask the funds for the reduction at the time of purchase. You must provide the Funds with your account number(s) and, if applicable, the account numbers for your spouse and/or children (and provide the children's ages). The Funds may amend or terminate this right of accumulation at any time. LETTER OF INTENT. You may purchase Investor Shares at the sales charge rate applicable to the total amount of the purchases you intend to make over a 13-month period. In other words, a Letter of Intent allows you to purchase Investor Shares of a Fund over a 13-month period and receive the same sales charge as if you had purchased all the shares at the same time. The Funds will only consider the value of Investor Shares sold subject to a sales charge. As a result, shares of the Investor Shares purchased with dividends or distributions will not be included in the calculation. To be entitled to a reduced sales charge based on shares you intend to purchase over the 13-month period, you must send the Funds a Letter of Intent. In calculating the total amount of purchases you may include in your Letter purchases made up to 90 days before the date of the Letter. The 13-month period begins on the date of the first purchase, including those purchases made in the 90-day period before the date of the Letter. Please note that the purchase price of these prior purchases will not be adjusted. You are not legally bound by the terms of your Letter of Intent to purchase the amount of your shares stated in the Letter. The Letter does, however, authorize the Fund to hold in escrow 3.75% of the total amount you intend to purchase. If you do not complete the total intended purchase at the end of the 13-month period, the Fund's transfer agent will redeem the necessary portion of the escrowed shares to make up the difference between the reduced rate sales charge (based on the amount you intended to purchase) and the sales charge that would normally apply (based on the actual amount you purchased). COMBINED PURCHASE/QUANTITY DISCOUNT PRIVILEGE. When calculating the appropriate sales charge rate, the Fund will combine same day purchases of Investor Shares (that are subject to a sales charge) made by you, your spouse and your minor children (under age 21). This combination also applies to Investor Shares you purchase with a Letter of Intent. 32 PROSPECTUS PURCHASING, SELLING AND EXCHANGING FUND SHARES CONTINGENT DEFERRED SALES CHARGES - FLEX SHARES You do not pay a sales charge when you purchase Flex Shares. The offering price of Flex Shares is simply the next calculated NAV. But if you sell your shares within the first year after your purchase, you will pay a contingent deferred sales charge (CDSC) equal to 2.00% for either (1) the NAV of the shares at the time of purchase, or (2) NAV of the shares next calculated after the Fund receives your sale request, whichever is less. The sales charge does not apply to shares you purchase through reinvestment of dividends or distributions. So, you never pay a deferred sales charge on any increase in your investment above the initial offering price. This sales charge does not apply to exchanges of Flex Shares of one Fund for Flex Shares of another Fund. The contingent deferred sales charge will be waived if you sell your Flex Shares for the following reasons: [bullet] to make certain withdrawals from a retirement plan (not including IRAs); [bullet] because of death or disability; [bullet] for certain payments under the Systematic Withdrawal Plan (which is discussed later); or [bullet] for exchanges from Trust or Investor Shares to Flex Shares where the total accumulated period from the original date of purchase is at least one year. OFFERING PRICE OF FUND SHARES The offering price of Investor Shares is the NAV next calculated after the transfer agent receives your request, plus the front-end sales load. The offering price of Flex Shares is simply the next calculated NAV. HOW TO SELL YOUR FUND SHARES If you own your shares through a brokerage account with SunTrust, you may sell (sometimes called "redeem") your shares on any Business Day by contacting SunTrust Securities directly by mail or telephone at 1-800-874-4770. The minimum amount for telephone redemptions is $1,000. If you own your shares through an account with a broker or other institution, contact that broker or institution to sell your shares. If you would like to sell $25,000 or more of your shares, please notify the Fund in writing and include a signature guarantee by a bank or other financial institution (a notarized signature is not sufficient). The sale price of each share will be the next NAV determined after the Fund receives your request less, in the case of Flex Shares, any applicable deferred sales charge. SYSTEMATIC WITHDRAWAL PLAN If you have at least $10,000 in your account, you may use the systematic withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual or annual automatic withdrawals of at least $50 from any Fund. The proceeds of each withdrawal will be mailed to you by check or, if you have a checking or savings account with a SunTrust affiliates bank, electronically transferred to your account. RECEIVING YOUR MONEY Normally, the Funds will send your sale proceeds within five Business Days after the Funds receive your request. Your proceeds can be wired to your bank account (subject to a $7.00 fee) or sent to you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK OR THROUGH ACH, REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 BUSINESS DAYS). REDEMPTIONS IN KIND The Funds generally pay sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Funds' remaining shareholders) the Funds might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. PROSPECTUS 33 PURCHASING, SELLING AND EXCHANGING FUND SHARES INVOLUNTARY SALES OF YOUR SHARES If your account balance drops below the required minimum you may be required to sell your shares. The account balance minimums are: CLASS DOLLAR AMOUNT -------------------------------------------------------------------------------- Investor Shares $2,000 Flex Shares $5,000 -------------------------------------------------------------------------------- But, the Funds will always give you at least 60 days written notice to give you time to add to your account and avoid the sale of your shares. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES A Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. HOW TO EXCHANGE YOUR SHARES You may exchange your shares on any Business Day by contacting SunTrust Securities or your financial institution by mail or telephone. Exchange requests must be for an amount of at least $1,000. The exchange privilege is not intended as a vehicle for short-term trading. Excessive exchange activity may interfere with Fund management and may have an adverse effect on all shareholders. In order to limit excessive exchange activity and in other circumstances where it is in the best interests of a Fund, all Funds reserve the right to revise or terminate the exchange privilege, limit the amount or number of exchanges or reject any exchange. Currently, you may exchange your shares up to four times during a calendar year. If you exchange your shares more than four times during a year, you may be charged a $10.00 fee for each additional exchange. You will be notified before any fee is charged. IF YOU RECENTLY PURCHASED SHARES BY CHECK OR THROUGH ACH, YOU MAY NOT BE ABLE TO EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 BUSINESS DAYS). This exchange privilege may be changed or canceled at any time upon 60 days notice. EXCHANGES When you exchange shares, you are really selling your shares and buying other Fund shares. So, your sale price and purchase price will be based on the NAV next calculated after the Fund(s) receives your exchange request. INVESTOR SHARES You may exchange Investor Shares of any Fund for Investor Shares of any other Fund. If you exchange shares that you purchased without a sales charge or with a lower sales charge into a Fund with a sales charge or with a higher sales charge, the exchange is subject to an incremental sales charge (e.g., the difference between the lower and higher applicable sales charges). If you exchange shares into a Fund with the same, lower or no sales charge there is no incremental sales charge for the exchange. For purposes of computing the CDSC applicable to Flex Shares, the length of time you have owned your shares will be measured from the original date of purchase and will not be affected by any exchange. FLEX SHARES You may exchange Flex Shares of any Fund for Flex Shares of any other Fund. Again, the CDSC will be computed as of the original date of purchase. TELEPHONE TRANSACTIONS Purchasing, selling and exchanging Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believes to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. 34 PROSPECTUS DIVIDENDS, DISTRIBUTIONS AND TAXES DISTRIBUTION OF FUND SHARES Each Fund has adopted a distribution plan that allows the Fund to pay distribution and service fees for the sale and distribution of its shares, and for services provided to shareholders. Because these fees are paid out of a Fund's assets continuously, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. Distribution fees, as a percentage of average daily net assets are as follows: For Investor Shares FLORIDA TAX-EXEMPT BOND FUND 0.18% GEORGIA TAX-EXEMPT BOND FUND 0.18% INVESTMENT GRADE BOND FUND 0.43% INVESTMENT GRADE TAX-EXEMPT BOND FUND 0.43% LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND 0.23% SHORT-TERM BOND FUND 0.23% SHORT-TERM U.S. TREASURY SECURITIES FUND 0.18% U.S. GOVERNMENT SECURITIES FUND 0.38% VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND 0.15% For Flex Shares, the maximum distribution fee is 1.00% of the average daily net assets of each Fund. The Distributor may, from time to time in its sole discretion, institute one or more promotional incentive programs for dealers, which will be paid for by the Distributor from any sales charge it receives or from any other source available to it. Under any such program, the Distributor may provide cash or non-cash compensation as recognition for past sales or encouragement for future sales that may include the following: merchandise, travel expenses, prizes, meals, and lodgings, and gifts that do not exceed $100 per year, per individual. DIVIDENDS AND DISTRIBUTIONS Each Fund distributes its income dividends daily and pays these dividends monthly. Each Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Fund in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Fund receives your written notice. To cancel your election, simply send the Fund written notice. TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Funds have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from a Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE OR EXCHANGE OF FUND SHARES IS A TAXABLE EVENT. The Florida Tax-Exempt Bond Fund, Georgia Tax-Exempt Bond Fund, Maryland Municipal Bond Fund, Virginia Intermediate Municipal Bond Fund and Virginia Municipal Bond Fund intend to distribute federally tax-exempt income. Each Fund may invest a portion of its assets in securities that generate taxable income for federal or state income taxes. Income exempt from federal tax may be subject to state and local taxes. Any capital gains distributed by these Funds may be taxable. MORE INFORMATION ABOUT TAXES IS IN THE SAI. PROSPECTUS 35 FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS The tables that follow present performance information about Investor Shares and Flex Shares of each Fund. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. The information for each Fund, except the Maryland Municipal Bond Fund, Virginia Intermediate Municipal Bond Fund and Virginia Municipal Bond Fund for the periods ended prior to May 31, 1999, and the High Income Fund for periods prior to March 31, 2000, has been audited by Arthur Andersen LLP, independent public accountants. The financial highlights for the Maryland Municipal Bond Fund, Virginia Intermediate Municipal Bond Fund, and Virginia Municipal Bond Fund for the periods ended prior to May 31, 1999 have been audited by Deloitte & Touche LLP, independent public accountants. The financial highlights for the High Income Fund for the periods prior to March 31, 2000 have been audited by PricewaterhouseCooper LLP, independent public accountants. The report of Arthur Andersen LLP, along with each Fund's financial statements, appears in the annual report that accompanies the SAI. You can obtain the annual report, which contains more performance information, at no charge by calling 1-800-428-6970. For the Periods Ended May 31, (Unless Otherwise Indicated) For a Share Outstanding Throughout the Periods
NET REALIZED NET ASSET NET AND DISTRIBUTIONS TAX VALUE INVESTMENT UNREALIZED FROM NET DISTRIBUTION RETURN NET ASSET BEGINNING INCOME GAINS (LOSSES) INVESTMENT FROM REALIZED OF VALUE END TOTAL PERIOD (000) (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS CAPITAL OF PERIOD RETURN (+) ----------- ---------- -------------- ------------- ------------- ------- --------- --------- ---------------------------- FLORIDA TAX-EXEMPT BOND FUND ---------------------------- Investor Shares 2000 ... $10.60 $0.42 $(0.49) $(0.42) $(0.04) $ -- $10.07 (0.68)% 1999 ... 10.72 0.40 (0.01) (0.40) (0.11) -- 10.60 3.62 1998 ... 10.29 0.42 0.44 (0.42) (0.01) -- 10.72 8.46 1997 ... 10.07 0.44 0.25 (0.44) (0.03) -- 10.29 7.00 1996 ... 10.18 0.44 (0.06) (0.44) (0.05) -- 10.07 3.76 Flex Shares 2000 ... $10.62 $0.36 $(0.49) $(0.36) $(0.04) $ -- $10.09 (1.17)% 1999 ... 10.74 0.35 (0.01) (0.35) (0.11) -- 10.62 3.13 1998 ... 10.30 0.37 0.45 (0.37) (0.01) -- 10.74 8.04 1997 ... 10.08 0.39 0.25 (0.39) (0.03) -- 10.30 6.48 1996(1) 10.19 0.39 (0.06) (0.39) (0.05) -- 10.08 3.27 ---------------------------- GEORGIA TAX-EXEMPT BOND FUND ---------------------------- Investor Shares 2000 ... $10.05 $0.38 $(0.50) $(0.38) $(0.04) $ -- $ 9.51 (1.26)% 1999 ... 10.13 0.37 (0.06) (0.37) (0.02) -- 10.05 3.13 1998 ... 9.74 0.39 0.40 (0.39) (0.01) -- 10.13 8.26 1997 ... 9.58 0.40 0.21 (0.40) (0.05) -- 9.74 6.47 1996 ... 9.65 0.41 (0.05) (0.41) (0.02) -- 9.58 3.69 Flex Shares 2000 ... $10.04 $0.33 $(0.49) $(0.33) $(0.04) $ -- $ 9.51 (1.59)% 1999 ... 10.12 0.32 (0.06) (0.32) (0.02) -- 10.04 2.63 1998 ... 9.73 0.34 0.40 (0.34) (0.01) -- 10.12 7.74 1997 ... 9.56 0.35 0.22 (0.35) (0.05) -- 9.73 6.06 1996(2) 9.72 0.36 (0.14) (0.36) (0.02) -- 9.56 2.25* -------------------- HIGH INCOME FUND (A) -------------------- Flex Shares 2000 ... $7.98 $0.09 $(0.10) $(0.09) $ -- $ -- $ 7.88 (0.13)% For the years ended March 31: 2000 ... $9.77 $0.87 $(1.85) $(0.81) $ -- $ -- $ 7.98 (10.84)% 1999 ... 9.99 0.51(++) 0.04 (0.57) (0.15) (0.05) 9.77 5.64 1998 ... 9.73 0.34 0.44 (0.52) -- -- 9.99 8.18 1997 ... 9.89 0.60 (0.16) (0.60) -- -- 9.73 3.91 1996 ... 9.94 0.59 0.16 (0.59) (0.21) -- 9.89 7.67
RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME (LOSS) TO NET ASSETS RATIO OF INVESTMENT AVERAGE NET AVERAGE NET END OF EXPENSES TO INCOME (LOSS) ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO PERIOD AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE --------- ---------- -------------- ----------------- ----------------- --------- ---------------------------- FLORIDA TAX-EXEMPT BOND FUND ---------------------------- Investor Shares 2000 ....... $ 2,875 0.87% 4.05% 1.36% 3.56% 88% 1999 ....... 3,799 0.87 3.71 1.31 3.27 72 1998 ....... 3,381 0.86 3.98 1.34 3.50 69 1997 ....... 3,226 0.85 4.28 1.31 3.82 135 1996 ....... 4,025 0.85 4.28 1.36 3.77 63 Flex Shares 2000 ....... $ 9,791 1.37% 3.54% 1.89% 3.02% 88% 1999 ....... 14,762 1.37 3.21 1.88 2.70 72 1998 ....... 8,160 1.36 3.45 2.01 2.80 69 1997 ....... 3,000 1.35 3.78 2.28 2.85 135 1996(1) .... 2,692 1.35 3.79 2.54 2.60 63 ---------------------------- GEORGIA TAX-EXEMPT BOND FUND ---------------------------- Investor Shares 2000 ....... $ 2,458 0.87% 3.93% 1.40% 3.40% 19% 1999 ....... 3,676 0.87 3.67 1.25 3.29 12 1998 ....... 3,975 0.86 3.89 1.30 3.45 7 1997 ....... 3,511 0.85 4.10 1.33 3.62 15 1996 ....... 3,418 0.85 4.17 1.41 3.61 60 Flex Shares 2000 ....... $ 8,827 1.37% 3.43% 1.95% 2.85% 19% 1999 ....... 13,358 1.37 3.19 1.89 2.67 12 1998 ....... 8,264 1.36 3.39 2.02 2.73 7 1997 ....... 4,662 1.35 3.60 2.07 2.88 15 1996(2)..... 4,207 1.35 3.66 2.35 2.66 60 -------------------- HIGH INCOME FUND (A) -------------------- Flex Shares 2000 ....... $ 3,075 1.40%* 6.57%* 2.83%* 5.14%* --% For the years ended March 31: 2000 ....... $ 2,032 1.73% 8.94% 2.95% 7.72% 24% 1999 ....... 7,230 1.91 5.09 2.22 4.78 95 1998 ....... 24,413 1.87 5.27 1.87 5.27 130 1997 ....... 32,506 1.65 5.49 1.70 5.44 123 1996 ....... 36,891 1.70 5.87 1.75 5.82 138 (+) Return is for the period indicated and has not been annualized. Total return figures do not reflect applicable sales loads. (++) Calculated using the average share method. (1) Commenced operations on June 1, 1995. All ratios for the period have been annualized. (2) Commenced operations on June 6, 1995. All ratios for the period have been annualized. (A) On March 27, 2000, the ESC Strategic Income Fund exchanged all of its assets and certain liabilities for shares of the High Income Fund. The ESC Strategic Income Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to March 27, 2000 have been carried forward in these financial highlights. Subsequent to the merger, the High Income Fund changed its fiscal year end to May 31. Amounts designated as "--" are either $0 or round to $0.
36 PROSPECTUS FINANCIAL HIGHLIGHTS STI CLASSIC FIXED INCOME FUNDS For the Periods Ended May 31, (unless otherwise indicated) For a Share Outstanding Throughout the Periods
NET REALIZED NET ASSET NET AND DISTRIBUTIONS VALUE INVESTMENT UNREALIZED FROM NET DISTRIBUTION NET ASSET BEGINNING INCOME GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL PERIOD (000) (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN (+) ----------- ---------- -------------- ------------- ------------- --------- --------- -------------------------- INVESTMENT GRADE BOND FUND -------------------------- Investor Shares 2000 ........ $10.36 $0.57 $(0.78) $(0.57) $ -- $ 9.58 (2.17)% 1999 ........ 10.65 0.52 (0.11) (0.52) (0.18) 10.36 3.86 1998 ........ 10.16 0.55 0.49 (0.55) -- 10.65 10.49 1997 ........ 10.06 0.56 0.10 (0.56) -- 10.16 6.66 1996 ........ 10.26 0.56 (0.20) (0.56) -- 10.06 3.50 Flex Shares 2000 ........ $10.37 $0.52 $(0.78) $(0.52) $ -- $ 9.59 (2.63)% 1999 ........ 10.66 0.47 (0.11) (0.47) (0.18) 10.37 3.35 1998 ........ 10.17 0.51 0.49 (0.51) -- 10.66 9.99 1997 ........ 10.07 0.51 0.10 (0.51) -- 10.17 6.16 1996 (4) .... 10.33 0.52 (0.26) (0.52) -- 10.07 2.50 ------------------------------------- INVESTMENT GRADE TAX-EXEMPT BOND FUND ------------------------------------- Investor Shares 2000 ........ $11.12 $0.39 $(0.30) $(0.39) $(0.14) $10.68 0.90% 1999 ........ 11.41 0.38 0.11 (0.38) (0.40) 11.12 4.35 1998 ........ 11.24 0.39 0.49 (0.39) (0.32) 11.41 8.05 1997 ........ 11.12 0.40 0.33 (0.40) (0.21) 11.24 6.69 1996 ........ 11.30 0.41 0.19 (0.41) (0.37) 11.12 5.40 Flex Shares 2000 ........ $11.10 $0.34 $(0.29) $(0.34) $(0.14) $10.67 0.52% 1999 ........ 11.40 0.33 0.10 (0.33) (0.40) 11.10 3.78 1998 ........ 11.23 0.33 0.49 (0.33) (0.32) 11.40 7.50 1997 ........ 11.11 0.35 0.33 (0.35) (0.21) 11.23 6.19 1996(5) ..... 11.30 0.37 0.18 (0.37) (0.37) 11.11 4.91 --------------------------------------------- LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND --------------------------------------------- Investor Shares 2000 ........ $ 9.93 $0.52 $(0.33) $(0.52) $ -- $ 9.60 1.93% 1999 ........ 10.11 0.51 (0.06) (0.51) (0.12) 9.93 4.47 1998 ........ 10.00 0.56 0.12 (0.56) (0.01) 10.11 6.95 1997 ........ 9.97 0.56 0.04 (0.56) (0.01) 10.00 6.17 1996 ........ 10.11 0.60 (0.14) (0.60) -- 9.97 4.59 Flex Shares 2000 ........ $ 9.94 $0.49 $(0.32) $(0.49) $ -- $ 9.62 1.71% 1999 ........ 10.12 0.48 (0.06) (0.48) (0.12) 9.94 4.14 1998 ........ 10.02 0.52 0.11 (0.52) (0.01) 10.12 6.49 1997 ........ 9.99 0.52 0.04 (0.52) (0.01) 10.02 5.80 1996(6) ..... 10.14 0.55 (0.15) (0.55) -- 9.99 4.10 -------------------------------- MARYLAND MUNICIPAL BOND FUND (B) -------------------------------- Flex Shares 2000 ........ $10.08 $0.32 $(0.60) $(0.33) $ -- $ 9.48 (2.66%) 1999 ........ 10.24 0.15 (0.15) (0.15) (0.01) 10.08 0.05 For the years ended November 30: 1998 ........ 9.96 0.33 0.28 (0.33) -- 10.24 6.17 1997 ........ 9.76 0.34 0.20 (0.34) -- 9.96 5.64 1996(7) ..... 9.53 0.20 0.23 (0.20) -- 9.76 7.67
RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME (LOSS) TO NET ASSETS RATIO OF INVESTMENT AVERAGE NET AVERAGE NET END OF EXPENSES TO INCOME (LOSS) ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO PERIOD AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE --------- ---------- -------------- ----------------- ----------------- --------- -------------------------- INVESTMENT GRADE BOND FUND -------------------------- Investor Shares 2000 ....... $22,553 1.17% 5.60% 1.37% 5.40% 202% 1999 ....... 34,913 1.17 4.87 1.36 4.68 221 1998 ....... 33,269 1.14 5.29 1.38 5.05 109 1997 ....... 33,165 1.15 5.48 1.41 5.22 298 1996 ....... 36,155 1.15 5.40 1.44 5.11 184 Flex Shares 2000 ....... $20,056 1.66% 5.14% 1.99% 4.81% 202% 1999 ....... 26,020 1.66 4.40 2.00 4.06 221 1998 ....... 13,111 1.65 4.76 2.11 4.30 109 1997 ....... 5,763 1.64 5.00 2.20 4.44 298 1996 (4) ... 4,621 1.64 4.84 2.49 3.99 184 ------------------------------------- INVESTMENT GRADE TAX-EXEMPT BOND FUND ------------------------------------- Investor Shares 2000 ....... $19,443 1.17% 3.59% 1.33% 3.43% 226% 1999 ....... 25,195 1.17 3.36 1.32 3.21 224 1998 ....... 28,159 1.16 3.43 1.43 3.16 378 1997 ....... 31,857 1.15 3.56 1.38 3.33 489 1996 ....... 37,427 1.15 3.61 1.42 3.34 514 Flex Shares 2000 ....... $14,678 1.65% 3.11% 1.95% 2.81% 226% 1999 ....... 16,518 1.65 2.86 2.03 2.48 224 1998 ....... 8,399 1.64 2.95 2.10 2.49 378 1997 ....... 4,681 1.63 3.08 2.15 2.56 489 1996(5) .... 5,536 1.63 3.12 2.25 2.50 514 --------------------------------------------- LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND --------------------------------------------- Investor Shares 2000 ....... $ 1,194 0.92% 5.31% 1.09% 5.14% 384% 1999 ....... 2,214 0.92 5.03 1.52 4.43 379 1998 ....... 2,705 0.91 5.50 1.51 4.90 163 1997 ....... 2,426 0.90 5.55 1.48 4.97 133 1996 ....... 2,512 0.90 5.75 2.25 4.40 83 Flex Shares 2000 ....... $ 1,706 1.27% 4.97% 2.38% 3.86% 384% 1999 ....... 2,119 1.27 4.69 2.42 3.54 379 1998 ....... 1,543 1.26 5.16 2.72 3.70 163 1997 ....... 1,409 1.25 5.20 2.66 3.79 133 1996(6) .... 1,349 1.25 5.38 3.59 3.04 83 -------------------------------- MARYLAND MUNICIPAL BOND FUND (B) -------------------------------- Flex Shares 2000 ....... $ 6,212 1.59% 3.34% 1.95% 2.98% 14% 1999 ....... 7,723 1.59 2.94 1.98 2.55 19 For the years ended November 30: 1998 ....... 3,246 1.57 3.16 1.96 2.77 12 1997 ....... 561 1.54 3.43 2.00 2.97 5 1996(7) .... 113 1.55 3.42 2.20 2.77 9 (+) Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (4) Commended operations on June 7, 1995. All ratios for the period have been annualized (5) Commenced operations on June 1, 1995. All ratios for the period have been annualized. (6) Commended operations on June 7, 1995. All ratios for the period have been annualized. (7) Commenced operations on April 25, 1996. All ratios for the period have been annualized. (B) On May 24, 1999, the CrestFund Maryland Municipal Bond, CrestFund Virginia Intermediate Municipal Bond, and CrestFund Virginia Municipal Bond Funds exchanged all of their assets and certain liabilities for shares of the Maryland Municipal Bond, Virginia Intermediate Municipal Bond, and Virginia Municipal Bond Funds, respectively. The CrestFund Maryland Municipal Bond, CrestFund Virginia Intermediate Municipal Bond, and CrestFund Virginia Municipal Bond Funds are the accounting survivors in this transaction, and as a result, their basis of accounting for assets and liabilities and their operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. Amounts designated as "--" are either $0 or round to $0.
PROSPECTUS 37 FINANCIAL HIGHLIGHTS
NET REALIZED NET ASSET NET AND DISTRIBUTIONS VALUE INVESTMENT UNREALIZED FROM NET DISTRIBUTION NET ASSET BEGINNING INCOME GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL PERIOD (000) (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN (+) ----------- ---------- -------------- ------------- ------------- --------- --------- -------------------- SHORT-TERM BOND FUND -------------------- Investor Shares 2000 ........ $ 9.93 $ 0.51 $(0.25) $(0.51) $(0.01) $ 9.67 2.67% 1999 ........ 10.07 0.49 (0.10) (0.50) (0.03) 9.93 3.88 1998 ........ 9.91 0.53 0.17 (0.53) (0.01) 10.07 7.19 1997 ........ 9.88 0.51 0.06 (0.51) (0.03) 9.91 5.97 1996 ........ 10.01 0.52 (0.10) (0.53) (0.02) 9.88 4.23 Flex Shares 2000 ........ $ 9.93 $ 0.48 $(0.25) $(0.48) $(0.01) $ 9.67 2.31% 1999 ........ 10.07 0.47 (0.11) (0.47) (0.03) 9.93 3.50 1998 ........ 9.91 0.50 0.17 (0.50) (0.01) 10.07 6.84 1997 ........ 9.88 0.48 0.06 (0.48) (0.03) 9.91 5.62 1996(8) ..... 10.02 0.47 (0.12) (0.47) (0.02) 9.88 3.73 ---------------------------------------- SHORT-TERM U.S. TREASURY SECURITIES FUND ---------------------------------------- Investor Shares 2000 ........ $ 9.95 $ 0.45 $(0.10) $(0.45) $ -- $ 9.85 3.58% 1999 ........ 9.96 0.46 (0.01) (0.46) -- 9.95 4.54 1998 ........ 9.88 0.49 0.09 (0.50) -- 9.96 6.04 1997 ........ 9.84 0.50 0.04 (0.50) -- 9.88 5.59 1996 ........ 9.94 0.54 (0.10) (0.54) -- 9.84 4.52 Flex Shares 2000 ........ $ 9.93 $ 0.42 $(0.10) $(0.42) $-- $ 9.83 3.34% 1999 ........ 9.94 0.44 (0.02) (0.43) -- 9.93 4.32 1998 ........ 9.85 0.47 0.10 (0.48) -- 9.94 5.90 1997 ........ 9.82 0.47 0.03 (0.47) -- 9.85 5.19 1996(9) ..... 9.96 0.48 (0.14) (0.48) -- 9.82 3.72 ------------------------------- U.S. GOVERNMENT SECURITIES FUND ------------------------------- Investor Shares 2000 ........ $10.28 $ 0.54 $(0.42) $(0.54) $-- $ 9.86 1.19% 1999 ........ 10.45 0.54 (0.17) (0.54) -- 10.28 3.56 1998 ........ 10.02 0.57 0.43 (0.57) -- 10.45 10.23 1997 ........ 9.90 0.58 0.12 (0.58) -- 10.02 7.21 1996 ........ 10.26 0.59 (0.33) (0.59) (0.03) 9.90 2.47 Flex Shares 2000 ........ $10.28 $ 0.49 $(0.42) $(0.49) $-- $ 9.86 0.70% 1999 ........ 10.46 0.49 (0.18) (0.49) -- 10.28 2.99 1998 ........ 10.02 0.52 0.44 (0.52) -- 10.46 9.78 1997 ........ 9.91 0.53 0.11 (0.53) -- 10.02 6.57 1996(10) .... 10.31 0.52 (0.37) (0.52) (0.03) 9.91 1.42 -------------------------------------------- VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND (B) --------------------------------------------- Investor Shares 2000 ........ $10.20 $0.42 $(0.56) $(0.42) $(0.05) $ 9.59 (1.24)% 1999(11) .... 10.45 0.22 (0.18) (0.22) (0.07) 10.20 0.35 For years ended November 30: 1998 ........ 10.31 0.46 0.17 (0.45) (0.04) 10.45 6.19 1997 ........ 10.21 0.47 0.09 (0.46) -- 10.31 5.65 1996 ........ 10.23 0.42 (0.02) (0.42) -- 10.21 4.01 -------------------------------- VIRGINIA MUNICIPAL BOND FUND (B) -------------------------------- Flex Shares 2000 ........ $10.48 $ 0.36 $(0.79) $(0.36) $(0.01) $9.68 (4.13)% 1999(11) .... 10.73 0.17 (0.18) (0.18) (0.06) 10.48 (0.16) For years ended November 30: 1998 ........ 10.48 0.37 0.28 (0.37) (0.03) 10.73 6.24 1997 ........ 10.31 0.39 0.18 (0.39) (0.01) 10.48 5.58 1996 ........ 10.43 0.38 (0.12) (0.38) -- 10.31 2.58
RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME (LOSS) TO NET ASSETS RATIO OF INVESTMENT AVERAGE NET AVERAGE NET END OF EXPENSES TO INCOME (LOSS) ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO PERIOD AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE --------- ---------- -------------- ----------------- ----------------- --------- -------------------- SHORT-TERM BOND FUND -------------------- Investor Shares 2000 ........$ 1,446 0.87% 5.20% 1.75% 4.32% 70% 1999 ........ 1,825 0.87 4.92 1.59 4.20 108 1998 ........ 1,949 0.86 5.27 1.71 4.42 87 1997 ........ 2,182 0.85 5.16 1.58 4.43 118 1996 ........ 2,700 0.85 5.20 1.72 4.33 163 Flex Shares 2000 ........$ 2,065 1.22% 4.85% 2.41% 3.66% 70% 1999 ........ 2,341 1.22 4.55 2.33 3.44 108 1998 ........ 2,110 1.21 4.93 2.85 3.29 87 1997 ........ 1,073 1.20 4.82 3.02 3.00 118 1996(8) ..... 966 1.20 4.77 4.06 1.91 163 ---------------------------------------- SHORT-TERM U.S. TREASURY SECURITIES FUND ---------------------------------------- Investor Shares 2000 ........$ 2,066 0.82% 4.50% 1.44% 3.88% 50% 1999 ........ 2,799 0.82 4.54 1.34 4.02 57 1998 ........ 3,277 0.81 5.07 1.33 4.55 39 1997 ........ 3,921 0.80 5.05 1.35 4.50 93 1996 ........ 4,192 0.80 5.43 1.32 4.91 94 Flex Shares 2000 ........$ 5,391 1.07% 4.26% 2.04% 3.29% 50% 1999 ........ 4,931 1.07 4.22 2.25 3.04 57 1998 ........ 1,413 1.06 4.81 2.87 3.00 39 1997 ........ 1,091 1.05 4.75 2.51 3.29 93 1996(9) ..... 2,423 1.05 5.03 2.97 3.11 94 ------------------------------- U.S. GOVERNMENT SECURITIES FUND ------------------------------- Investor Shares 2000 ........$ 1,407 1.17% 5.34% 2.14% 4.37% 29% 1999 ........ 2,534 1.17 5.17 1.60 4.74 19 1998 ........ 3,225 1.16 5.53 1.76 4.93 14 1997 ........ 2,243 1.15 5.76 1.79 5.12 21 1996 ........ 2,396 1.15 5.68 2.50 4.33 83 Flex Shares 2000 ........$ 7,750 1.68% 4.85% 2.28% 4.25% 29% 1999 ........ 11,520 1.68 4.66 2.08 4.26 19 1998 ........ 4,022 1.67 5.02 2.32 4.37 14 1997 ........ 2,801 1.66 5.26 2.42 4.50 21 1996(10) .... 2,826 1.66 5.18 2.86 3.98 83 -------------------------------------------- VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND (B) -------------------------------------------- Investor Shares 2000 ........$ 6,808 0.79% 4.33% 0.94% 4.18% 18% 1999(11) .... 7,706 0.79 4.17 0.93 4.03 19 For years ended November 30: 1998 ........ 7,899 0.79 4.33 0.94 4.18 24 1997 ........ 7,826 0.79 4.56 0.94 4.41 30 1996 ........ 8,185 0.79 4.12 0.94 3.97 25 -------------------------------- VIRGINIA MUNICIPAL BOND FUND (B) -------------------------------- Flex Shares 2000 ........$ 5,367 1.65% 3.61% 2.08% 3.18% 19% 1999(11) .... 6,939 1.65 3.32 1.91 3.06 7 For years ended 1998 ........ 3,697 1.64 3.46 1.92 3.18 28 1997 ........ 1,476 1.60 3.73 2.00 3.33 39 1996 ........ 787 1.57 3.73 1.97 3.33 24 (+) Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (8) Commenced operations on June 20, 1995. All ratios for the period have been annualized. (9) Commenced operations on June 22, 1995. All ratios for the period have been annualized. (10) Commenced operations on June 7, 1995. All ratios for the period have been annualized. (11) For the six month period ended May 31, 1999. All ratios for the period have been annualized. (B) On May 24, 1999, the CrestFund Maryland Municipal Bond, CrestFund Virginia Intermediate Municipal Bond, and CrestFund Virginia Municipal Bond Funds exchanged all of their assets and certain liabilities for shares of the Maryland Municipal Bond, Virginia Intermediate Municipal Bond, and Virginia Municipal Bond Funds, respectively. The CrestFund Maryland Municipal Bond, CrestFund Virginia Intermediate Municipal Bond, and CrestFund Virginia Municipal Bond Funds are the accounting survivors in this transaction, and as a result, their basis of accounting for assets and liabilities and their operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. Amounts designated as "--" are either $0 or round to $0.
38 PROSPECTUS HOW TO OBTAIN MORE INFORMATION ABOU THE STI CLASSIC FUNDS INVESTMENT ADVISER Trusco Capital Management, Inc. 50 Hurt Plaza Suite 1400 Atlanta, Georgia 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 2000, includes detailed information about the STI Classic Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list each Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends and their impact on Fund performance. The reports also contain detailed financial information about the Funds. TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION: BY TELEPHONE: Call 1-800-428-6970 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, Pennsylvania 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the EDGAR Database on the SEC's website ("HTTP://WWW.SEC.GOV"). You may review and copy documents at the SEC Public Reference Room in Washington, DC (for information on the operation of the Public Reference Room, call 202-942-8090). You may request documents by mail from the SEC, upon payment of a duplicating fee, by writing to: Securities and Exchange Commission, Public Reference Section, Washington, DC 20549-0102. You may also obtain this information, upon payment of a duplicating fee, by emailing the SEC at the following address: PUBLICINFO@SEC.GOV. The STI Classic Funds' Investment Company Act registration number is 811-06557. [SUNDIAL GRAPHIC OMITTED STI CLASSIC FUNDS-MONEY MARKET FUNDS-FLEX AND INVESTOR SHARES PROSPECTUS October 1, 2000 PRIME QUALITY MONEY MARKET FUND TAX-EXEMPT MONEY MARKET FUND U.S. GOVERNMENT SECURITIES MONEY MARKET FUND VIRGINIA TAX-FREE MONEY MARKET FUND (FORMERLY TAX-FREE MONEY MARKET FUND) INVESTMENT ADVISER TO THE FUNDS: TRUSCO CAPITAL MANAGEMENT, INC. (the "Adviser") [STI Logo Omitted] The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. PROSPECTUS ABOUT THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Investor and Flex Shares of the Money Market Funds that you should know before investing. Please read this prospectus and keep it for future reference. THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN THAT IS COMMON TO EACH OF THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE: 2 PRIME QUALITY MONEY MARKET FUND 4 TAX-EXEMPT MONEY MARKET FUND 6 U.S. GOVERNMENT SECURITIES MONEY MARKET FUND 8 VIRGINIA TAX-FREE MONEY MARKET FUND 10 MORE INFORMATION ABOUT RISK 10 MORE INFORMATION ABOUT FUND INVESTMENTS 11 INVESTMENT ADVISER AND PORTFOLIO MANAGERS 11 PURCHASING, SELLING AND EXCHANGING FUND SHARES 16 DIVIDENDS, DISTRIBUTIONS AND TAXES 17 FINANCIAL HIGHLIGHTS 22 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS -------------------------------------------------------------------------------- [BRIEFCASE GRAPHIC OMITTED] Fund Summary [TELESCOPE GRAPHIC OMITTED] Investment Strategy [INNERTUBE GRAPHIC OMITTED] What are the risks of investing? [BULLSEYE GRAPHIC OMITTED] Performance Information [CHART GRAPHIC OMITTED] What is an Index? [COINS GRAPHIC OMITTED] Fund Fees and Expenses [MOUNTAINTOPGRAPHIC OMITTED] More Information About Fund Investments [MAGNIFIER GRAPHIC OMITTED] Investment Adviser [HANDSHAKE GRAPHIC OMITTED] Purchasing, Selling and Exchanging Fund Shares [DOLLAR GRAPHIC OMITTED] Sales Charges -------------------------------------------------------------------------------- October 1, 2000 PROSPECTUS 1 RISK/RETURN INFORMATION COMMON TO THE FUNDS Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. Each Fund has its own investment goal and strategies for reaching that goal. The Adviser invests Fund assets in a way that it believes will help a Fund achieve its goal. Still, investing in each Fund involves risk and there is no guarantee that a Fund will achieve its goal. The Adviser's judgments about the markets, the economy or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job the Adviser does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. 2 PROSPECTUS PRIME QUALITY MONEY MARKET FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital and liquidity -------------------------------------------------------------------------------- INVESTMENT FOCUS Money market instruments -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify money market instruments with the most attractive risk/return trade-off -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors who want to receive current income from their investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Prime Quality Money Market Fund invests exclusively in high quality U.S. money market instruments and foreign money market instruments denominated in U.S. dollars. In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk. The Adviser analyzes maturity, yields, market sectors and credit risk. Investments are made in money market instruments with the most attractive risk/return trade-off. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1993 2.60% 1994 3.60% 1995 5.30% 1996 4.82% 1997 4.97% 1998 4.92% 1999 4.56% BEST QUARTER WORST QUARTER 1.33% 0.64% (6/30/95) (6/30/93) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.74%. PROSPECTUS 3 PRIME QUALITY MONEY MARKET FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE IMONEYNET, INC. FIRST TIER AVERAGE. INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Prime Quality Money Market Fund 4.56% 4.91% 4.27%* -------------------------------------------------------------------------------- iMoneyNet, Inc. First Tier Average 4.57% 4.97% 4.33%** -------------------------------------------------------------------------------- * SINCE 6/8/92 ** SINCE 5/31/92 FLEX SHARES SINCE INCEPTION -------------------------------------------------------------------------------- Prime Quality Money Market Fund 0.99%* -------------------------------------------------------------------------------- iMoneyNet, Inc. First Tier Average 1.24%** -------------------------------------------------------------------------------- * CUMULATIVE SINCE 10/4/99 ** CUMULATIVE SINCE 9/30/99 To obtain more information about the Fund's yield, call 1-800-814-3397. [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN AVERAGE? -------------------------------------------------------------------------------- An average is a composite of mutual funds with similar investment goals. The iMoneyNet, Inc. First Tier Average is a widely-recognized composite of money market funds which invest in securities rated in the highest category by at least two recognized rating agencies. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None None Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)* None 2.00% * THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN 1 YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.65% 0.65% Distribution and Service (12b-1) Fees 0.20% 0.75% Other Expenses 0.10% 0.59% ----- ----- Total Annual Fund Operating Expenses 0.95% 1.99% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $97 $303 $526 $1,166 Flex Shares $402 $624 $1,073 $2,317 IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $97 $303 $526 $1,166 Flex Shares $202 $624 $1,073 $2,317 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses are 0.54%, 0.17% and 0.81%, respectively. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses for Flex Shares are 0.54%, 0.41% and 1.54%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 4 PROSPECTUS TAX-EXEMPT MONEY MARKET FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current interest income exempt from federal income taxes, while preserving capital and liquidity -------------------------------------------------------------------------------- INVESTMENT FOCUS Municipal money market instruments -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without added risk by analyzing credit quality -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors who want to receive current tax-exempt income from their investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Tax-Exempt Money Market Fund invests substantially all of its assets in money market instruments issued by municipalities and issuers that pay income exempt from federal income taxes. In selecting investments for the Fund, the Adviser analyzes the credit quality and structure of each security to minimize risk. The Adviser actively manages the Fund's average maturity based on current interest rates and the Adviser's outlook of the market. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1993 1.90% 1994 2.37% 1995 3.36% 1996 2.94% 1997 3.11% 1998 2.90% 1999 2.69% BEST QUARTER WORST QUARTER 0.89% 0.42% (6/30/95) (3/31/93) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 1.70%. PROSPECTUS 5 TAX-EXEMPT MONEY MARKET FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE IMONEYNET, INC. TAX-FREE STOCKBROKER & GENERAL PURPOSE AVERAGE. INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Tax-Exempt Money Market Fund 2.69% 3.00% 2.71%* -------------------------------------------------------------------------------- iMoneyNet, Inc. Tax-Free Stockbroker & General Purpose Average 2.70% 3.00% 2.71%** -------------------------------------------------------------------------------- * SINCE 6/8/92 ** SINCE 5/31/92 To obtain more information about the Fund's yield, call 1-800-814-3397. [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN AVERAGE? -------------------------------------------------------------------------------- An average is a composite of mutual funds with similar investment goals. The iMoneyNet, Inc. Tax-Free Stockbroker & General Purpose Average is a widely-recognized composite of money market funds which invest in short-term municipal securities, the income of which is exempt from federal taxation. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES Investment Advisory Fees 0.55% Distribution and Service (12b-1) Fees 0.15% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 0.81% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $83 $259 $450 $1,002 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses are 0.45%, 0.11% and 0.67%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 6 PROSPECTUS U.S. GOVERNMENT SECURITIES MONEY MARKET FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital and liquidity -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. Treasury and government agency securities, and repurchase agreements -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without adding undue risk by analyzing yields -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors who want to receive current income -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The U.S. Government Securities Money Market Fund invests exclusively in U.S. Treasury obligations, obligations issued or guaranteed as to principal and interest by agencies or instrumentalities of the U.S. government, repurchase agreements involving these securities, and shares of registered money market funds that invest in the foregoing. In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk by analyzing yields. The Adviser actively manages the maturity of the Fund and its portfolio to maximize the Fund's yield based on current market interest rates and the Adviser's outlook on the market. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1993 2.52% 1994 3.48% 1995 5.25% 1996 4.66% 1997 4.85% 1998 4.73% 1999 4.26% BEST QUARTER WORST QUARTER 1.32% 0.61% (6/30/95) (6/30/93) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.58%. PROSPECTUS 7 U.S. GOVERNMENT SECURITIES MONEY MARKET FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE IMONEYNET, INC. U.S. GOVERNMENT & AGENCY AVERAGE. PREVIOUSLY, THE FUND'S RETURNS HAD BEEN COMPARED TO THE IMONEYNET, INC. U.S. TREASURY & REPO AVERAGE, BUT THE ADVISER BELIEVES THAT THE IMONEYNET, INC. U.S. GOVERNMENT & AGENCY AVERAGE, BECAUSE OF ITS INCLUSION OF MONEY MARKET FUNDS THAT INVEST IN SECURITIES OF GOVERNMENT AGENCIES AND INSTRUMENTALITIES, MORE ACCURATELY REFLECTS THE TYPE OF SECURITIES IN WHICH THE FUND INVESTS. INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- U.S. Government Securities Money Market Fund 4.26% 4.75% 4.13%* -------------------------------------------------------------------------------- iMoneyNet, Inc. U.S. Government & Agency Average 4.52% 4.89% 4.26%** -------------------------------------------------------------------------------- iMoneyNet, Inc. U.S. Treasury & Repo Average 4.36% 4.82% 4.20%** -------------------------------------------------------------------------------- * SINCE 6/8/92 ** SINCE 5/31/92 To obtain more information about the Fund's yield, call 1-800-814-3397. [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN AVERAGE? -------------------------------------------------------------------------------- An average is a composite of mutual funds with similar investment goals. The previous index, the iMoneyNet, Inc. U.S. Treasury & Repo Average, is a widely- recognized composite of money market funds which invest in U.S. Treasury securities and repurchase agreements backed by these securities. The iMoneyNet, Inc. U.S. Government & Agency Average is a widely-recognized composite of money market funds which invest in U.S. Treasury Bills, repurchase agreements or securities issued by agencies of the U.S. government. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES Investment Advisory Fees 0.65% Distribution and Service (12b-1) Fees 0.17% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 0.93% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $95 $296 $515 $1,143 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses are 0.56%, 0.13% and 0.80%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 8 PROSPECTUS VIRGINIA TAX-FREE MONEY MARKET FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income exempt from federal and Virginia income taxes, while preserving capital and liquidity -------------------------------------------------------------------------------- INVESTMENT FOCUS Virginia municipal money market instruments -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without added risk by analyzing credit quality -------------------------------------------------------------------------------- INVESTOR PROFILE Virginia residents who want to receive current income exempt from federal and state income taxes -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Virginia Tax-Free Money Market Fund invests substantially all of its assets in money market instruments issued by municipalities and issuers that pay income exempt from federal and Virginia income taxes. Issuers of these securities can be located in Virginia, Puerto Rico and other U.S. territories and possessions. In selecting investments for the Fund, the Adviser analyzes the credit quality and structure of each security to minimize risk. The Adviser actively manages the Fund's average maturity based on current interest rates and the Adviser's outlook of the market. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. The Fund's concentration of investments in securities of issuers located in Virginia subjects the Fund to economic and government policies within Virginia. There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes in the financial condition or credit rating of municipal issuers also may adversely affect the value of the Fund's securities. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1994 2.11% 1995 3.27% 1996 3.10% 1997 3.07% 1998 2.92% 1999 2.71% BEST QUARTER WORST QUARTER 0.91% 0.37% (3/31/96) (3/31/94) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 1.69%. PROSPECTUS 9 VIRGINIA TAX-FREE MONEY MARKET FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE IMONEYNET, INC. TAX-FREE STOCKBROKER & GENERAL PURPOSE AVERAGE. INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Virginia Tax-Free Money Market Fund 2.71% 3.01% 2.73%* -------------------------------------------------------------------------------- iMoneyNet, Inc. Tax-Free Stockbroker & General Purpose Average 2.70% 3.00% 2.79%** -------------------------------------------------------------------------------- * SINCE 5/5/93 ** SINCE 4/30/93 To obtain more information about the Fund's yield, call 1-800-814-3397. [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN AVERAGE? -------------------------------------------------------------------------------- An average is a composite of mutual funds with similar investment goals. The iMoneyNet, Inc. Tax-Free Stockbroker & General Purpose Average is a widely-recognized composite of money market funds which invest in short-term municipal securities, the income of which is exempt from federal taxation. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INVESTOR SHARES Investment Advisory Fees 0.40% Distribution and Service (12b-1) Fees 0.40% Other Expenses 0.19% ----- Total Annual Fund Operating Expenses 0.99% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $101 $315 $547 $1,213 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser and Distributor are voluntarily waiving a portion of their fees. Actual Investment Advisory Fees, Distribution Fees and Total Operating Expenses are 0.40%, 0.08% and 0.67%, respectively. The Adviser and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Adviser" and "Distribution of Fund Shares." 10 PROSPECTUS MORE INFORMATION ABOUT RISK [INNERTUBE GRAPHIC OMITTED] MORE INFORMATION ABOUT RISK FIXED INCOME RISK TAX-EXEMPT MONEY MARKET FUND VIRGINIA TAX-FREE MONEY MARKET FUND The market value of fixed income investments changes in response to interest rate changes and other factors. During periods of falling interest rates, the values of outstanding fixed income securities generally rise. Moreover, while securities with longer maturities tend to produce higher yields, the prices of longer maturity securities are also subject to greater market fluctuations as a result of changes in interest rates. In addition to these fundamental risks, different types of fixed income securities may be subject to the following additional risks. MUNICIPAL ISSUER RISK TAX-EXEMPT MONEY MARKET FUND VIRGINIA TAX-FREE MONEY MARKET FUND There may be economic or political changes that impact the ability of municipal issuers to repay principal and to make interest payments on municipal securities. Changes to the financial condition or credit rating of municipal issuers may also adversely affect the value of the Fund's municipal securities. Constitutional or legislative limits on borrowing by municipal issuers may result in reduced supplies of municipal securities. Moreover, certain municipal securities are backed only by a municipal issuer's ability to levy and collect taxes. In addition, the Fund's concentration of investments in issuers located in a single state makes the Fund more susceptible to adverse political or economic developments affecting that state. The Fund also may be riskier than mutual funds that buy securities of issuers in numerous states. REGIONAL RISK VIRGINIA TAX-FREE MONEY MARKET FUND To the extent that the Fund's investments are concentrated in a specific geographic region, the Fund may be subject to the political and other developments affecting that region. Regional economies are often closely interrelated, and political and economic developments affecting one region, country or state often affect other regions, countries or states, thus subjecting a Fund to additional risks. [MOUNTAINTOP GRAPHIC OMITTED] MORE INFORMATION ABOUT FUND INVESTMENTS This prospectus describes the Funds' primary strategies, and the Funds will normally invest in the types of securities described in this prospectus. However, in addition to the investments and strategies described in this prospectus, each Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). Of course, a Fund cannot guarantee that it will achieve its investment goal. PROSPECTUS 11 INVESTMENT ADVISER AND PORTFOLIO MANAGERS [MAGNIFIER GRAPHIC OMITTED] INVESTMENT ADVISER The Investment Adviser (the "Adviser") makes investment decisions for the Funds and continuously reviews, supervises and administers each Fund's respective investment program. The Board of Trustees supervises the Adviser and establishes policies that the Adviser must follow in its management activities. Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Funds. As of July 1, 2000, Trusco had approximately $47 billion in assets under management. For the fiscal period ended May 31, 2000, the Adviser received advisory fees of: PRIME QUALITY MONEY MARKET FUND 0.50% TAX-EXEMPT MONEY MARKET FUND 0.41% U.S. GOVERNMENT SECURITIES MONEY MARKET FUND 0.54% VIRGINIA TAX-FREE MONEY MARKET FUND 0.40% The Adviser may use its affiliates as brokers for Fund transactions. PORTFOLIO MANAGERS Mr. David S. Yealy has served as a Managing Director of Trusco since July 2000. He has managed the Prime Quality Money Market Fund since it began operating in June 1992. Prior to July 2000, Mr. Yealy was a First Vice President of Trusco and has worked there since 1991. He has more than 15 years of investment experience. Mr. Robert S. Bowman, CFA, has served as a Vice President of Trusco since January 1999. He has managed the Virginia Tax-Free Money Market Fund since May 1995, the Tax-Exempt Money Market Fund since July 2000 and the U.S. Government Securities Money Market Fund since October 2000. Prior to joining Trusco, Mr. Bowman served as an assistant trader from 1994 to 1995 and Vice President of Crestar Asset Management Company since 1995. He has more than 6 years of investment experience. [HANDSHAKE GRAPHIC OMITTED] PURCHASING, SELLING AND EXCHANGING FUND SHARES This section tells you how to purchase, sell (sometimes called "redeem") and exchange Investor Shares and Flex Shares of the Funds. Flex Shares of the Prime Quality Money Market Fund are available only through exchanges of Flex Shares of other STI Classic Funds or, potentially, in the future, Flex Shares of the Prime Quality Money Market Fund may be used to set up a systematic exchange program to purchase Flex Shares of other STI Classic Funds. Currently no such exchange program is available. Flex Shares of the Prime Quality Money Market Fund (i) are subject to a 2% contingent deferred sales charge (CDSC) if you redeem your shares within one year of the date you purchased the original STI Classic Fund Flex Shares; and (ii) have higher annual expenses than Investor Shares of the Prime Quality Money Market Fund. HOW TO PURCHASE FUND SHARES A SunTrust Securities Investment Consultant can assist you in opening a brokerage account which will be used for all transactions regarding the purchase of STI Classic Funds. Once your account is established, you may buy shares of the Funds by: [bullet] Mail [bullet] Telephone (1-800-874-4770) [bullet] Wire [bullet] Automated Clearing House (ACH) You may also buy shares through investment representatives of certain correspondent banks of SunTrust Banks, Inc. (SunTrust) and other financial institutions that are authorized to place transactions in Fund shares for their customers. Please contact your financial institution directly and follow its procedures for fund share transactions. Your institution may charge a fee for its services, in addition to the fees charged by a Fund. You will also generally have to address your correspondence or questions regarding a Fund to your institution. 12 PROSPECTUS PURCHASING, SELLING AND EXCHANGING FUND SHARES A Fund may reject any purchase order if it is determined that accepting the order would not be in the best interests of STI Classic Funds or its shareholders. WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange and the Federal Reserve are open for business (a Business Day). The price per share (the offering price) will be the net asset value per share (NAV) next determined after the Funds receive your purchase order. Each Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time.) So, for you to be eligible to receive dividends declared on the day you submit your purchase order, the Funds must generally receive your order before 11:00 a.m. Eastern time for the Tax-Exempt Money Market Fund, before 12:00 p.m. Eastern time for the Virginia Tax-Free Money Market Fund or before 3:00 p.m. Eastern time for the Prime Quality Money Market Fund and U.S. Government Securities Money Market Fund. Also each Fund must receive federal funds (readily available funds) before 4:00 p.m. Eastern time. Otherwise, your purchase order will be effective the following Business Day, as long as each Fund receives federal funds before the Funds calculate their NAV the following day. FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES, AND OTHER FINANCIAL INSTITUTIONS YOU MAY HAVE TO TRANSMIT YOUR PURCHASE, SALE AND EXCHANGE REQUESTS TO SUNTRUST OR OTHER FINANCIAL INSTITUTIONS AT AN EARLIER TIME FOR YOUR TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS THE FINANCIAL INSTITUTION TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE, SELL OR EXCHANGE FUND SHARES, INCLUDING SPECIFIC SUNTRUST OR OTHER FINANCIAL INSTITUTIONS INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR FINANCIAL INSTITUTION DIRECTLY. HOW THE FUNDS CALCULATE NAV In calculating NAV, a Fund generally values its investment portfolio using the amortized cost valuation method, which is described in detail in the SAI. If this method is determined to be unreliable during certain market conditions or for other reasons, a Fund may value its portfolio at market price or fair value prices may be determined in good faith using methods approved by the Board of Trustees. NET ASSET VALUE NAV for one Fund share is the value of that share's portion of the net assets of the Fund. MINIMUM PURCHASES To purchase Investor shares for the first time, you must invest at least $2,000 in any Fund. Your subsequent investments in any Fund must be made in amounts of at least $1,000 or, if you pay by a statement coupon, $100. A Fund may accept investments of smaller amounts at its discretion. FUNDLINK FUNDLINK is a telephone activated service that allows you to transfer money quickly and easily between the STI Classic Funds and your SunTrust bank account(s). To use FUNDLINK, you must first contact your SunTrust Bank Investment Consultant and complete the FUNDLINK application and authorization agreements. Once you have signed up to use FUNDLINK, simply call the Funds at 1-800-874-4770 to complete all of your purchase and redemption transactions. PROSPECTUS 13 PURCHASING, SELLING AND EXCHANGING FUND SHARES SYSTEMATIC INVESTMENT PLAN If you have a checking or savings account with a SunTrust affiliate bank, you may purchase Investor Shares automatically through regular deductions from your account. With a $500 minimum initial investment, you may begin regularly- scheduled investments from $50 up to $100,000 once or twice a month. The Distributor may close your account if you do not meet this minimum investment requirement at the end of two years. [DOLLAR GRAPHIC OMITTED] SALES CHARGES CONTINGENT DEFERRED SALES CHARGES -- FLEX SHARES You do not pay a sales charge when you purchase Flex Shares. The offering price of Flex Shares is simply the next calculated NAV. But if you sell your shares within the first year after your purchase, you will pay a contingent deferred sales charge equal to 2.00% for either (1) the NAV of the shares at the time of purchase, or (2) NAV of the shares next calculated after the Fund receives your sale request, whichever is less. The sales charge does not apply to shares you purchase through reinvestment of dividends or distributions. So, you never pay a deferred sales charge on any increase in your investment above the initial offering price. This sales charge does not apply to exchanges of Flex Shares of one Fund for Flex Shares of another Fund. The contingent deferred sales charge will be waived if you sell your Flex Shares for the following reasons: [bullet] to make certain withdrawals from a retirement plan (not including IRAs); [bullet] because of death or disability; [bullet] for certain payments under the Systematic Withdrawal Plan (which is discussed later); or [bullet] for exchanges from Trust or Investor Shares to Flex Shares when the total accumulated period from the original date of purchase is at least one year. OFFERING PRICE OF FUND SHARES The offering price of Investor and Flex Shares is the NAV next calculated after the transfer agent receives your request. HOW TO SELL YOUR FUND SHARES If you own your shares through a brokerage account with SunTrust Securities, you may sell (sometimes called "redeem") your shares on any Business Day by contacting SunTrust Securities directly by mail or telephone at 1-800-874-4770. The minimum amount for telephone redemptions is $1,000. If you own your shares through an account with a broker or other institution, contact that broker or institution to sell your shares. If you would like to sell $25,000 or more of your shares, please notify the Fund in writing and include a signature guarantee by a bank or other financial institution (a notarized signature is not sufficient). The sale price of each share will be the next NAV determined after the Fund receives your request less, in the case of Flex Shares of the Prime Quality Money Market Fund, any applicable deferred sales charge. Redemption orders must be received by the Funds on a Business Day before 11:00 a.m. Eastern Time for the Tax-Exempt Money Market Fund, 12:00 p.m. Eastern Time for the Virginia Tax-Free Money Market Fund or 3:00 p.m. Eastern time for the Prime Quality Money Market Fund and U.S. Government Securities Money Market Fund. Orders received after these times will be executed the following Business Day. 14 PROSPECTUS PURCHASING, SELLING AND EXCHANGING FUND SHARES SYSTEMATIC WITHDRAWAL PLAN If you have at least $10,000 in your account, you may use the systematic withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual or annual automatic withdrawals of at least $50 from any Fund. The proceeds of each withdrawal will be mailed to you by check or, if you have a checking or savings account with a bank, electronically transferred to your account. RECEIVING YOUR MONEY Normally, the Funds will send your sale proceeds within five Business Days after the Fund receives your request. Your proceeds can be wired to your bank account (subject to a $7.00 fee) or sent to you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK OR THROUGH ACH, REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 DAYS FROM YOUR DATE OF PURCHASE). REDEMPTIONS IN KIND The Funds generally pay sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Funds' remaining shareholders) the Funds might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. INVOLUNTARY SALES OF YOUR SHARES If your account balance drops below the required $2,000 because of redemptions you may be required to sell your shares. But, the Funds will always give you at least 60 days written notice to give you time to add to your account and avoid the sale of your shares. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES A Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. HOW TO EXCHANGE YOUR SHARES You may exchange your shares on any Business Day by contacting SunTrust Securities or your financial institution by mail or telephone. Exchange requests must be for an amount of at least $1,000. The exchange privilege is not intended as a vehicle for short-term trading. Excessive exchange activity may interfere with Fund management and may have an adverse effect on all shareholders. In order to limit excessive exchange activity and in other circumstances where it is in the best interests of a Fund, all Funds reserve the right to revise or terminate the exchange privilege, limit the amount or number of exchanges or reject any exchange. Currently, you may exchange your shares up to four times during a calendar year. If you exchange your shares more than four times during a year, you may be charged a $10 fee for each additional exchange. You will be notified before any fee is charged. IF YOU RECENTLY PURCHASED SHARES BY CHECK OR THROUGH ACH, YOU MAY NOT BE ABLE TO EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 DAYS FROM YOUR DATE OF PURCHASE). This exchange privilege may be changed or canceled at any time upon 60 days notice. PROSPECTUS 15 PURCHASING, SELLING AND EXCHANGING FUND SHARES EXCHANGES When you exchange shares, you are really selling your shares and buying other Fund shares. So, your sale price and purchase price will be based on the NAV next calculated after the Fund receives your exchange request. INVESTOR SHARES You may exchange Investor Shares of any Fund for Investor Shares of any other Fund. If you exchange shares that you purchased without a sales charge or with a lower sales charge into a Fund with a sales charge or with a higher sales charge, the exchange is subject to an incremental sales charge (e.g., the difference between the lower and higher applicable sales charges). If you exchange shares into a Fund with the same, lower or no sales charge there is no incremental sales charge for the exchange. For purposes of computing the CDSC applicable to Flex Shares, the length of time you have owned your shares will be measured from the original date of purchase and will not be affected by any exchange. FLEX SHARES You may exchange Flex Shares of any Fund for Flex Shares of any other Fund. Again, the CDSC will be computed as of the original date of purchase. TELEPHONE TRANSACTIONS Purchasing, selling and exchanging Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believes to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. DISTRIBUTION OF FUND SHARES Each Fund has adopted a distribution plan that allows the Fund to pay distribution and service fees for the sale and distribution of its shares, and for services provided to shareholders. Because these fees are paid out of a Fund's assets continuously, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. Distribution fees, as a percentage of average daily net assets are as follows: For Investor Shares PRIME QUALITY MONEY MARKET FUND 0.20% TAX-EXEMPT MONEY MARKET FUND 0.15% U.S. GOVERNMENT SECURITIES MONEY MARKET FUND 0.17% VIRGINIA TAX-FREE MONEY MARKET FUND 0.40% For Flex Shares of the Prime Quality Money Market Fund, the maximum distribution fee is 1.00% of the average daily net assets of the Fund. The Distributor may, from time to time in its sole discretion, institute one or more promotional incentive programs for dealers, which will be paid for by the Distributor from any sales charge it receives or from any other source available to it. Under any such program, the Distributor may provide cash or non-cash compensation as recognition for past sales or encouragement for future sales that may include the following: merchandise, travel expenses, prizes, meals, and lodgings, and gifts that do not exceed $100 per year, per individual. 16 PROSPECTUS DIVIDENDS, DISTRIBUTIONS AND TAXES DIVIDENDS AND DISTRIBUTIONS Each Fund declares dividends daily and pays these dividends monthly. Each Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Fund in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Fund receives your written notice. To cancel your election, simply send the Fund written notice. TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Funds have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from the Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE OR EXCHANGE OF FUND SHARES IS A TAXABLE EVENT. The Tax-Exempt Money Market Fund and Virginia Tax-Free Money Market Fund intend to distribute federally tax-exempt income. Both of these Funds may invest a portion of their assets in securities that generate taxable income for federal or state income taxes. Income exempt from federal tax may be subject to state and local taxes. Any capital gains distributed by the Funds may be taxable. MORE INFORMATION ABOUT TAXES IS IN THE SAI. PROSPECTUS 17 FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS The tables that follow present performance information about Investor Shares of each Fund. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. This information for each Fund, except the Virginia Tax-Free Money Market Fund for the periods ended prior to May 31, 1999, have been audited by Arthur Andersen LLP, independent public accountants. The financial highlights for the Virginia Tax-Free Money Market Fund for the periods ended prior to May 31, 1999 have been audited by Deloitte & Touche LLP, independent public accountants. The report of Arthur Andersen LLP, along with each Fund's financial statements, appears in the annual report that accompanies the SAI. You can obtain the annual report, which contains more performance information, at no charge by calling 1-800-428-6970. For the Periods Ended May 31, (unless otherwise noted) For a Share Outstanding Throughout the Periods
NET ASSET DISTRIBUTIONS VALUE NET FROM NET NET ASSET BEGINNING INVESTMENT INVESTMENT VALUE END TOTAL OF PERIOD INCOME INCOME OF PERIOD RETURN (+) --------- ---------- ------------- --------- ---------- ------------------------------- PRIME QUALITY MONEY MARKET FUND ------------------------------- Investor Shares 2000 ..... $1.00 $ 0.05 $(0.05) $1.00 5.02% 1999 ..... 1.00 0.05 (0.05) 1.00 4.66 1998 ..... 1.00 0.05 (0.05) 1.00 5.04 1997 ..... 1.00 0.05 (0.05) 1.00 4.84 1996 ..... 1.00 0.05 (0.05) 1.00 5.08 Flex Shares 2000(A) $1.00 $0.03 $(0.03) $1.00 2.93% ---------------------------- TAX-EXEMPT MONEY MARKET FUND ---------------------------- Investor Shares 2000 ..... $1.00 $ 0.03 $(0.03) $1.00 3.07% 1999 ..... 1.00 0.03 (0.03) 1.00 2.69 1998 ..... 1.00 0.03 (0.03) 1.00 3.09 1997 ..... 1.00 0.03 (0.03) 1.00 2.97 1996 ..... 1.00 0.03 (0.03) 1.00 3.16 -------------------------------------------- U.S. GOVERNMENT SECURITIES MONEY MARKET FUND -------------------------------------------- Investor Shares 2000 ..... $1.00 $0.05 $(0.05) $1.00 4.71% 1999 ..... 1.00 0.04 (0.04) 1.00 4.41 1998 ..... 1.00 0.05 (0.05) 1.00 4.90 1997 ..... 1.00 0.05 (0.05) 1.00 4.69 1996 ..... 1.00 0.05 (0.05) 1.00 4.99 --------------------------------------------------------------------------------- VIRGINIA TAX-FREE MONEY MARKET FUND (FORMERLY THE TAX-FREE MONEY MARKET FUND) (B) --------------------------------------------------------------------------------- Investor Shares 2000 ..... $1.00 $0.03 $(0.03) $1.00 3.07% 1999** ... 1.00 0.01 (0.01) 1.00 1.27 For the Year Ended November 30: 1998 ..... 1.00 0.03 (0.03) 1.00 2.96 1997 ..... 1.00 0.03 (0.03) 1.00 3.05 1996 ..... 1.00 0.03 (0.03) 1.00 3.13
RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME TO RATIO OF INVESTMENT AVERAGE NET AVERAGE NET NET ASSETS EXPENSES TO INCOME ASSETS (EXCLUDING ASSETS (EXCLUDING END OF AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) ------------ ----------- ---------- ----------------- ----------------- ------------------------------- PRIME QUALITY MONEY MARKET FUND ------------------------------- Investor Shares 2000 ..... $1,312,653 0.77% 4.94% 0.95% 4.76% 1999 ..... 918,100 0.77 4.52 0.97 4.32 1998 ..... 411,821 0.76 4.93 0.98 4.71 1997 ..... 283,544 0.75 4.74 0.97 4.52 1996 ..... 215,696 0.75 4.94 1.00 4.69 Flex Shares 2000(A) .. $3,445 1.50%* 4.46%* 1.99%* 3.97%* ---------------------------- TAX-EXEMPT MONEY MARKET FUND ---------------------------- Investor Shares 2000 ..... $125,500 0.64% 3.01% 0.82% 2.83% 1999 ..... 128,854 0.64 2.66 0.83 2.48 1998 ..... 134,538 0.62 3.04 0.83 2.83 1997 ..... 102,013 0.62 2.92 0.83 2.71 1996 ..... 95,223 0.62 3.10 0.85 2.87 -------------------------------------------- U.S. GOVERNMENT SECURITIES MONEY MARKET FUND -------------------------------------------- Investor Shares 2000 ..... $79,311 0.77% 4.62% 0.93% 4.46% 1999 ..... 61,472 0.77 4.32 0.98 4.11 1998 ..... 58,753 0.76 4.79 0.96 4.59 1997 ..... 63,178 0.75 4.59 0.96 4.38 1996 ..... 58,608 0.75 4.88 0.99 4.64 --------------------------------------------------------------------------------- VIRGINIA TAX-FREE MONEY MARKET FUND (FORMERLY THE TAX-FREE MONEY MARKET FUND) (B) --------------------------------------------------------------------------------- Investor Shares 2000 ..... $62,878 0.67% 3.17% 0.99% 2.85% 1999** ... 5,955 0.67 2.52 1.06 2.13 For the Year Ended November 30: 1998 ..... 8,851 0.67 2.92 1.07 2.52 1997 ..... 7,634 0.68 3.42 1.08 3.02 1996 ..... 2,994 0.67 2.86 1.07 2.46
* Annualized. ** For the period December 1, 1998 to May 31, 1999. All ratios for the period have been annualized. (+) Total return is for the period indicated and has not been annualized. (A) Commenced operations on October 4, 1999. (B) On May 24, 1999, the CrestFunds Tax Free Money Fund exchanged all of its assets and certain liabilities for shares of the Virginia Tax-Free Money Market Fund (formerly the Tax-Free Money Market Fund). The CrestFunds Tax Free Money Fund was the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. 18 PROSPECTUS NOTES PROSPECTUS 19 NOTES 20 PROSPECTUS NOTES (THIS PAGE INTENTIONALLY LEFT BLANK) 22 PROSPECTUS HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS INVESTMENT ADVISER Trusco Capital Management, Inc. 50 Hurt Plaza Suite 1400 Atlanta, Georgia 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 2000, includes detailed information about the STI Classic Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list each Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends and their impact on Fund performance. The reports also contain detailed financial information about the Funds. TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION: BY TELEPHONE: Call 1-800-428-6970 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, Pennsylvania 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the EDGAR Database on the SEC's website ("HTTP://WWW.SEC.GOV"). You may review and copy documents at the SEC Public Reference Room in Washington, DC (for information on the operation of the Public Reference Room, call 202-942-8090). You may request documents by mail from the SEC, upon payment of a duplicating fee, by writing to: Securities and Exchange Commission, Public Reference Section, Washington, DC 20549-0102. You may also obtain this information, upon payment of a duplicating fee, by e-mailing the SEC at the following address: PUBLICINFO@SEC.GOV. The STI Classic Funds' Investment Company Act registration number is 811-06557. [SUNDIAL GRAPHIC OMITTED] XXXXXXXX STI CLASSIC FUNDS FOR PARTICIPANTS OF SUNTRUST BANKS SPONSORED RETIREMENT PLANS PROSPECTUS OCTOBER 1, 2000 BALANCED FUND CAPITAL APPRECIATION FUND CORE EQUITY FUND E-COMMERCE OPPORTUNITY FUND GROWTH AND INCOME FUND INTERNATIONAL EQUITY FUND INTERNATIONAL EQUITY INDEX FUND INVESTMENT GRADE BOND FUND LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND MID-CAP EQUITY FUND SHORT-TERM BOND FUND SHORT-TERM U.S. TREASURY SECURITIES FUND SMALL CAP GROWTH STOCK FUND SMALL CAP VALUE EQUITY FUND (FORMERLY SMALL CAP EQUITY FUND) TAX SENSITIVE GROWTH STOCK FUND U.S. GOVERNMENT SECURITIES FUND VALUE INCOME STOCK FUND PRIME QUALITY MONEY MARKET FUND U.S. GOVERNMENT SECURITIES MONEY MARKET FUND U.S. TREASURY MONEY MARKET FUND LIFE VISION AGGRESSIVE GROWTH FUND (FORMERLY LIFE VISION MAXIMUM GROWTH PORTFOLIO) LIFE VISION GROWTH AND INCOME FUND (FORMERLY LIFE VISION GROWTH AND INCOME PORTFOLIO) LIFE VISION MODERATE GROWTH FUND (FORMERLY LIFE VISION BALANCED PORTFOLIO) INVESTMENT ADVISER TO THE FUNDS: TRUSCO CAPITAL MANAGEMENT, INC. (the "Adviser") [STI LOGO OMITTED] THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PROSPECTUS ABOUT THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Trust Shares of each Fund that you should know before investing. Please read this prospectus and keep it for future reference. THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN THAT IS COMMON TO EACH OF THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE: 2 BALANCED FUND 4 CAPITAL APPRECIATION FUND 6 CORE EQUITY FUND 8 E-COMMERCE OPPORTUNITY FUND 10 GROWTH AND INCOME FUND 12 INTERNATIONAL EQUITY FUND 14 INTERNATIONAL EQUITY INDEX FUND 16 INVESTMENT GRADE BOND FUND 18 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND 20 MID-CAP EQUITY FUND 22 SHORT-TERM BOND FUND 24 SHORT-TERM U.S. TREASURY SECURITIES FUND 26 SMALL CAP GROWTH STOCK FUND 28 SMALL CAP VALUE EQUITY FUND 30 TAX SENSITIVE GROWTH STOCK FUND 32 U.S. GOVERNMENT SECURITIES FUND 34 VALUE INCOME STOCK FUND 36 PRIME QUALITY MONEY MARKET FUND 38 U.S. GOVERNMENT SECURITIES MONEY MARKET FUND 40 U.S. TREASURY MONEY MARKET FUND 44 LIFE VISION AGGRESSIVE GROWTH FUND 46 LIFE VISION GROWTH AND INCOME FUND 48 LIFE VISION MODERATE GROWTH FUND 50 MORE INFORMATION ABOUT RISK 51 MORE INFORMATION ABOUT FUND INVESTMENTS 51 INVESTMENT ADVISER AND PORTFOLIO MANAGERS 54 PURCHASING AND SELLING FUND SHARES 56 DIVIDENDS, DISTRIBUTIONS AND TAXES 57 FINANCIAL HIGHLIGHTS 66 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS -------------------------------------------------------------------------------- [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING? [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION [CHART GRAPHIC OMITTED] WHAT IS AN INDEX? [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES [MOUNTAINTOP GRAPHIC OMITTED] MORE INFORMATION ABOUT FUND INVESTMENTS [MAGNIFIER GRAPHIC OMITTED] INVESTMENT ADVISER [HANDSHAKE GRAPHIC OMITTED] PURCHASING AND SELLING FUND SHARES -------------------------------------------------------------------------------- OCTOBER 1, 2000 PROSPECTUS 1 RISK/RETURN INFORMATION COMMON TO THE FUNDS Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. Each Fund has its own investment goal and strategies for reaching that goal. The Adviser invests Fund assets in a way that it believes will help a Fund achieve its goal. Still, investing in each Fund involves risk and there is no guarantee that a Fund will achieve its goal. The Adviser's judgments about the markets, the economy or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job the Adviser does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. The value of your investment in a Fund (other than a money market fund) is based on the market prices of the securities the Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, may be greater or lesser depending on the types of securities a Fund owns and the markets in which they trade. The effect on a Fund of a change in the value of a single security will depend on how widely the Fund diversifies its holdings. 2 PROSPECTUS BALANCED FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Capital appreciation and current income -------------------------------------------------------------------------------- INVESTMENT FOCUS PRIMARY U.S. common stocks SECONDARY Bonds -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with a history of earnings growth and bonds with minimal risk -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want income from their investment, as well as an increase in its value -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Balanced Fund invests in common and preferred stocks, convertible securities, U.S. government obligations and investment grade corporate bonds. In selecting stocks for the Fund, the Adviser attempts to identify high-quality companies with a history of above average earnings growth. In selecting bonds, the Adviser tries to minimize risk while attempting to outperform selected market indices. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1995 25.51% 1996 12.13% 1997 21.14% 1998 19.55% 1999 4.66% BEST QUARTER WORST QUARTER 12.57% -5.70% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 4.24%. PROSPECTUS 3 BALANCED FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN BROTHERS U.S. GOVERNMENT/CREDIT INDEX AND THE S&P 500 INDEX. SINCE TRUST SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- Balanced Fund 4.66% 16.36% 12.63%* -------------------------------------------------------------------------------- Lehman Brothers U.S. Government/ Credit Index -2.15% 7.60% 5.67%** -------------------------------------------------------------------------------- S&P 500 Index 21.04% 28.55% 23.55%** -------------------------------------------------------------------------------- * SINCE 1/3/94 ** SINCE 12/31/93 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers U.S. Government/Credit Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, corporate debt backed by the U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least 1 year. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.95% Other Expenses 0.12% ----- Total Annual Fund Operating Expenses 1.07% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $109 $340 $590 $1,306 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.92% and 1.04%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 4 PROSPECTUS CAPITAL APPRECIATION FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Capital appreciation -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. common stocks -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with above average growth potential -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need to receive income on their investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Capital Appreciation Fund invests primarily in U.S. common stocks and other equity securities that the Adviser believes have strong business fundamentals, such as revenue growth, cash flows and earning trends. In selecting investments for the Fund, the Adviser chooses companies that it believes have above average growth potential. The Adviser's strategy focuses on large cap stocks with a strong growth history. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1993 9.89% 1994 -7.41% 1995 31.15% 1996 20.31% 1997 31.13% 1998 28.06% 1999 9.71% BEST QUARTER WORST QUARTER 22.93% -11.16% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 5.91%. PROSPECTUS 5 CAPITAL APPRECIATION FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1999 TO THOSE OF THE S&P 500 INDEX. SINCE TRUST SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- Capital Appreciation Fund 9.71% 23.79% 17.41%* -------------------------------------------------------------------------------- S&P 500 Index 21.04% 28.55% 21.24%** -------------------------------------------------------------------------------- * SINCE 7/1/92 ** SINCE 6/30/92 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 1.15% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.26% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $128 $400 $692 $1,523 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 1.13% and 1.24%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 6 PROSPECTUS CORE EQUITY FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Long-term capital growth -------------------------------------------------------------------------------- INVESTMENT FOCUS Common stocks of mid- to large-cap companies -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate to high -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with superior earnings trends -------------------------------------------------------------------------------- INVESTOR PROFILE Investors seeking long-term growth of capital without regard to income who are willing to accept more volatility for the possibility of higher returns -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Core Equity Fund invests primarily in common stocks of U.S. companies with market capitalizations of more than $1 billion. In selecting stocks for the Fund, the Adviser attempts to capture superior growth prospects based on earnings potential, profitability and other measures. These measures include growth characteristics such as whether a company makes significant investments in research and product development or whether a company is participating in rapidly expanding industries. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. In addition, the Fund is subject to the risk that mid- to large-capitalization growth stocks may underperform other segments of the equity market or the equity markets as a whole. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The Core Equity Fund commenced operations on September 30, 1999, and therefore does not have a performance history for a full calendar year. PROSPECTUS 7 CORE EQUITY FUND [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 1.10% Other Expenses 0.17% ----- Total Annual Fund Operating Expenses 1.27% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $129 $403 $697 $1,534 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 8 PROSPECTUS E-COMMERCE OPPORTUNITY FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Long-term capital growth -------------------------------------------------------------------------------- INVESTMENT FOCUS Common stocks of companies participating in multiple electronic commerce market segments -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Very high -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies utilizing electronic commerce opportunities to achieve above average growth -------------------------------------------------------------------------------- INVESTOR PROFILE Aggressive investors with long-term investment goals who are willing to accept significant volatility for the possibility of higher returns -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The E-Commerce Opportunity Fund invests primarily in common stocks of U.S. companies that are expected to benefit substantially from electronic commerce and achieve above average growth. The Fund defines electronic commerce, or e-commerce, as conducting business through the use of computers, the Internet, telecommunication lines and other electronic means of information transfer. The Fund's holdings are generally diversified across three market segments. The first segment is comprised of corporations whose core line of business focuses on an emerging e-commerce market. The second segment consists of established technology companies that provide the infrastructure to support electronic commerce. The third segment includes established, non-tech companies that are expected to achieve substantial direct or indirect benefits from e-commerce. In selecting investments for the Fund, the Adviser focuses on a "bottom-up" analysis that evaluates the competitive advantages and market sustainability of individual companies. The Fund invests primarily in companies with market capitalizations over $1 billion, but may invest a portion of its assets in smaller companies. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange. Due to the focus of the Fund, many holdings share similar risk factors. Many companies in the portfolio have limited operating histories, function in rapidly changing business environments and trade at valuations which are significantly higher than average. As a result, the Fund's NAV may be more volatile than other, broadly diversified equity funds. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The E-Commerce Opportunity Fund commenced operations on September 30, 1999, and therefore does not have a performance history for a full calendar year. PROSPECTUS 9 E-COMMERCE OPPORTUNITY FUND [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 1.10% Other Expenses 0.24% ----- Total Annual Fund Operating Expenses 1.34% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $136 $425 $734 $1,613 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 10 PROSPECTUS GROWTH AND INCOME FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOALS PRIMARY Long-term capital appreciation SECONDARY Current income -------------------------------------------------------------------------------- INVESTMENT FOCUS Equity securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify securities of companies with market capitalizations of at least $1 billion with attractive valuation and/or above average earnings potential relative either to their sectors or the market as a whole -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who are looking for capital appreciation potential and income with less volatility than the equity markets as a whole -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Growth and Income Fund invests primarily in equity securities, including common stock and listed American Depositary Receipts (ADRs), of domestic and foreign companies with market capitalizations of at least $1 billion. However, the average market capitalization can vary throughout a full market cycle and will be flexible to allow the Adviser to capture market opportunities. The Adviser uses a quantitative screening process to identify companies with an attractive fundamental profile. The portfolio management team selects stocks of companies with strong financial quality and above average earnings momentum to secure the best relative values in each economic sector. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1993 10.20% 1994 -0.81% 1995 29.38% 1996 19.06% 1997 27.69% 1998 18.20% 1999 14.17% BEST QUARTER WORST QUARTER 17.38% -10.36% (6/30/97) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS -0.35%. PROSPECTUS 11 GROWTH AND INCOME FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 500/BARRA VALUE INDEX. PREVIOUSLY, THE FUND'S RETURNS HAD BEEN COMPARED TO THE S&P 500 INDEX, BUT THE ADVISER BELIEVES THAT THE S&P 500/BARRA VALUE INDEX, BECAUSE OF ITS GREATER EMPHASIS ON LARGE CAP VALUE STOCKS, MORE ACCURATELY REFLECTS THE TYPE OF SECURITIES IN WHICH THE FUND INVESTS. SINCE TRUST SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- Growth and Income Fund 14.17% 21.56% 16.83%* -------------------------------------------------------------------------------- S&P 500/BARRA Value Index 12.72% 22.94% 18.54%** -------------------------------------------------------------------------------- S&P 500 Index 21.04% 28.55% 21.52%** -------------------------------------------------------------------------------- * SINCE 9/26/92 ** SINCE 9/30/92 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The previous index, the S&P 500 Index, is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. The S&P 500/BARRA Value Index is a widely-recognized index of stocks in the S&P 500 Index that have lower price-to-book ratios. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.90% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.01% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $103 $322 $558 $1,236 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 12 PROSPECTUS INTERNATIONAL EQUITY FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Long-term capital appreciation -------------------------------------------------------------------------------- INVESTMENT FOCUS Foreign common stocks -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY High -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with good fundamentals or a history of consistent growth -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want an increase in the value of their investment without regard to income, are willing to accept the increased risks of international investing for the possibility of higher returns, and want exposure to a diversified portfolio of international stocks -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The International Equity Fund invests primarily in common stocks and other equity securities of foreign companies. The Fund invests primarily in developed countries, but may invest in countries with emerging markets. The Adviser's "bottom-up" approach to stock selection focuses on individual stocks and fundamental characteristics of companies. The Adviser's goal is to find companies with top management, quality products and sound financial positions, or a history of consistent growth in cash flows, sales, operating profits, returns on equity and returns on invested capital. In selecting investments for the Fund, The Adviser diversifies the Fund's investments among at least three foreign countries. The Adviser diversifies the Fund's investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that foreign common stocks may underperform other segments of the equity market or the equity markets as a whole. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. Emerging market countries are countries that the World Bank or the United Nations considers to be emerging or developing. Emerging markets may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in other countries. As a result, there will tend to be an increased risk of price volatility associated with the Fund's investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to December 1995, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. PROSPECTUS 13 INTERNATIONAL EQUITY FUND THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1996 22.08% 1997 13.35% 1998 11.22% 1999 9.47% BEST QUARTER WORST QUARTER 16.88% -18.28% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 3.91%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, AND FAR EAST (MSCI EAFE) INDEX. TRUST SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- International Equity Fund 9.47% 18.78%* -------------------------------------------------------------------------------- MSCI EAFE Index 26.96% 13.97%* -------------------------------------------------------------------------------- * SINCE 1/31/95 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The MSCI EAFE Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than smaller market capitalizations) index of over 900 securities listed on the stock exchanges in Europe, Australasia and the Far East. The country weighting of the Index is calculated using the market capitalization of each of the various countries, and then with respect to the market capitalization of the various companies operating in each country. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 1.25% Other Expenses 0.23% ----- Total Annual Fund Operating Expenses 1.48% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $151 $468 $808 $1,768 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 14 PROSPECTUS INTERNATIONAL EQUITY INDEX FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Investment results that correspond to the performance of the MSCI EAFE-GDP Weighted Index -------------------------------------------------------------------------------- INVESTMENT FOCUS Foreign common stocks in MSCI EAFE-GDP Weighted Index -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY High -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Statistical analysis to track the Index -------------------------------------------------------------------------------- INVESTOR PROFILE Aggressive investors who want exposure to foreign markets and are willing to accept the increased risks of foreign investing for the possibility of higher returns -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The International Equity Index Fund invests primarily in common stocks of foreign companies. In selecting investments for the Fund, the Adviser chooses companies included in the MSCI EAFE-GDP Weighted Index, an index of equity securities of companies located in Europe, Australasia and the Far East. While the Fund is structured to have overall investment characteristics similar to those of the Index, it selects a sample of stocks within the Index using a statistical process. So, the Fund will not hold all stocks included in the Index. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that foreign common stocks may underperform other segments of the equity markets or the equity markets as a whole. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. In addition to the above mentioned risks, the Adviser may not be able to match the performance of the Fund's benchmark. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1995 10.73% 1996 6.04% 1997 8.99% 1998 30.02% 1999 30.66% BEST QUARTER WORST QUARTER 21.26% -12.98% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS -4.88%. PROSPECTUS 15 INTERNATIONAL EQUITY INDEX FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA AND FAR EAST-GROSS DOMESTIC PRODUCT (MSCI EAFE-GDP) WEIGHTED INDEX. SINCE TRUST SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- International Equity Index Fund 30.66% 16.80% 14.43%* -------------------------------------------------------------------------------- MSCI EAFE-GDP Weighted Index (Price Return) 29.49% 14.45% 12.59%** -------------------------------------------------------------------------------- * SINCE 6/6/94 ** SINCE 5/31/94 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The MSCI EAFE-GDP Weighted Index is a widely-recognized, capitalization weighted (companies with larger market capitalizations have more influence than smaller market capitalizations) index of over 900 securities listed on the stock exchanges in Europe, Australasia and the Far East. The country weighting of the Index is calculated using the gross domestic product of each of the various countries and then with respect to the market capitalization of the various companies operating in each country. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.90% Other Expenses 0.28% ----- Total Annual Fund Operating Expenses 1.18% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $120 $375 $649 $1,432 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.81% and 1.09%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 16 PROSPECTUS INVESTMENT GRADE BOND FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High total return through current income and capital appreciation, while preserving the principal amount invested -------------------------------------------------------------------------------- INVESTMENT FOCUS Investment grade U.S. government and corporate debt securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify relatively inexpensive securities in a selected market index -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want to receive income from their investment, as well as an increase in the value of the investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Investment Grade Bond Fund invests primarily in investment grade corporate debt securities, U.S. Treasury obligations and mortgage-backed securities. In selecting investments for the Fund, the Adviser tries to minimize risk while attempting to outperform selected market indices. Currently, the Adviser's selected index is the Lehman Brothers U.S. Government/Credit Index, a widely-recognized, unmanaged index of investment grade government and corporate debt securities. The Adviser seeks to invest more in portions of the Index that seem relatively inexpensive, and less in those that seem expensive. The Adviser allocates the Fund's investments among various market sectors based on the Adviser's analysis of historical data, yield information and credit ratings. The Adviser anticipates that the Fund's average weighted maturity will range from 4 to 10 years. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. Mortgage backed securities are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1993 10.84% 1994 -3.32% 1995 17.80% 1996 2.34% 1997 9.08% 1998 9.19% 1999 -1.53% BEST QUARTER WORST QUARTER 6.11% -2.67% (6/30/95) (3/31/94) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 0.45%. PROSPECTUS 17 INVESTMENT GRADE BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN BROTHERS U.S. GOVERNMENT/CREDIT INDEX, LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX AND THE LIPPER INTERMEDIATE INVESTMENT GRADE DEBT FUNDS AVERAGE. SINCE TRUST SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- Investment Grade Bond Fund -1.53% 7.17% 6.07%* -------------------------------------------------------------------------------- Lehman Brothers U.S. Government/ Credit Index -2.15% 7.60% 6.38%** -------------------------------------------------------------------------------- Lehman Brothers U.S. Aggregate Bond Index -0.83% 7.73% 6.40%** -------------------------------------------------------------------------------- Lipper Intermediate Investment Grade Debt Funds Average -1.31% 6.79% 5.81%** -------------------------------------------------------------------------------- * SINCE 7/16/92 ** SINCE 7/31/92 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers U.S. Government/Credit Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, corporate debt backed by the U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least 1 year. The Lehman Brothers U.S. Aggregate Bond Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index that combines the Lehman Brothers U.S. Government/Credit Index and the Lehman Brothers Mortgage-Backed Securities Index. The Lehman Brothers Mortgage-Backed Securities Index consists of mortgage-backed securities rated AAA. The Lipper Intermediate Investment Grade Debt Funds Average is a composite of mutual funds with investment goals similar to the Fund's goals. It reports the average return of the intermediate term investment grade bond mutual funds tracked by Lipper Analytical Services, Inc. The number of funds in the Average varies. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.74% Other Expenses 0.10% ----- Total Annual Fund Operating Expenses 0.84% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $86 $268 $466 $1,037 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.72% and 0.82%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 18 PROSPECTUS LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital -------------------------------------------------------------------------------- INVESTMENT FOCUS Mortgage-backed securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify securities that are less prone to prepayment risk -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors who want to receive income from their investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Limited-Term Federal Mortgage Securities Fund invests primarily in U.S. government agency mortgage-backed securities, such as Fannie Mae, GNMA and collateralized mortgage obligations. These securities typically have an effective maturity from 1 to 5 years. In selecting investments for the Fund, the Adviser tries to identify securities that the Adviser expects to perform well in rising and falling markets. The Adviser also attempts to reduce the risk that the underlying mortgages are prepaid by focusing on securities that the Adviser believes are less prone to this risk. For example, Fannie Mae or GNMA securities that were issued years ago may be less prone to prepayment risk because there have been many opportunities for prepayment, but few have occurred. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that mortgage-backed securities may underperform other segments of the fixed income market or the fixed income markets as a whole. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. Mortgage-backed securities are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1995 12.14% 1996 4.53% 1997 6.74% 1998 6.90% 1999 1.25% BEST QUARTER WORST QUARTER 4.05% -0.29% (3/31/95) (6/30/99) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.61%. PROSPECTUS 19 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE MERRILL LYNCH 1-5 YEAR U.S. TREASURIES/AGENCIES INDEX AND THE MERRILL LYNCH 1-5 YEAR U.S TREASURY INDEX. SINCE TRUST SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- Limited-Term Federal Mortgage Securities Fund 1.25% 6.26% 5.65%* -------------------------------------------------------------------------------- Merrill Lynch 1-5 Year U.S. Treasuries/ Agencies Index 2.11% 6.78% 6.22%** -------------------------------------------------------------------------------- Merrill Lynch 1-5 Year U.S. Treasury Index 2.04% 6.78% 6.22%** -------------------------------------------------------------------------------- * SINCE 6/6/94 ** SINCE 5/31/94 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Merrill Lynch 1-5 Year U.S Treasuries/ Agencies Index includes U.S. Government Treasury and Agency Bonds that have a minimum issue size of $150 million. The current market value of the index is $1.29 trillion with duration of 2.1 years and yield to maturity of 6.4%. The Merrill Lynch 1-5 Year U.S Treasury Index is a widely-recognized, capitalization- weighted index of U.S. Treasury securities with maturities 1 year or greater and no more than 5 years. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.65% Other Expenses 0.14% ----- Total Annual Fund Operating Expenses 0.79% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $81 $252 $439 $978 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.60% and 0.74%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 20 PROSPECTUS MID-CAP EQUITY FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Capital appreciation -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. mid-cap common stocks -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate to high -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with above average growth potential at an attractive price -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want the value of their investment to grow and who are willing to accept more volatility for the possibility of higher returns -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Mid-Cap Equity Fund invests primarily in a diversified portfolio of common stocks and other equity securities of U.S. companies. In selecting investments for the Fund, the Adviser primarily chooses companies that have small- to mid-sized market capitalizations (I.E., companies with market capitalizations of $500 million to $10 billion and companies in the S&P 400 Mid Cap Index) and that have above average growth potential at attractive prices. The Adviser evaluates companies based on their industry sectors and the market in general. The Fund maintains holdings in the industries that appear to perform best during a given business cycle. The Adviser analyzes companies that are in favored industries based on their fundamental characteristics, such as growth rates and earnings. The Adviser does not consider current income in selecting investments for the Fund. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that mid-cap common stocks may underperform other segments of the equity market or the equity markets as a whole. The small- to mid-sized capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small-cap and mid-cap stocks may be more volatile than those of larger companies. These securities may be traded over the counter or listed on an exchange. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1995 31.22% 1996 15.42% 1997 21.23% 1998 6.48% 1999 16.14% BEST QUARTER WORST QUARTER 24.73% -19.96% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 9.78%. PROSPECTUS 21 MID-CAP EQUITY FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 400 MID CAP INDEX. SINCE TRUST SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- Mid-Cap Equity Fund 16.14% 17.82% 14.56%* -------------------------------------------------------------------------------- S&P 400 Mid Cap Index 14.72% 23.04% 17.96%** -------------------------------------------------------------------------------- * SINCE 2/2/94 ** SINCE 1/31/94 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 400 Mid Cap Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of 400 domestic mid-cap stocks chosen for market size, liquidity, and industry group representation. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 1.15% Other Expenses 0.10% ----- Total Annual Fund Operating Expenses 1.25% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $127 $397 $686 $1,511 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 1.12% and 1.22%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 22 PROSPECTUS SHORT-TERM BOND FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital -------------------------------------------------------------------------------- INVESTMENT FOCUS Investment grade U.S. government and corporate debt securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Low -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify securities that offer a comparably better return than similar securities for a given level of credit risk -------------------------------------------------------------------------------- INVESTOR PROFILE Income oriented investors who are willing to accept increased risk for the possibility of returns greater than money market investing -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Short-Term Bond Fund invests primarily in a diversified portfolio of short- to medium-term investment grade U.S. Treasury, corporate debt, mortgage-backed and asset-backed securities. The Fund expects that it will normally maintain an average weighted maturity of approximately 3 years. In selecting investments for the Fund, the Adviser attempts to identify securities that offer a comparably better investment return for a given level of credit risk. For example, short-term bonds generally have better returns than money market instruments, with a fairly modest increase in credit risk and/or volatility. The Adviser manages the Fund from a total return perspective. That is, the Adviser makes day-to-day investment decisions for the Fund with a view towards maximizing returns. The Adviser analyzes yields, market sectors and credit risk in an effort to identify attractive investments with the best risk/reward trade-off. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. Mortgage-backed and asset-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans or underlying assets such as truck and auto loans, leases and credit card receivables. Mortgage-backed and asset-backed securities are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loan, receivables or other assets underlying these securities. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed or asset-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in the market place. When interest rates fall, however, mortgage-backed and asset-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayment or prepayment of the underlying asset that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed or asset-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1994 -0.07% 1995 11.77% 1996 3.90% 1997 6.78% 1998 6.84% 1999 0.92% BEST QUARTER WORST QUARTER 3.76% -0.58% (6/30/95) (3/31/94) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.83%. PROSPECTUS 23 SHORT-TERM BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE SALOMON 1-3 YEAR TREASURY/GOVERNMENT SPONSORED/CORPORATE INDEX. SINCE TRUST SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- Short-Term Bond Fund 0.92% 5.98% 4.97%* -------------------------------------------------------------------------------- Salomon 1-3 Year Treasury/Government Sponsored/Corporate Index 3.29% 6.56% 5.41%** -------------------------------------------------------------------------------- * SINCE 3/15/93 ** SINCE 2/28/93 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Salomon 1-3 Year Treasury/ Government Sponsored/Corporate Index is a widely-recognized index of U.S. Treasury securities, government agency obligations, and corporate debt securities rated at least investment grade (BBB). The securities in the Index have maturities of 1 year or greater and less than 3 years. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.65% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 0.76% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $78 $243 $422 $942 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.60% and 0.71%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 24 PROSPECTUS SHORT-TERM U.S. TREASURY SECURITIES FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital -------------------------------------------------------------------------------- INVESTMENT FOCUS Short-term U.S. Treasury securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Low -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify Treasury securities with maturities that offer a comparably better return potential and yield than either shorter maturity or longer maturity securities for a given level of interest rate risk -------------------------------------------------------------------------------- INVESTOR PROFILE Income oriented investors who are willing to accept increased risk for the possibility of returns greater than money market investing -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Short-Term U.S. Treasury Securities Fund invests exclusively in short-term U.S. Treasury securities (those with remaining maturities of 3 years or less). The Fund intends to maintain an average weighted maturity from 1 to 2 years. The Fund offers investors the opportunity to capture the advantage of investing in short-term bonds over money market instruments. Generally, short-term bonds offer a comparably better return than money market instruments, with a modest increase in interest rate risk. The Adviser manages the Fund from a total return perspective. That is, the Adviser makes day-to-day investment decisions for the Fund with a view toward maximizing returns and yield. The Adviser tries to select those U.S. Treasury securities that offer the best risk/reward trade-off. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that short-term U.S. Treasury securities may underperform other segments of the fixed income market or the fixed income markets as a whole. Although the Fund's U.S. Treasury securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1994 1.41% 1995 8.58% 1996 4.52% 1997 5.86% 1998 6.24% 1999 2.71% BEST QUARTER WORST QUARTER 2.61% -0.10% (3/31/95) (3/31/94) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.49%. PROSPECTUS 25 SHORT-TERM U.S. TREASURY SECURITIES FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE SALOMON 1-3 YEAR TREASURY INDEX AND THE SALOMON 6 MONTH TREASURY BILL INDEX. SINCE TRUST SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- Short-Term U.S. Treasury Securities Fund 2.71% 5.56% 4.71%* -------------------------------------------------------------------------------- Salomon 1-3 Year Treasury Index 3.06% 6.48% 5.31%** -------------------------------------------------------------------------------- Salomon 6 Month Treasury Bill Index 4.80% 5.33% 4.93%** -------------------------------------------------------------------------------- * SINCE 3/15/93 ** SINCE 2/28/93 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Salomon 1-3 Year Treasury Index is a widely-recognized index of U.S. Treasury securities with maturities of one year or greater and less than three years. The Salomon 6 Month Treasury Bill Index is a widely-recognized index of the 6 month U.S. Treasury Bills. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.65% Other Expenses 0.14% ----- Total Annual Fund Operating Expenses 0.79% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $81 $252 $439 $978 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.59% and 0.73%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 26 PROSPECTUS SMALL CAP GROWTH STOCK FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Long-term capital appreciation -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. small cap common stocks of growth companies -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY High -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Identifies small cap companies with above average growth potential -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need current income -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Small Cap Growth Stock Fund invests primarily in small U.S. companies with market capitalizations between $50 million and $3 billion in size. The Fund's investment philosophy is based on the premise that a portfolio of small cap stocks with positive earnings trends, reasonable valuation, and strong fundamentals will provide superior returns over time. The Adviser selects companies with strong current earnings growth, improving profitability, a strong balance sheet, strong current and projected business fundamentals, and priced at reasonable valuations. The Adviser believes in executing a very disciplined and objective investment process and in controlling risk through a broadly diversified portfolio. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and the potential for capital gains tax liabilities for taxable investors. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that small capitalization growth stocks may underperform other segments of the equity market or the equity markets as a whole. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS THE PERFORMANCE OF THE FUND'S TRUST SHARES FOR ONE YEAR.* [Bar Graph Omitted] Plot point is as follows: 1999 20.55% BEST QUARTER WORST QUARTER 20.77% -11.36% (6/30/99) (3/31/99) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 16.26%. PROSPECTUS 27 SMALL CAP GROWTH STOCK FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 600 SMALL CAP INDEX. TRUST SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Small Cap Growth Stock Fund 20.55% 58.61%* -------------------------------------------------------------------------------- S&P 600 Small Cap Index 12.41% 25.01%** -------------------------------------------------------------------------------- * SINCE 10/8/98 ** SINCE 9/30/98 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 600 Small Cap Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of 600 domestic small cap stocks. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 1.15% Other Expenses 0.08% ----- Total Annual Fund Operating Expenses 1.23% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares are the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $125 $390 $676 $1,489 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 28 PROSPECTUS SMALL CAP VALUE EQUITY FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOALS PRIMARY Capital appreciation SECONDARY Current income -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. small cap common stocks -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify undervalued small cap stocks -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who primarily want the value of their investment to grow, but want to receive some income from their investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Small Cap Value Equity Fund invests primarily in common stocks of U.S. companies. In selecting investments for the Fund, the Adviser chooses common stocks of small sized companies (I.E., companies with market capitalizations under $1 billion) that it believes are undervalued in the market. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that small capitalization common stocks may underperform other segments of equity market or the equity markets as a whole. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over the counter or listed on an exchange. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to January 1997, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1995 30.99% 1996 34.25% 1997 32.59% 1998 -13.45% 1999 -2.72% BEST QUARTER WORST QUARTER 19.82% -21.99% (6/30/99) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 1.49%. PROSPECTUS 29 SMALL CAP VALUE EQUITY FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE RUSSELL 2000 VALUE INDEX. PREVIOUSLY, THE FUND'S RETURNS HAD BEEN COMPARED TO THE RUSSELL 2000 INDEX, BUT THE ADVISER BELIEVES THAT THE RUSSELL 2000 VALUE INDEX, BECAUSE OF ITS GREATER EMPHASIS ON SMALL U.S. COMPANIES WITH LOWER GROWTH RATES AND PRICE-TO-BOOK RATIOS, MORE ACCURATELY REFLECTS THE TYPE OF SECURITIES IN WHICH THE FUND INVESTS. SINCE TRUST SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- Small Cap Value Equity Fund -2.72% 14.44% 13.63%* -------------------------------------------------------------------------------- Russell 2000 Value Index -1.49% 13.13% 11.41%* -------------------------------------------------------------------------------- Russell 2000 Index 21.26% 16.69% 15.09%* -------------------------------------------------------------------------------- * SINCE 8/31/94 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The previous index, the Russell 2000 Index, is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of the 2,000 smallest U.S. companies out of the 3,000 largest companies. The Russell 2000 Value Index is a widely-recognized, capitalization weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of companies in the Russell 2000 Index with lower growth rates and price-to-book ratios. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 1.15% Other Expenses 0.10% ----- Total Annual Fund Operating Expenses 1.25% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares are the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $127 $397 $686 $1,511 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 30 PROSPECTUS TAX SENSITIVE GROWTH STOCK FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Long-term capital growth with nominal dividend income -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. common stocks of growth companies -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies that have above-average growth potential and uses a low portfolio turnover strategy to reduce capital gains distributions -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want to increase the value of their investment while minimizing taxable capital gains distributions -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Tax Sensitive Growth Stock Fund invests primarily in a diversified portfolio of common stocks of financially strong U.S. growth companies. Many of these companies have a history of stable or rising dividend payout policies. The Adviser attempts to minimize the impact of capital gains taxes on investment returns by using a low turnover rate (generally 50% or less) strategy, in conjunction with other tax management strategies. These strategies may lead to lower capital gains distributions and, therefore, lower capital gains taxes. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that common stocks of U.S. growth companies may underperform other segments of the equity market or the equity markets as a whole. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to December 1998, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1996 21.04% 1997 28.76% 1998 31.73% 1999 24.74% BEST QUARTER WORST QUARTER 27.74% -9.96% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 0.50%. PROSPECTUS 31 TAX SENSITIVE GROWTH STOCK FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 500 INDEX. TRUST SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Tax Sensitive Growth Stock Fund 24.74% 26.56%* -------------------------------------------------------------------------------- S&P 500 Index 21.04% 26.39%* -------------------------------------------------------------------------------- * SINCE 12/31/95 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 1.15% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.26% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $128 $400 $692 $1,523 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 32 PROSPECTUS U.S. GOVERNMENT SECURITIES FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital -------------------------------------------------------------------------------- INVESTMENT FOCUS Mortgage-backed securities and U.S. Treasury obligations -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Low to moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without adding undue risk -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors who want to receive income from their investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The U.S. Government Securities Fund invests primarily in U.S. government debt securities, such as mortgage-backed securities and U.S. Treasury obligations. In an attempt to provide a consistently high dividend without adding undue risk, the Fund focuses its investments in mortgage-backed securities. The average maturity of the Fund's portfolio will typically range from 7 to 14 years. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. The Fund is also subject to the risk that U.S. government debt securities may underperform other segments of the fixed income market or the fixed income markets as a whole. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. Mortgage-backed securities are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1995 17.33% 1996 2.55% 1997 8.94% 1998 8.16% 1999 -0.97% BEST QUARTER WORST QUARTER 5.89% -2.24% (6/30/95) (3/31/96) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 3.82%. PROSPECTUS 33 U.S. GOVERNMENT SECURITIES FUND THIS TABLE COMPARES THE FUND'S AVERAGE TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE MERRILL LYNCH GOVERNMENT/MORTGAGE INDEX AND THE LEHMAN BROTHERS INTERMEDIATE U.S. GOVERNMENT BOND INDEX. SINCE TRUST SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- U.S. Government Securities Fund -0.97% 7.02% 6.14%* -------------------------------------------------------------------------------- Merrill Lynch Government/ Mortgage Index -0.70% 7.67% 6.90%** -------------------------------------------------------------------------------- Lehman Brothers Intermediate U.S. Government Bond Index 0.50% 6.93% 6.26%** -------------------------------------------------------------------------------- * SINCE 8/1/94 ** SINCE 7/31/94 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Merrill Lynch Government/ Mortgage Index is a synthetic index created by combining, at their respective market weights (i) the Merrill Lynch Government Master Index, which is a widely-recognized index comprised of U.S. Treasury securities and U.S. government agency securities with a maturity of at least 1 year; and (ii) the Merrill Lynch Mortgage Master Index, which is a widely-recognized index comprised of mortgage-backed securities including 15 and 30 year single family mortgages in addition to aggregated pooled mortgages. The Lehman Brothers Intermediate U.S. Government Bond Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, and corporate debt backed by the U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least 1 year. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.74% Other Expenses 0.10% ----- Total Annual Fund Operating Expenses 0.84% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $86 $268 $466 $1,037 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.71% and 0.81%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 34 PROSPECTUS VALUE INCOME STOCK FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOALS PRIMARY Current income SECONDARY Capital appreciation -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. common stocks -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify high dividend- paying, undervalued stocks -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who are looking for current income and capital appreciation with less volatility than the average stock fund -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Value Income Stock Fund invests primarily in common stocks and other equity securities of U.S. companies. In selecting investments for the Fund, the Adviser primarily chooses companies that have a market capitalization of at least $500 million and that have a history of paying regular dividends. The Adviser focuses on high dividend-paying stocks that trade below their historical value. The Adviser's "bottom-up" approach to stock selection emphasizes individual stocks over economic trends. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to February 1993, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THE BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1990 -4.93% 1991 39.30% 1992 20.05% 1993 11.14% 1994 3.54% 1995 35.93% 1996 19.46% 1997 27.08% 1998 10.58% 1999 -2.93% BEST QUARTER WORST QUARTER 18.56% -14.86% (3/31/91) (9/30/90) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS -6.33%. PROSPECTUS 35 VALUE INCOME STOCK FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 500/BARRA VALUE INDEX. SINCE TRUST SHARES 1 YEAR 5 YEARS 10 YEARS INCEPTION -------------------------------------------------------------------------------- Value Income Stock Fund -2.93% 17.24% 15.02% 15.06%* -------------------------------------------------------------------------------- S&P 500/BARRA Value Index* 12.72% 22.94% 15.37% 15.46%* -------------------------------------------------------------------------------- * SINCE 10/31/89 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500/BARRA Value Index is a widely-recognized index of the stocks in the S&P 500 Index that have lower price-to-book ratios. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.80% Other Expenses 0.09% ----- Total Annual Fund Operating Expenses 0.89% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $91 $284 $493 $1,096 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 36 PROSPECTUS PRIME QUALITY MONEY MARKET FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital and liquidity -------------------------------------------------------------------------------- INVESTMENT FOCUS Money market instruments -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify money market instruments with the most attractive risk/return trade-off -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors who want to receive current income -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Prime Quality Money Market Fund invests exclusively in high quality U.S. money market instruments and foreign money market instruments denominated in U.S. dollars. In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk. The Adviser analyzes maturity, yields, market sectors and credit risk. Investments are made in money market instruments with the most attractive risk/return trade-off. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1993 2.77% 1994 3.77% 1995 5.47% 1996 4.99% 1997 5.15% 1998 5.10% 1999 4.74% BEST QUARTER WORST QUARTER 1.37% 0.68% (6/30/95) (6/30/93) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.83%. PROSPECTUS 37 PRIME QUALITY MONEY MARKET FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE IMONEYNET, INC. FIRST TIER AVERAGE. SINCE TRUST SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- Prime Quality Money Market Fund 4.74% 5.09% 4.45%* -------------------------------------------------------------------------------- iMoneyNet, Inc. First Tier Average 4.57% 4.97% 4.33%** -------------------------------------------------------------------------------- * SINCE 6/8/92 ** SINCE 5/31/92 To obtain more information about the Fund's yield, call 1-800-814-3397. [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN AVERAGE? -------------------------------------------------------------------------------- An average is a composite of mutual funds with similar investment goals. The iMoneyNet, Inc. First Tier Average is a widely-recognized composite of money market funds which invest in securities rated in the highest category by at least two recognized rating agencies. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.65% Other Expenses 0.10% ----- Total Annual Fund Operating Expenses 0.75% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares are the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $77 $240 $417 $930 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.54% and 0.64%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 38 PROSPECTUS U.S. GOVERNMENT SECURITIES MONEY MARKET FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital and liquidity -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. Treasury and government agency securities, and repurchase agreements -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without adding undue risk by analyzing yields -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors who want to receive current income -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The U.S. Government Securities Money Market Fund invests exclusively in U.S. Treasury obligations, obligations issued or guaranteed as to principal and interest by agencies or instrumentalities of the U.S. government, repurchase agreements involving these securities, and shares of registered money market funds that invest in the foregoing. In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk by analyzing yields. The Adviser actively manages the maturity of the Fund and its portfolio to maximize the Fund's yield based on current market interest rates and the Adviser's outlook on the market. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1993 2.67% 1994 3.64% 1995 5.39% 1996 4.81% 1997 4.99% 1998 4.88% 1999 4.41% BEST QUARTER WORST QUARTER 1.36% 0.65% (6/30/95) (6/30/93) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.65%. PROSPECTUS 39 U.S. GOVERNMENT SECURITIES MONEY MARKET FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE IMONEYNET, INC. U.S. GOVERNMENT & AGENCY AVERAGE. PREVIOUSLY, THE FUND'S RETURNS HAD BEEN COMPARED TO THE IMONEYNET, INC. U.S. TREASURY & REPO AVERAGE, BUT THE ADVISER BELIEVES THAT THE IMONEYNET, INC. U.S. GOVERNMENT & AGENCY AVERAGE, BECAUSE OF ITS INCLUSION OF MONEY MARKET FUNDS THAT INVEST IN SECURITIES OF GOVERNMENT AGENCIES AND INSTRUMENTALITIES, MORE ACCURATELY REFLECTS THE TYPE OF SECURITIES IN WHICH THE FUND INVESTS. SINCE TRUST SHARES 1 YEAR 5 YEARS INCEPTION U.S. Government Securities Money Market Fund 4.41% 4.90% 4.28%* -------------------------------------------------------------------------------- iMoneyNet, Inc. U.S. Government & Agency Average 4.52% 4.89% 4.26%** -------------------------------------------------------------------------------- iMoneyNet, Inc. U.S. Treasury & Repo Average 4.36% 4.82% 4.20%** -------------------------------------------------------------------------------- * SINCE 6/8/92 ** SINCE 5/31/92 To obtain more information about the Fund's yield, call 1-800-814-3397. [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN AVERAGE? -------------------------------------------------------------------------------- An average is a composite of mutual funds with similar investment goals. The previous index, the iMoneyNet, Inc. U.S. Treasury & Repo Average, is a widely recognized composite of money market funds which invest in U.S. Treasury securities and repurchase agreements backed by these securities. The iMoneyNet, Inc. U.S. Government & Agency Average is a widely-recognized composite of all money market funds which invest in U.S. Treasury Bills, repurchase agreements or securities issued by agencies of the U.S. government. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.65% Other Expenses 0.09% ----- Total Annual Fund Operating Expenses 0.74% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $76 $237 $411 $918 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.56% and 0.65%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 40 PROSPECTUS U.S. TREASURY MONEY MARKET FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while maintaining liquidity -------------------------------------------------------------------------------- INVESTMENT FOCUS Money market instruments issued and guaranteed by the U.S. Treasury -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Investing in U.S. Treasury obligations and repurchase agreements -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors who want to receive current income from their investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The U.S. Treasury Money Market Fund invests solely in U.S. Treasury obligations and repurchase agreements that are collateralized by obligations issued or guaranteed by the U.S. Treasury. The Fund limits its investments so as to obtain the highest investment quality rating by a nationally recognized statistical rating organization (Standard and Poor's Corporation, AAA). The Fund will maintain an average maturity of 90 days or less, and will only acquire securities that have a remaining maturity of 397 days or less. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. Although the Fund's U.S. Treasury securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* 1990 7.86% 1991 5.75% 1992 3.40% 1993 2.51% 1994 3.50% 1995 5.33% 1996 4.77% 1997 4.93% 1998 4.82% 1999 4.38% BEST QUARTER WORST QUARTER 1.92% 0.61% (6/30/90) (12/31/93) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.60%. PROSPECTUS 41 U.S. TREASURY MONEY MARKET FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE IMONEYNET, INC. U.S. TREASURY & REPO AVERAGE. SINCE TRUST SHARES 1 YEAR 5 YEARS 10 YEARS INCEPTION -------------------------------------------------------------------------------- U.S. Treasury Money Market Fund 4.38% 4.85% 4.71% 5.30%* -------------------------------------------------------------------------------- iMoneyNet, Inc. U.S. Treasury & Repo Average 4.36% 4.82% N/A N/A -------------------------------------------------------------------------------- * SINCE 2/18/87 To obtain more information about the Fund's yield, call 1-800-814-3397. [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN AVERAGE? -------------------------------------------------------------------------------- An average is a composite of mutual funds with similar investment goals. The iMoneyNet, Inc. U.S. Treasury & Repo Average is a widely recognized composite of money market funds which invest in U.S. Treasury securities and repurchase agreements backed by these securities. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.65% Other Expenses 0.09% ----- Total Annual Fund Operating Expenses 0.74% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares are the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $76 $237 $411 $918 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.56% and 0.65%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 42 PROSPECTUS RISK/RETURN INFORMATION COMMON TO THE LIFE VISION FUNDS The Life Vision Aggressive Growth Fund, Life Vision Growth and Income Fund and the Life Vision Moderate Growth Fund (each a "Life Vision Fund," and collectively, the "Life Vision Funds"), and each underlying STI Classic Fund in which they invest are mutual funds. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities like stocks and bonds. Before you invest, you should know a few things about investing in mutual funds. The value of your investment in a Life Vision Fund is based on the market prices of the securities the underlying STI Classic Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, will vary depending on the types of securities the underlying STI Classic Fund owns and the markets where these securities trade. The effect on a Life Vision Fund of a change in the value of a single security will depend on how widely the Life Vision Fund and the underlying STI Classic Funds diversify their holdings. Like other investments, you could lose money on your investment in a Life Vision Fund. Your investment in a Life Vision Fund is not a bank deposit. It is not insured or guaranteed by the FDIC or any government agency. The Life Vision Funds provide investors with the opportunity to purchase three distinct asset allocations strategies implemented through investments in Trust Class Shares of selected STI Classic Funds. By investing in the Life Vision Funds, investors have the opportunity to diversify and allocate their assets among the broad range of Funds in the STI Classic Funds. The assets of each Life Vision Fund will be allocated among underlying STI Classic Funds in accordance with its investment objective, the Adviser's outlook for the economy, the financial markets and the relative market valuations of the underlying STI Classic Funds. Each Life Vision Fund has the ability to invest its assets allocated to a particular asset class in one or more of the underlying STI Classic Funds, which have different investment objectives, policies and risk characteristics. Although the Life Vision Funds currently expect to invest in one or more of the underlying STI Classic Funds, the Adviser has the discretion to change the particular STI Classic Funds used as underlying investments for the Life Vision Funds. If determined to be in the best interest of the Life Vision Funds, the Adviser reserves the right to substitute or include other underlying STI Classic Funds, including STI Classic Funds that do not currently exist. A Life Vision Fund's goal may be changed without shareholder approval. Before investing, make sure that the Life Vision Fund's goal matches your own. PROSPECTUS 43 LIFE VISION AGGRESSIVE GROWTH FUND [BRIEFCASE GRAPHIC OMITTED] LIFE VISION FUND SUMMARY INVESTMENT GOAL High capital appreciation -------------------------------------------------------------------------------- INVESTMENT FOCUS Equity and money market Funds -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY High -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Investing at least 80% of the Life Vision Fund's total assets in STI Classic Equity Funds -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need to receive income on their investment, and are willing to be subject to the risks of equity securities -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Life Vision Aggressive Growth Fund invests at least 80% of its total assets in STI Classic Funds that invest primarily in equity securities. The Fund's remaining assets may be invested in STI Classic Money Market Funds, securities issued by the U.S. government, its agencies or instrumentalities, repurchase agreements and short-term paper. In selecting a diversified portfolio of underlying STI Classic Funds, the Adviser analyzes many factors, including the underlying STI Classic Funds' investment objectives, total return, volatility and expenses. The Fund currently plans to invest in shares of the following underlying STI Classic Funds within the percentage ranges indicated: INVESTMENT RANGE (PERCENTAGE OF THE LIFE VISION AGGRESSIVE ASSET CLASS GROWTH FUND'S ASSETS) -------------------------------------------------------------------------------- Equity Funds 80-100% Core Equity Fund Growth and Income Fund International Equity Index Fund Mid-Cap Equity Fund Small Cap Value Equity Fund Small Cap Growth Stock Fund Value Income Stock Fund -------------------------------------------------------------------------------- Money Market Funds 0-20% Prime Quality Money Market Fund -------------------------------------------------------------------------------- Other STI Classic Funds may be utilized in the future. Due to its investment strategy, this Life Vision Fund holds STI Classic Funds that buy and sell securities frequently. This may result in higher transaction costs and additional capital gains taxes. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS LIFE VISION FUND? The value of an investment in this Life Vision Fund is based primarily on the performance of the underlying STI Classic Funds and the allocation of this Life Vision Fund's assets among them. Since it purchases equity securities, this Life Vision Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the STI Classic Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in this Life Vision Fund. This Life Vision Fund is also subject to the risk that the Adviser's asset allocation decisions will not anticipate market trends successfully. For example, weighting common stocks too heavily during a stock market decline may result in a failure to preserve capital. Conversely, investing too heavily in fixed income securities during a period of stock market appreciation may result in lower total return. The risks associated with investing in this Life Vision Fund will vary depending upon how the assets are allocated among the underlying STI Classic Funds. 44 PROSPECTUS LIFE VISION AGGRESSIVE GROWTH FUND [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in this Life Vision Fund. Of course, the Life Vision Fund's past performance does not necessarily indicate how this Life Vision Fund will perform in the future. The periods prior to June 1997, when the Life Vision Fund began operating, represent the performance of the Adviser's similarly managed asset allocation program. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's asset allocation program was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the asset allocation program's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THIS LIFE VISION FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1993 12.14% 1994 -4.30% 1995 25.12% 1996 16.62% 1997 22.53% 1998 12.31% 1999 10.31% BEST QUARTER WORST QUARTER 18.72% -15.23% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THIS LIFE VISION FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 4.38%. THIS TABLE COMPARES THIS LIFE VISION FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1999, TO THOSE OF A HYBRID 61/15/12/10/2 BLEND OF THE FOLLOWING BENCHMARKS: THE RUSSELL 1000 INDEX, MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA AND FAR EAST (MSCI EAFE) INDEX, RUSSELL 2000 INDEX, SALOMON 3-MONTH TREASURY BILL INDEX AND THE RUSSELL MID-CAP INDEX. SINCE TRUST SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- Life Vision Aggressive Growth Fund 10.31% 17.24% 13.16%* -------------------------------------------------------------------------------- Hybrid 61/15/12/10/2 Blend of the Following Market Indices 19.76% 21.39% 17.16%* -------------------------------------------------------------------------------- Russell 1000 Index 20.91% 28.04% 21.04%* -------------------------------------------------------------------------------- MSCI EAFE Index 26.96% 12.83% 14.71%* -------------------------------------------------------------------------------- Russell 2000 Index 21.26% 16.69% 14.15%* -------------------------------------------------------------------------------- Salomon 3-Month Treasury Bill Index 4.73% 5.20% 4.75%* -------------------------------------------------------------------------------- Russell Mid-Cap Index 18.23% 21.86% 17.03%* -------------------------------------------------------------------------------- * SINCE 12/31/92 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 90% of the total market capitalization of the Russell 3000 Index. The MSCI EAFE Index is a widely-recognized, capitalization-weighted larger market capitalizations have more influence than smaller market capitalizations) index of over 900 securities listed on the stock exchanges in Europe, Australasia and the Far East. The country weighting of the Index is calculated using the market capitalization of each of the various countries, and then with respect to the market capitalization of the various companies operating in each country. The Russell 2000 Index is a widely recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of the 2,000 smallest U.S. companies out of the 3,000 largest companies. The Salomon 3-Month Treasury Bill Index is a widely recognized index of the 3 month U.S. Treasury Bills. The Russell Mid-Cap Index measures the performance of those Frank Russell Mid-Cap companies with higher price-to-book ratios and higher forecasted growth values. The stocks are also members of the Russell 1000 Index. PROSPECTUS 45 LIFE VISION AGGRESSIVE GROWTH FUND [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes this Life Vision Fund's fees and expenses that you may pay if you buy and hold this Life Vision Fund's shares. The table does not reflect any of the operating costs and investment advisory fees of the underlying STI Classic Funds. This Life Vision Fund and its shareholders will indirectly bear a pro rata share of the expenses of the underlying STI Classic Funds. -------------------------------------------------------------------------------- ANNUAL LIFE VISION FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM LIFE VISION FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.25% Other Expenses 0.19% ----- Total Annual Life Vision Fund Operating Expenses 0.44% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in this Life Vision Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the this Life Vision Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, this Life Vision Fund's operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $45 $141 $246 $555 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Life Vision Fund expenses in the table above are shown as a percentage of the Life Vision Fund's net assets. These expenses are deducted from Life Vision Fund assets. The table shows the highest expenses that could be currently charged to the Life Vision Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.06% and 0.25%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 46 PROSPECTUS LIFE VISION GROWTH AND INCOME FUND [BRIEFCASE GRAPHIC OMITTED] LIFE VISION FUND SUMMARY INVESTMENT GOAL Long-term capital appreciation -------------------------------------------------------------------------------- INVESTMENT FOCUS Equity and bond funds -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Investing pursuant to an asset allocation strategy in a combination of STI Classic Equity and, to a lesser extent, Bond Funds -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want their assets to grow, but want to moderate the risks of equity securities through investment of a portion of their assets in bonds -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Life Vision Growth and Income Fund invests at least 70% to 80% of its total assets in STI Classic Funds that invest primarily in either equity securities or fixed income securities. The Fund's remaining assets may be invested in shares of underlying STI Classic Money Market Funds, securities issued by the U.S. government, its agencies or instrumentalities, repurchase agreements and short-term paper. In selecting a diversified portfolio of underlying STI Classic Funds, the Adviser analyzes many factors, including the underlying STI Classic Funds' investment objectives, total returns, volatility and expenses. The Fund currently plans to invest in shares of the following underlying STI Classic Funds within the percentage ranges indicated: INVESTMENT RANGE (PERCENTAGE OF THE LIFE ASSET CLASS VISION GROWTH AND INCOME FUND'S ASSETS) -------------------------------------------------------------------------------- Equity Funds 50-80% Core Equity Fund Growth and Income Fund International Equity Index Fund Mid-Cap Equity Fund Small Cap Value Equity Fund Small Cap Growth Stock Fund Value Income Stock Fund -------------------------------------------------------------------------------- Bond Funds 20-50% Short-Term Bond Fund Investment Grade Bond Fund Limited-Term Federal Mortgage Securities Fund -------------------------------------------------------------------------------- Money Market Funds 0-20% Prime Quality Money Market Fund -------------------------------------------------------------------------------- Other STI Classic Funds may be utilized in the future. Due to its investment strategy, this Life Vision Fund holds STI Classic Funds that buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS LIFE VISION FUND? The value of an investment in this Life Vision Fund is based primarily on the performance of the underlying STI Classic Funds and the allocation of this Life Vision Fund's assets among them. Since it purchases equity funds, this Life Vision Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of an underlying STI Classic Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in this Life Vision Fund. The prices of an underlying STI Classic Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, an underlying STI Classic Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. This Life Vision Fund is also subject to the risk that the Adviser's asset allocation decisions will not anticipate market trends successfully. For example, weighting common stocks too heavily during a stock market decline may result in a failure to preserve capital. Conversely, investing too heavily in fixed income securities during a period of stock market appreciation may result in lower total return. The risks associated with investing in this Life Vision Fund will vary depending upon how the assets are allocated among the underlying STI Classic Funds. PROSPECTUS 47 LIFE VISION GROWTH AND INCOME FUND [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in this Life Vision Fund. Of course, this Life Vision Fund's past performance does not necessarily indicate how this Life Vision Fund will perform in the future. The periods prior to June 1997, when the Life Vision Fund began operating, represent the performance of the Adviser's similarly managed asset allocation program. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's asset allocation program was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the asset allocation program's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THIS LIFE VISION FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1993 10.02% 1994 -3.52% 1995 22.68% 1996 12.16% 1997 18.08% 1998 11.16% 1999 7.95% BEST QUARTER WORST QUARTER 13.65% -10.20% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THIS LIFE VISION FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 3.19%. THIS TABLE COMPARES THIS LIFE VISION FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1999 TO THOSE OF THE HYBRID 40/17/16/13/12/2 BLEND OF THE FOLLOWING MARKET INDICES: THE RUSSELL 1000 INDEX, MERRILL LYNCH 1-5 YEAR U.S. CORPORATE/ GOVERNMENT INDEX, LEHMAN BROTHERS U.S. GOVERNMENT/CREDIT INDEX, MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA AND FAR EAST (MSCI EAFE) INDEX, RUSSELL 2000 INDEX AND THE RUSSELL MID-CAP INDEX. SINCE TRUST SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- Life Vision Growth and Income Fund 7.95% 14.29% 10.94%* -------------------------------------------------------------------------------- Hybrid 40/17/16/13/12/2 Blend of the Following Market Indices 15.34% 17.98% 14.84%* -------------------------------------------------------------------------------- Russell 1000 Index 20.91% 28.04% 21.04%* -------------------------------------------------------------------------------- Merrill Lynch 1-5 Year U.S. Corporate/ Government Index 2.19% 6.86% 5.81%* -------------------------------------------------------------------------------- Lehman Brothers U.S. Government/ Credit Index -2.15% 7.60% 6.42%* -------------------------------------------------------------------------------- MSCI EAFE Index 26.96% 12.83% 14.71%* -------------------------------------------------------------------------------- Russell 2000 Index 21.26% 16.69% 14.15%* -------------------------------------------------------------------------------- Russell Mid-Cap Index 18.23% 21.86% 17.03%* -------------------------------------------------------------------------------- * SINCE 12/31/92 48 PROSPECTUS LIFE VISION GROWTH AND INCOME FUND [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 90% of the total market capitalization of the Russell 3000 Index. The Merrill Lynch 1-5 Year U.S. Corporate/Government Index is a widely- recognized, capitalization-weighted index including all U.S. Corporate securities and U.S. Government securities with maturities of 1 year or greater but less than 5 years from maturity. The Lehman Brothers U.S. Government/Credit Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, corporate debt backed by the U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least 1 year. The MSCI EAFE Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than smaller market capitalizations) index of over 900 securities listed on the stock exchanges in Europe, Australasia and the Far East. The country weighting of the Index is calculated using the market capitalization of each of the various countries, and then with respect to the market capitalization of the various companies operating in each country. The Russell 2000 Index is a widely recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of the 2,000 smallest U.S. companies out of the 3,000 largest companies. The Russell Mid-Cap Index measures the performance of those Frank Russell Mid-Cap companies with higher price-to-book ratios and higher forecasted growth values. The stocks are also members of the Russell 1000 Index. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Life Vision Fund's fees and expenses that you may pay if you buy and hold this Life Vision Fund's shares. The table does not reflect any of the operating costs and investment advisory fees of the underlying STI Classic Funds. This Life Vision Fund and its shareholders will indirectly bear a pro rata share of the expenses of the underlying STI Classic Funds. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM LIFE VISION FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.25% Other Expenses 0.17% ----- Total Annual Portfolio Operating Expenses 0.42% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in this Life Vision Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in this Life Vision Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, the Life Vision Fund's operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $43 $135 $235 $530 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Life Vision Fund expenses in the table above are shown as a percentage of the Life Vision Fund's net assets. These expenses are deducted from Life Vision Fund assets. The table shows the highest expenses that could be currently charged to the Life Vision Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.08% and 0.25%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." PROSPECTUS 49 LIFE VISION MODERATE GROWTH FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Capital appreciation and current income -------------------------------------------------------------------------------- INVESTMENT FOCUS Equity and bond funds -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Low -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Investing pursuant to an asset allocation strategy in a combination of STI Classic Equity and Bond Funds -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want income from their investment, as well as an increase in its value, and are willing to be subject to the risks of equity securities -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Life Vision Moderate Growth Fund principally invests in STI Classic Funds that invest primarily in equity securities and fixed income securities. The Fund's remaining assets may be invested in shares of underlying STI Classic Funds that are money market funds, securities issued by the U.S. government, its agencies or instrumentalities, repurchase agreements and short-term paper. In selecting a diversified portfolio of underlying STI Classic Funds, the Adviser analyzes many factors, including the underlying STI Classic Funds' investment objectives, total returns, volatility and expenses. The Fund currently plans to invest in shares of the following underlying STI Classic Funds within the percentage ranges indicated: INVESTMENT RANGE (PERCENTAGE OF THE LIFE ASSET CLASS VISION MODERATE GROWTH FUND'S ASSETS) -------------------------------------------------------------------------------- Equity Funds 35-65% Core Equity Fund Growth and Income Fund International Equity Index Fund Mid-Cap Equity Fund Small Cap Value Equity Fund Small Cap Growth Stock Fund Value Income Stock Fund -------------------------------------------------------------------------------- Bond Funds 35-65% Short-Term Bond Fund Investment Grade Bond Fund Limited-Term Federal Mortgage Securities Fund -------------------------------------------------------------------------------- Money Market Funds 0-20% Prime Quality Money Market Fund -------------------------------------------------------------------------------- Other STI Class Funds may be utilized in the future. Due to its investment strategy, this Life Vision Fund holds STI Classic Funds that buy and sell securities frequently. This may result in higher transaction costs and additional capital gains taxes. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS LIFE VISION FUND? The value of an investment in this Life Vision Fund is based primarily on the performance of the underlying STI Classic Funds and the allocation of this Life Vision Fund's assets among them. Since it purchases equity funds, this Life Vision Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of an underlying STI Classic Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in this Life Vision Fund. The prices of an underlying STI Classic Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, an underlying STI Classic Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. This Life Vision Fund is also subject to the risk that the Adviser's asset allocation decisions will not anticipate market trends successfully. For example, weighting common stocks too heavily during a stock market decline may result in a failure to preserve capital. Conversely, investing too heavily in fixed income securities during a period of stock market appreciation may result in lower total return. The risks associated with investing in this Life Vision Fund will vary depending upon how the assets are allocated among the underlying STI Classic Funds. 50 PROSPECTUS LIFE VISION MODERATE GROWTH FUND [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in this Life Vision Fund. Of course, this Life Vision Fund's past performance does not necessarily indicate how this Life Vision Fund will perform in the future. The periods prior to June 1997, when the Life Vision Fund began operating, represent the performance of the Adviser's similarly managed asset allocation program. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's asset allocation program was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the asset allocation program's performance would have been lower. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THIS LIFE VISION FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Graph Omitted] Plot points are as follows: 1993 9.26% 1994 -2.97% 1995 20.52% 1996 10.51% 1997 16.41% 1998 11.15% 1999 6.19% BEST QUARTER WORST QUARTER 11.24% -7.99% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THIS LIFE VISION FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.97%. THIS TABLE COMPARES THIS LIFE VISION FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF A HYBRID 27/26/22/14/10/1 BLEND OF THE FOLLOWING BENCHMARKS: THE RUSSELL 1000 INDEX, MERRILL LYNCH 1-5 YEAR U.S. CORPORATE/ GOVERNMENT INDEX, LEHMAN BROTHERS U.S. GOVERNMENT/CREDIT INDEX, MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA AND FAR EAST (MSCI EAFE) INDEX, RUSSELL 2000 INDEX AND THE RUSSELL MID-CAP INDEX. SINCE TRUST SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- Life Vision Moderate Growth Fund 6.19% 12.85% 9.93%* -------------------------------------------------------------------------------- Hybrid 27/26/22/14/10/1 Blend of the Following Benchmarks 11.58% 14.81% 12.42%* -------------------------------------------------------------------------------- Russell 1000 Index 20.91% 28.04% 21.04%* -------------------------------------------------------------------------------- Merrill Lynch 1-5 Year U.S. Corporate/ Government Index 2.19% 6.86% 5.81%* -------------------------------------------------------------------------------- Lehman Brothers U.S. Government/ Credit Index -2.15% 7.60% 6.42%* -------------------------------------------------------------------------------- MSCI EAFE Index 26.96% 12.83% 14.71%* -------------------------------------------------------------------------------- Russell 2000 Index 21.26% 16.69% 14.15%* -------------------------------------------------------------------------------- Russell Mid-Cap Index 18.23% 21.86% 17.03%* -------------------------------------------------------------------------------- * SINCE 12/31/92 PROSPECTUS 51 LIFE VISION MODERATE GROWTH FUND [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 90% of the total market capitalization of the Russell 3000 Index. The Merrill Lynch 1-5 Year U.S. Corporate/Government Index is a widely-recognized, capitalization-weighted index including all U.S. Corporate securities and U.S. Government securities with maturities of 1 year or greater but less than 5 years from maturity. The Lehman Brothers U.S. Government/Credit Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, corporate debt backed by the U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least 1 year. The MSCI EAFE Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than smaller market capitalizations) index of over 900 securities listed on the stock exchanges in Europe, Australasia and the Far East. The country weighting of the Index is calculated using the market capitalization of each of the various countries, and then with respect to the market capitalization of the various companies operating in each country. The Russell 2000 Index is a widely recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of the 2,000 smallest U.S. companies out of the 3,000 largest companies. The Russell Mid-Cap Index measures the performance of those Frank Russell Mid-Cap companies with higher price-to-book ratios and higher forecasted growth values. The stocks are also members of the Russell 1000 Index. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes this Life Vision Fund's fees and expenses that you may pay if you buy and hold this Life Vision Fund's shares. The table does not reflect any of the operating costs and investment advisory fees of the underlying STI Classic Funds. This Life Vision Fund and its shareholders will indirectly bear a pro rata share of the expenses of the underlying STI Classic Funds. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM LIFE VISION FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.25% Other Expenses 0.12% ----- Total Annual Fund Operating Expenses 0.37% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in this Life Vision Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in this Life Vision Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, the Life Vision Fund's operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $38 $119 $208 $468 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Life Vision Fund expenses in the table above are shown as a percentage of the Life Vision Fund's net assets. These expenses are deducted from Life Vision Fund assets. The table shows the highest expenses that could be currently charged to the Life Vision Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.13% and 0.25%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 52 PROSPECTUS MORE INFORMATION ABOUT RISK [INNERTUBE GRAPHIC OMITTED] MORE INFORMATION ABOUT RISK EQUITY RISK BALANCED FUND CAPITAL APPRECIATION FUND CORE EQUITY FUND E-COMMERCE OPPORTUNITY FUND GROWTH AND INCOME FUND INTERNATIONAL EQUITY FUND INTERNATIONAL EQUITY INDEX FUND MID-CAP EQUITY FUND SMALL CAP VALUE EQUITY FUND SMALL CAP GROWTH STOCK FUND TAX SENSITIVE GROWTH STOCK FUND VALUE INCOME STOCK FUND LIFE VISION AGGRESSIVE GROWTH FUND LIFE VISION GROWTH AND INCOME FUND LIFE VISION MODERATE GROWTH FUND Equity securities include public and privately issued equity securities, common and preferred stocks, warrants, rights to subscribe to common stock and convertible securities, as well as instruments that attempt to track the price movement of equity indices. Investments in equity securities and equity derivatives in general are subject to market risks that may cause their prices to fluctuate over time. The value of securities convertible into equity securities, such as warrants or convertible debt, is also affected by prevailing interest rates, the credit quality of the issuer and any call provision. Fluctuations in the value of equity securities in which a mutual fund invests will cause a fund's net asset value to fluctuate. An investment in a portfolio of equity securities may be more suitable for long-term investors who can bear the risk of these share price fluctuations. FIXED INCOME RISK BALANCED FUND INVESTMENT GRADE BOND FUND LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND SHORT-TERM BOND FUND SHORT-TERM U.S. TREASURY SECURITIES FUND LIFE VISION AGGRESSIVE GROWTH FUND LIFE VISION GROWTH AND INCOME FUND LIFE VISION MODERATE GROWTH FUND The market value of fixed income investments change in response to interest rate changes and other factors. During periods of falling interest rates, the values of outstanding fixed income securities generally rise. Moreover, while securities with longer maturities tend to produce higher yields, the prices of longer maturity securities are also subject to greater market fluctuations as a result of changes in interest rates. In addition to these fundamental risks, different types of fixed income securities may be subject to the following additional risk: CREDIT RISK BALANCED FUND INVESTMENT GRADE BOND FUND SHORT-TERM BOND FUND The possibility that an issuer will be unable to make timely payments of either principal or interest. FOREIGN SECURITY RISKS GROWTH AND INCOME FUND INTERNATIONAL EQUITY FUND INTERNATIONAL EQUITY INDEX FUND Investments in securities of foreign companies or governments can be more volatile than investments in U.S. companies or governments. Diplomatic, political, or economic developments, including nationalization or appropriation, could affect investments in foreign countries. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets. In addition, the value of securities denominated in foreign currencies, and of dividends from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign companies or governments generally are not subject to uniform accounting, auditing, and financial reporting standards comparable to those applicable to domestic U.S. companies or governments. Transaction costs are generally higher than those in the U.S. and expenses for custodial arrangements of foreign securities may be somewhat greater than typical expenses for custodial arrangements of similar U.S. securities. Some foreign governments levy withholding taxes against dividend and interest income. Although in PROSPECTUS 53 INVESTMENT ADVISER AND PORTFOLIO MANAGERS some countries a portion of these taxes are recoverable, the non-recovered portion will reduce the income received from the securities comprising the portfolio. TRACKING ERROR RISK INTERNATIONAL EQUITY INDEX FUND Factors such as Fund expenses, imperfect correlation between the Fund's investments and those of their benchmarks, rounding of share prices, changes to the benchmark, regulatory policies, and leverage, may affect their ability to achieve perfect correlation. The magnitude of any tracking error may be affected by a higher portfolio turnover rate. Because an index is just a composite of the prices of the securities it represents rather than an actual portfolio of those securities, an index will have no expenses. As a result, a Fund, which will have expenses such as taxes, custody, management fees and other operational costs, and brokerage, may not achieve its investment objective of accurately correlating to an index. [MOUNTAINTOP GRAPHIC OMITTED] MORE INFORMATION ABOUT FUND INVESTMENTS This prospectus describes the Fund's primary strategies, and the Funds will normally invest in the types of securities described in this prospectus. However, each Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). The investments and strategies described in this prospectus are those that the Funds use under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, each Fund (except the Money Market Funds) may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and short-term obligations that would not ordinarily be consistent with a Fund's objectives. The Small Cap Value Equity Fund may invest in investment grade fixed income securities and mid to large cap common stocks. In addition, the Investment Grade Bond and Short-Term Bond Funds each may shorten its average weighted maturity to as little as 90 days. A Fund (other than a Money Market Fund) will do so only if the Adviser believes that the risk of loss outweighs the opportunity for capital gains or higher income. Of course, a Fund cannot guarantee that it will achieve its investment goal. [MAGNIFIER GRAPHIC OMITTED] INVESTMENT ADVISER The Investment Adviser (the "Adviser") makes investment decisions for the Funds and continuously reviews, supervises and administers each Fund's respective investment program. The Board of Trustees supervises the Adviser and establishes policies that the Adviser must follow in its management activities. Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Funds. As of July 1, 2000, Trusco had approximately $47 billion in assets under management. For the fiscal period ended May 31, 2000, the Adviser received advisory fees of: BALANCED FUND 0.85% CAPITAL APPRECIATION FUND 1.06% CORE EQUITY FUND 1.03% E-COMMERCE OPPORTUNITY FUND 0.96% GROWTH AND INCOME FUND 0.90% INTERNATIONAL EQUITY FUND 1.25% INTERNATIONAL EQUITY INDEX FUND 0.79% INVESTMENT GRADE BOND FUND 0.67% LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND 0.53% MID-CAP EQUITY FUND 1.07% SHORT-TERM BOND FUND 0.56% SHORT-TERM U.S. TREASURY SECURITIES FUND 0.53% SMALL CAP GROWTH STOCK FUND 1.10% SMALL CAP VALUE EQUITY FUND 1.12% TAX SENSITIVE GROWTH STOCK FUND 1.09% U.S. GOVERNMENT SECURITIES FUND 0.67% VALUE INCOME STOCK FUND 0.80% 54 PROSPECTUS INVESTMENT ADVISER AND PORTFOLIO MANAGERS PRIME QUALITY MONEY MARKET FUND 0.50% U.S. GOVERNMENT SECURITIES MONEY MARKET FUND 0.54% U.S. TREASURY MONEY MARKET FUND 0.54% LIFE VISION AGGRESSIVE GROWTH FUND 0.06% LIFE VISION GROWTH AND INCOME FUND 0.08% LIFE VISION MODERATE GROWTH FUND 0.13% The Core Equity and E-Commerce Opportunity Funds had not completed a full fiscal year as of May 31, 2000. The Adviser may use its affiliates as brokers for Fund transactions. For periods prior to January 1, 2000, STI Capital Management, N.A. ("STI"), a subsidiary of SunTrust Banks, Inc. served as Investment Adviser to the Balanced Fund, Capital Appreciation Fund, International Equity Fund, Investment Grade Bond Fund, Limited-Term Federal Mortgage Securities Fund, Mid-Cap Equity Fund, Small Cap Value Equity Fund, and Value Income Stock Fund. On January 1, 2000, SunTrust Bank (formerly SunTrust Bank, Atlanta), a subsidiary of SunTrust Banks, Inc. succeeded STI as the Investment Adviser to those Funds. On July 1, 2000, SunTrust Banks, Inc. reorganized its money management units, including those of SunTrust Bank, into Trusco Capital Management, Inc. As a result, Trusco now serves as the Investment Adviser to each STI Classic Fund including the Life Vision Funds. THE INVESTMENT TEAM The Life Vision Moderate Growth Fund, Life Vision Growth and Income Fund and Life Vision Aggressive Growth Fund are managed by a team of investment professionals. No one person is primarily responsible for making investment recommendations to the team. PORTFOLIO MANAGERS The Balanced Fund is co-managed by Mr. Robert J. Rhodes, CFA, Mr. Earl L. Denney, CFA, and Mr. Dave E. West, CFA. Mr. Rhodes manages the equity portion of the Fund. Mr. Denney and Mr. West co-manage the fixed-income portion of the Fund. Mr. Rhodes has also managed the Core Equity Fund since it began operating in September 1999 and the Capital Appreciation Fund since June 2000. Mr. Rhodes is an Executive Vice President and head of the Equity Funds group at Trusco. Mr. Rhodes has been employed by Trusco since 1973 and was Director of Research at Trusco from 1980 to 2000. Mr. Rhodes has more than 27 years of investment experience. Mr. West has served as a Managing Director of STI and has worked there since 1985. In January 2000, he was named Managing Director of SunTrust Bank and is now a Managing Director of Trusco. Mr. West has more than 14 years of investment experience. Mr. Denney has served as Managing Director of STI since 1983. In January 2000 he was named Managing Director of SunTrust Bank and is now a Managing Director of Trusco. Mr. Denney has more than 21 years of investment experience. Mr. Alan S. Kelley has served as a Vice President of Trusco since July 2000. He has managed the E-Commerce Opportunity Fund since it began operating in September 1999. Prior to joining Trusco, Mr. Kelley served as a Portfolio Manager with SunTrust Bank, Atlanta from 1995 to 1999. He has more than 7 years of investment experience. Mr. Jeffrey E. Markunas, CFA, has served as Lead Portfolio Manager of the Growth and Income Fund since it began operating in September 1992. From 1992 until July 2000, he served as Senior Vice President and Director of Equity Management for Crestar Asset Management Company. Additionally, he was named Senior Vice President of Trusco in January 1999, and Managing Director in July 2000. Mr. Markunas has more than 17 years of investment experience. The International Equity Index Fund is managed by Mr. Chad Deakins, CFA, and co-managed by Mr. Robert J. Rhodes, CFA. Mr. Deakins serves as a Vice President of Trusco and has worked there since 1996. He has co-managed the International Equity Index Fund since February 1999. Mr. Deakins has also managed the International Equity Fund since May 2000. Prior to joining Trusco, Mr. Deakins worked at SunTrust Bank. He has more than 6 years of investment experience. Mr. Rhodes is an Executive Vice President and head of the Equity Funds group at Trusco. He has been employed by Trusco since 1973 PROSPECTUS 55 INVESTMENT ADVISER AND PORTFOLIO MANAGERS and was Director of Research at Trusco from 1980 to 2000. Mr. Rhodes has co-managed the International Equity Index Fund since it began operating in June 1994. Mr. Rhodes has more than 27 years of investment experience. The Investment Grade Bond Fund and the Limited-Term Federal Mortgage Securities Fund are co-managed by Mr. L. Earl Denney, CFA, and Mr. Dave E. West, CFA. Mr. Denney has served as Managing Director of STI since 1983. In January 2000, he was named Managing Director of SunTrust Bank and is now Managing Director of Trusco. He has co-managed the Investment Grade Bond Fund since it began operating in June 1992 and has co-managed the Limited-Term Mortgage Securities Fund since it began operating in June 1994. He has more than 21 years of investment experience. Mr. West has served as a Managing Director of STI and has worked there since 1985. In January 2000, he was named Managing Director of SunTrust Bank and is now a Managing Director of Trusco. He has co-managed the Investment Grade Bond Fund since it began operating in June 1992 and has co-managed the Limited-Term Federal Mortgage Securities Fund since it began operating in June 1994. Mr. West has more than 14 years of investment experience. Mr. John Hamlin has served as a Vice President of Trusco since July 2000, after serving as a Portfolio Manager of STI since March 1999. He has managed the Mid-Cap Equity Fund since April 1999. Prior to joining STI, Mr. Hamlin served as Portfolio Manager at Phoenix Investment Counsel, Inc. from 1992 to 1999. He has more than 11 years of investment experience. Ms. Agnes G. Pampush, CFA, has served as a Managing Director of Trusco since July 2000, after serving as a Vice President of Trusco since 1998. Ms. Pampush was employed by Trusco from 1988 to 1996, and rejoined the firm in 1998. She has managed the Short-Term Bond Fund since February 1999. She has more than 18 years of investment experience. Mr. David S. Yealy has served as a Managing Director of Trusco since July 2000. He has managed the Prime Quality Money Market Fund since it began operating in June 1992, the Short-Term U.S. Treasury Securities Fund since July 1996, and the U.S Treasury Money Market Fund since October 2000. Prior to July 2000, Mr. Yealy was a First Vice President of Trusco and has worked there since 1991. He has more than 15 years of investment experience. Mr. Mark D. Garfinkel, CFA, has served as a Portfolio Manager of Trusco since 1994. He has managed the Small Cap Growth Stock Fund since it began operating in October 1998. He has more than 13 years of investment experience. Mr. Brett Barner, CFA, has served as a Vice President of Trusco since July 2000, after serving as a Managing Director of STI since 1994. He has managed the Small Cap Value Equity Fund since it began operating in January 1997. He has more than 16 years of investment experience. Mr. Jonathan Mote, CFA, CFP, has served as a Portfolio Manager of Trusco since August 1998. He has managed the Tax Sensitive Growth Stock Fund since it began operating in December 1998. Prior to joining Trusco, Mr. Mote served as a Portfolio Manager with SunTrust Banks. He has more than 15 years of investment experience. Mr. Neil J. Powers, CFA, joined Trusco in 1997 and serves as a Managing Director. He has managed the U.S. Government Securities Fund since 2000. Prior to joining Trusco, Mr. Powers worked at Putnam Investments, from 1986 to 1997, where he managed multi-sector bond funds and separately managed institutional accounts. He has more than 16 years of investment experience. The Value Income Stock Fund is co-managed by Mr. Mills Riddick, CFA, and Mr. Dan Lewis. Mr. Riddick has served as a Managing Director of Trusco since July 2000, after serving as a Managing Director of STI since 1994. He has managed the Value Income Stock Fund since April 1995. Mr. Riddick has more than 18 years of investment experience. Mr. Lewis has served as a Portfolio Manager of Trusco since July 2000, after serving as a Portfolio Manager for STI since 1993. He has been an analyst of the Value Income Stock Fund since 1995. He has more than 9 years of investment experience. 56 PROSPECTUS PURCHASING AND SELLING FUND SHARES Mr. Robert S. Bowman, CFA, has served as a Vice President of Trusco since January 1999. He has managed the U.S. Government Securities Money Market Fund since October 2000. Prior to joining Trusco, Mr. Bowman served as an assistant trader from 1994 to 1995 and Vice President of Crestar Asset Management Company since 1995. He has more than 6 years of investment experience. [HANDSHAKE GRAPHIC OMITTED] PURCHASING AND SELLING FUND SHARES This section tells you how to purchase and sell (sometimes called "redeem") Trust Shares of the Funds. HOW TO PURCHASE FUND SHARES The Funds offer Trust Shares only to financial institutions or intermediaries, including subsidiaries of SunTrust Banks, Inc. (SunTrust), for their own or their customers' accounts for which they act as fiduciary, agent, investment adviser, or custodian. As a result, you, as a customer of a financial institution may purchase Trust Shares through accounts made with financial institutions. Trust Shares will be held of record by (in the name of) your financial institution. Depending upon the terms of your account, however, you may have, or be given, the right to vote your Trust Shares. The Funds may reject any purchase order if it is determined that accepting the order would not be in the best interests of the STI Classic Funds or its shareholders. If you are no longer eligible to participate in a 401(k) plan that holds Trust Shares of a Life Vision Fund on your behalf, you may exchange those shares for Investor Shares of the underlying Funds held by that Life Vision Fund. There is no sales charge for such an exchange. WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange is open for business (a Business Day). But you may not do so for shares of the Money Market Funds on federal holidays. The price per share (the offering price) will be the net asset value per share (NAV) next determined after the Funds receive your purchase order. Each Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m., Eastern time). So, for you to receive the current Business Day's NAV for each Fund (except the Money Market Funds), generally the Funds must receive your purchase order before 4:00 p.m. Eastern time. Each Money Market Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally 4:00 p.m., Eastern time.) So, for you to be eligible to receive dividends declared on the day you submit your purchase order, the Money Market Funds must generally receive your order before 3:00 p.m. Eastern time and receive federal funds (readily available funds) before 4:00 p.m, Eastern time. Otherwise, your purchase order will be effective the following Business Day, as long as each Money Market Fund receives federal funds before calculating its NAV the following day. FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES, AND OTHER FINANCIAL INSTITUTIONS YOU MAY HAVE TO TRANSMIT YOUR PURCHASE AND SALE REQUESTS TO SUNTRUST OR OTHER FINANCIAL INSTITUTIONS AT AN EARLIER TIME FOR YOUR TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS THE FINANCIAL INSTITUTION TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE OR SELL FUND SHARES, INCLUDING SPECIFIC SUNTRUST OR OTHER FINANCIAL INSTITUTIONS INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR FINANCIAL INSTITUTION DIRECTLY. HOW THE FUNDS CALCULATE NAV In calculating NAV, each Fund (except the Money Market Funds) generally values its investment portfolio at market price. In calculating NAV for each Money Market Fund, each Fund generally values its investment portfolio using the amortized cost PROSPECTUS 57 PURCHASING AND SELLING FUND SHARES valuation method, which is described in detail in the SAI. If market prices are unavailable or a Fund thinks that the market price or amortized cost valuation method is unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. Each Money Market Fund expects its NAV to remain constant at $1.00 per share, although the Fund cannot guarantee this. Some Funds hold securities that are listed on foreign exchanges. These securities may trade on weekends or other days when the Funds do not calculate NAV. As a result, the market value of these investments may change on days when you cannot purchase or sell Fund shares. NET ASSET VALUE NAV for one Fund share is the value of that share's portion of the net assets of the Fund. HOW TO SELL YOUR FUND SHARES You may sell (sometimes called "redeem") your shares on any Business Day by contacting SunTrust or your financial institution. SunTrust or your financial institution will give you information about how to sell your shares including any specific cut-off times required. Holders of Trust Shares may sell shares by following the procedures established when they opened their account or accounts with the Funds or with their financial institution or intermediary. The sale price of each share will be the next NAV determined after the Funds receive your request. Redemption orders must be received by the Money Market Funds on a Business Day before 3:00 p.m. Eastern time. Orders received after this time will be executed the following Business Day. RECEIVING YOUR MONEY Normally, the Funds will send your sale proceeds within five Business Days after the Adviser receives your request, but it may take up to seven days. REDEMPTIONS IN KIND The Funds generally pay sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Funds' remaining shareholders) the Funds might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES A Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. TELEPHONE TRANSACTIONS Purchasing and selling Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believes to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. 58 PROSPECTUS DIVIDENDS, DISTRIBUTIONS AND TAXES DIVIDENDS AND DISTRIBUTIONS Each Fund distributes its income as follows: QUARTERLY -------------------------------------------------------------------------------- BALANCED FUND CAPITAL APPRECIATION FUND CORE EQUITY FUND E-COMMERCE OPPORTUNITY FUND GROWTH AND INCOME FUND MID-CAP EQUITY FUND SMALL CAP VALUE EQUITY FUND SMALL CAP GROWTH STOCK FUND TAX SENSITIVE GROWTH STOCK FUND VALUE INCOME STOCK FUND LIFE VISION AGGRESSIVE GROWTH FUND LIFE VISION GROWTH AND INCOME FUND LIFE VISION MODERATE GROWTH FUND ANNUALLY -------------------------------------------------------------------------------- INTERNATIONAL EQUITY FUND INTERNATIONAL EQUITY INDEX FUND The Bond and Money Market Funds declare dividends daily and pay these dividends monthly. Each Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Funds in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Funds receive your written notice. To cancel your election, simply send the Funds written notice. TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Funds have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Dividends and distributions will accumulate on a tax-deferred basis if you are investing through an employer-sponsored retirement or savings plan that qualifies for tax-exempt treatment under federal income tax laws. Generally, you will not owe taxes on these distributions until you begin withdrawals from the plan. Withdrawals from the plan are subject to special tax rules and may be subject to a penalty tax in the case of premature withdrawals. You should consult your plan administrator, your plan's Summary Plan Description, and/or your tax advisor about the tax consequences of plan withdrawals. MORE INFORMATION ABOUT TAXES IS IN THE SAI. PROSPECTUS 59 FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS The tables that follow present performance information about Trust Shares of each Fund. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. The information for each Fund, except the Growth and Income Fund, U.S. Treasury Money Market Fund, Life Vision Aggressive Growth Fund, Life Vision Growth and Income Fund, and Life Vision Moderate Growth Fund for the periods ended prior to May 31, 1999, have been audited by Arthur Andersen LLP, independent public accountants. The financial highlights for the Growth and Income Fund and U.S. Treasury Money Market Fund, and the Life Vision Moderate Growth Fund, Life Vision Growth and Income Fund, and Life Vision Aggressive Growth Fund for the periods ended prior to May 31, 1999 have been audited by Deloitte & Touche LLP, independent accountants. The report of Arthur Andersen LLP, along with each Fund's financial statements, appears in the annual report that accompanies the SAI, at no charge by calling 1-800-428-6970. For the Periods Ended May 31, (unless otherwise indicated) For a Share Outstanding Throughout the Periods
NET REALIZED NET ASSET NET AND DISTRIBUTIONS VALUE INVESTMENT UNREALIZED FROM NET DISTRIBUTIONS NET ASSET BEGINNING INCOME GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN (+) --------- ---------- -------------- -------------- ------------- --------- ---------- ------------- BALANCED FUND ------------- Trust Shares 2000 ................. $13.26 $0.32 $0.33 $(0.30) $(0.24) $13.37 5.02% 1999 ................. 13.09 0.28 1.09 (0.28) (0.92) 13.26 10.98 1998 ................. 11.94 0.31 2.19 (0.32) (1.03) 13.09 22.15 1997 ................. 11.55 0.33 1.47 (0.32) (1.09) 11.94 16.66 1996 ................. 10.26 0.33 1.41 (0.34) (0.11) 11.55 17.26 ------------------------- CAPITAL APPRECIATION FUND ------------------------- Trust Shares 2000 ................. $16.62 $0.02 $1.40 $ -- $(0.92) $17.12 8.98% 1999 ................. 16.48 0.05 2.70 (0.06) (2.55) 16.62 17.83 1998 ................. 15.09 0.09 3.96 (0.09) (2.57) 16.48 29.51 1997 ................. 14.90 0.12 3.13 (0.12) (2.94) 15.09 24.66 1996 ................. 12.18 0.12 3.32 (0.13) (0.59) 14.90 28.97 -------------------------- GROWTH AND INCOME FUND (A) -------------------------- Trust Shares 2000 ................. $16.09 $0.11 $0.55 $(0.10) $(1.12) $15.53 4.11% 1999(1) .............. 15.10 0.04 1.97 (0.02) (1.00) 16.09 14.24 For the years ended November 30: 1998 ................. 16.55 0.09 1.64 (0.09) (3.09) 15.10 13.64 1997 ................. 13.39 0.14 3.24 (0.15) (0.07) 16.55 25.41 1996 ................. 11.60 0.17 2.38 (0.17) (0.59) 13.39 22.68
RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME TO RATIO OF INVESTMENT AVERAGE NET AVERAGE NET NET ASSETS EXPENSES TO INCOME ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO END OF AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE ------------ ----------- ---------- ----------------- --------------- --------- ------------- BALANCED FUND ------------- Trust Shares 2000 .............. $ 223,634 0.97% 2.39% 1.07% 2.29% 182% 1999 .............. 251,752 0.97 2.19 1.06 2.10 179 1998 .............. 188,465 0.96 2.51 1.08 2.39 154 1997 .............. 151,358 0.95 2.89 1.08 2.76 197 1996 .............. 111,638 0.95 3.00 1.09 2.86 155 ------------------------- CAPITAL APPRECIATION FUND ------------------------- Trust Shares 2000 ............. $1,296,927 1.17% 0.10% 1.26% 0.01% 129% 1999 ............. 1,966,842 1.17 0.29 1.26 0.20 147 1998 ............. 1,532,587 1.16 0.61 1.27 0.50 194 1997 ............. 1,085,128 1.15 0.83 1.25 0.73 141 1996 ............. 981,498 1.15 0.90 1.27 0.78 156 -------------------------- GROWTH AND INCOME FUND (A) -------------------------- Trust Shares 2000 ............. $ 885,109 1.01% 0.76% 1.01% 0.76% 53% 1999(1) .......... 634,279 1.14 0.49 1.43 0.20% 31 For the years ended November 30: 1998 ............. 577,042 1.03 0.63 1.21 0.45 71 1997 ............. 590,824 1.02 0.92 1.17 0.77 100 1996 ............. 553,648 1.02 1.38 1.17 1.23 82 (+) Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (1) For the six month period ended May 31, 1999. All ratios for the period have been annualized. (A) On May 24, 1999, the CrestFunds Value Fund exchanged all of its assets and certain liabilities for shares of the Growth and Income Fund. The CrestFunds Value Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. Amounts designated as "--" are either $0 or round to $0.
60 PROSPECTUS FINANCIAL HIGHLIGHTS
NET REALIZED NET ASSET NET AND DISTRIBUTIONS VALUE INVESTMENT UNREALIZED FROM NET DISTRIBUTIONS NET ASSET BEGINNING INCOME GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN (+) --------- ---------- --------------- ------------- -------------- --------- ---------- ------------------------- INTERNATIONAL EQUITY FUND ------------------------- Trust Shares 2000 ............. $12.97 $(0.10) $ 1.42 $(0.07) $(1.66) $12.56 10.58% 1999 ............. 15.00 -- (1.14) (0.05) (0.84) 12.97 (7.43) 1998 ............. 13.63 0.04 2.69 (0.04) (1.32) 15.00 21.87 1997 ............. 11.40 0.03 2.57 (0.02) (0.35) 13.63 23.29 1996(1) .......... 10.00 0.05 1.35 -- -- 11.40 14.00 ------------------------------- INTERNATIONAL EQUITY INDEX FUND ------------------------------- Trust Shares 2000 ............. $11.82 $ 0.16 $ 2.13 $(0.03) $(0.11) $13.97 19.36% 1999 ............. 13.31 0.09 0.85 (0.24) (2.19) 11.82 7.87 1998 ............. 11.34 0.11 2.65 (0.11) (0.68) 13.31 25.82 1997 ............. 10.96 0.10 0.69 (0.11) (0.30) 11.34 7.48 1996 ............. 10.24 0.10 0.84 (0.13) (0.09) 10.96 9.29 -------------------------- INVESTMENT GRADE BOND FUND -------------------------- Trust Shares 2000 ............. $10.36 $ 0.61 $(0.78) $(0.61) $ -- $ 9.58 (1.76)% 1999 ............. 10.65 0.56 (0.11) (0.56) (0.18) 10.36 4.25 1998 ............. 10.16 0.60 0.49 (0.60) -- 10.65 10.92 1997 ............. 10.07 0.60 0.09 (0.60) -- 10.16 6.99 1996 ............. 10.26 0.60 (0.19) (0.60) -- 10.07 4.02 --------------------------------------------- LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND --------------------------------------------- Trust Shares 2000 ............. $ 9.94 $ 0.55 $(0.32) $(0.55) $ -- $ 9.62 2.33% 1999 ............. 10.12 0.54 (0.06) (0.54) (0.12) 9.94 4.75 1998 ............. 10.02 0.58 0.11 (0.58) (0.01) 10.12 7.12 1997 ............. 9.99 0.58 0.04 (0.58) (0.01) 10.02 6.43 1996 ............. 10.11 0.62 (0.14) (0.60) -- 9.99 4.84
RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME (LOSS) TO RATIO OF INVESTMENT AVERAGE NET AVERAGE NET NET ASSETS EXPENSES TO INCOME (LOSS) ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO END OF AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE ----------- --------- ------------ ----------------- --------------- --------- ------------------------- INTERNATIONAL EQUITY FUND ------------------------- Trust Shares 2000 ............. $ 299,100 1.48% 0.59% 1.48% 0.59% 179% 1999 ............. 573,255 1.47 0.68 1.53 0.63 161 1998 ............. 628,870 1.47 0.61 1.48 0.60 108 1997 ............. 489,325 1.46 0.51 1.51 0.46 139 1996(1) .......... 213,306 1.46 1.36 1.65 1.17 113 -------------------- INTERNATIONAL EQUITY -------------------- INDEX FUND Trust Shares 2000 ............. $ 340,853 1.07% 0.83% 1.18% 0.72% 9% 1999 ............. 74,616 1.07 0.69 1.18 0.58 32 1998 ............. 56,200 1.06 0.88 1.18 0.76 1 1997 ............. 53,516 1.05 0.71 1.15 0.61 2 1996 ............. 90,980 1.05 0.84 1.19 0.70 30 -------------------------- INVESTMENT GRADE BOND FUND -------------------------- Trust Shares 2000 ............. $ 998,596 0.77% 6.05% 0.84% 5.98% 202% 1999 ............. 1,149,068 0.77 5.25 0.85 5.17 221 1998 ............. 793,488 0.76 5.67 0.86 5.57 109 1997 ............. 633,646 0.75 5.89 0.85 5.79 298 1996 ............. 599,514 0.75 5.81 0.87 5.69 184 -------------------- LIMITED-TERM FEDERAL -------------------- MORTGAGE SECURITIES FUND Trust Shares 2000 ............. $ 125,355 0.67% 5.60% 0.79% 5.48% 384% 1999 ............. 135,256 0.67 5.28 0.77 5.18 379 1998 ............. 137,488 0.66 5.75 0.77 5.64 163 1997 ............. 123,903 0.65 5.81 0.78 5.68 133 1996 ............. 73,370 0.65 6.04 0.84 5.85 83 (+) Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (1) Commenced operations on December 1, 1995. All ratios for the period have been annualized. Amounts designated as "--" are either $0 or round to $0.
PROSPECTUS 61 FINANCIAL HIGHLIGHTS
NET REALIZED NET ASSET NET AND DISTRIBUTIONS VALUE INVESTMENT UNREALIZED FROM NET DISTRIBUTIONS NET ASSET BEGINNING INCOME GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN (+) --------- ---------- --------------- ------------- -------------- --------- ---------- ------------------- MID-CAP EQUITY FUND ------------------- Trust Shares 2000 ............. $12.68 $(0.04) $ 2.32 $ -- $(0.86) $14.10 19.10% 1999 ............. 13.79 0.01 0.07 -- (1.19) 12.68 1.61 1998 ............. 13.21 -- 2.54 -- (1.96) 13.79 21.14 1997 ............. 12.76 0.03 1.69 (0.05) (1.22) 13.21 14.23 1996 ............. 11.00 0.08 2.63 (0.08) (0.87) 12.76 25.54 -------------------- SHORT-TERM BOND FUND -------------------- Trust Shares 2000 ............. $ 9.91 $ 0.53 $(0.25) $(0.53) $(0.01) $ 9.65 2.87% 1999 ............. 10.05 0.51 (0.10) (0.52) (0.03) 9.91 4.06 1998 ............. 9.90 0.55 0.16 (0.55) (0.01) 10.05 7.31 1997 ............. 9.86 0.53 0.07 (0.53) (0.03) 9.90 6.30 1996 ............. 9.98 0.54 (0.10) (0.54) (0.02) 9.86 4.45 ---------------------------------------- SHORT-TERM U.S. TREASURY SECURITIES FUND ---------------------------------------- Trust Shares 2000 ............. $ 9.95 $ 0.46 $(0.10) $(0.46) $ -- $ 9.85 3.75% 1999 ............. 9.97 0.47 (0.02) (0.47) -- 9.95 4.59 1998 ............. 9.88 0.51 0.10 (0.52) -- 9.97 6.30 1997 ............. 9.84 0.51 0.04 (0.51) -- 9.88 5.76 1996 ............. 9.93 0.55 (0.09) (0.55) -- 9.84 4.73 --------------------------- SMALL CAP GROWTH STOCK FUND --------------------------- Trust Shares 2000 ............. $14.55 $(0.08) $ 4.02 $ -- $(0.19) $18.30 27.24% 1999(1) .......... 10.00 (0.05) 4.62 -- (0.02) 14.55 45.70 --------------------------- SMALL CAP VALUE EQUITY FUND --------------------------- Trust Shares 2000 ............. $ 9.70 $ 0.13 $(0.59) $(0.11) $ -- $ 9.13 (4.72)% 1999 ............. 12.88 0.13 (2.57) (0.13) (0.61) 9.70 (18.72) 1998 ............. 11.07 0.14 2.41 (0.12) (0.62) 12.88 23.59 1997(2) .......... 10.00 0.05 1.04 (0.02) -- 11.07 10.97
RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME (LOSS) TO RATIO OF INVESTMENT AVERAGE NET AVERAGE NET NET ASSETS EXPENSES TO INCOME (LOSS) ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO END OF AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE ----------- --------- ------------ ----------------- --------------- --------- ------------------- MID-CAP EQUITY FUND ------------------- Trust Shares 2000 ............. $206,545 1.17% $ -- 1.25% (0.08)% 131% 1999 ............. 254,055 1.17 (0.47) 1.28 (0.58) 76 1998 ............. 337,825 1.16 (0.29) 1.27 (0.40) 129 1997 ............. 287,370 1.15 0.23 1.26 0.12 152 1996 ............. 253,905 1.15 0.70 1.29 0.56 116 -------------------- SHORT-TERM BOND FUND -------------------- Trust Shares 2000 ............. $180,402 0.67% 5.40% 0.76% 5.31% 70% 1999 ............. 209,904 0.67 5.12 0.77 5.02 108 1998 ............. 120,422 0.66 5.47 0.79 5.34 87 1997 ............. 89,701 0.65 5.37 0.78 5.24 118 1996 ............. 91,156 0.65 5.39 0.81 5.23 163 ---------------------------------------- SHORT-TERM U.S. TREASURY SECURITIES FUND ---------------------------------------- Trust Shares 2000 ............. $ 72,570 0.67% 4.70% 0.79% 4.58% 50% 1999 ............. 56,027 0.67 4.69 0.78 4.58 57 1998 ............. 46,920 0.66 5.19 0.84 5.01 39 1997 ............. 21,988 0.65 5.23 0.92 4.96 93 1996 ............. 10,149 0.65 5.56 1.00 5.21 94 --------------------------- SMALL CAP GROWTH STOCK FUND --------------------------- Trust Shares 2000 ............. $431,478 1.20% (0.86)% 1.23% (0.89)% 110% 1999(1) .......... 152,290 1.20 (0.48) 1.49 (0.77) 75 --------------------------- SMALL CAP VALUE EQUITY FUND --------------------------- Trust Shares 2000 ............. $212,074 1.22% 1.31% 1.25% 1.28% 65% 1999 ............. 301,984 1.22 1.27 1.27 1.22 63 1998 ............. 390,841 1.21 1.07 1.31 0.97 55 1997(2) .......... 131,049 1.20 1.86 1.37 1.69 27 (+) Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (1) Commenced operations on October 8, 1998. All ratios for this period have been annualized. (2) Commenced operations on January 31, 1997. All ratios for the period have been annualized. Amounts designated as "--" are either $0 or round to $0.
62 PROSPECTUS FINANCIAL HIGHLIGHTS
NET REALIZED NET ASSET NET AND DISTRIBUTIONS VALUE INVESTMENT UNREALIZED FROM NET DISTRIBUTIONS NET ASSET BEGINNING INCOME GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN (+) --------- ---------- --------------- ------------- -------------- --------- ---------- ------------------------------- TAX SENSITIVE GROWTH STOCK FUND ------------------------------- Trust Shares 2000 ............. $29.96 $0.02 $3.12 $ -- $ -- $33.10 10.48% 1999(1) .......... 25.61 0.02 4.34 (0.01) -- 29.96 17.04 ------------------------------- U.S. GOVERNMENT SECURITIES FUND ------------------------------- Trust Shares 2000 ............. $10.28 $0.58 $(0.42) $(0.58) $ -- $ 9.86 1.63% 1999 ............. 10.46 0.59 (0.18) (0.59) -- 10.28 3.90 1998 ............. 10.02 0.61 0.44 (0.61) -- 10.46 10.76 1997 ............. 9.91 0.62 0.11 (0.62) -- 10.02 7.54 1996 ............. 10.27 0.62 (0.33) (0.62) (0.03) 9.91 2.77 ----------------------- VALUE INCOME STOCK FUND ----------------------- Trust Shares 2000 ............. $12.85 $0.23 $(1.49) $(0.22) $(0.99) $10.38 (10.52)% 1999 ............. 13.90 0.24 1.02 (0.24) (2.07) 12.85 11.13 1998 ............. 13.71 0.26 2.62 (0.27) (2.42) 13.90 23.10 1997 ............. 13.15 0.30 2.32 (0.30) (1.76) 13.71 22.18 1996 ............. 11.59 0.35 2.71 (0.34) (1.16) 13.15 27.91
RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME (LOSS) TO RATIO OF INVESTMENT AVERAGE NET AVERAGE NET NET ASSETS EXPENSES TO INCOME (LOSS) ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO END OF AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE ----------- --------- ------------ ----------------- --------------- --------- -------------------- TAX SENSITIVE GROWTH -------------------- STOCK FUND Trust Shares 2000 ............. $ 710,179 1.20% 0.13% 1.26% 0.07% 30% 1999(1) .......... 223,543 1.20 0.21 1.34 0.07 18 -------------------------- U.S. GOVERNMENT SECURITIES -------------------------- FUND Trust Shares 2000 ............. $ 85,420 0.77% 5.77% 0.84% 5.70% 29% 1999 ............. 102,167 0.77 5.58 0.88 5.47 19 1998 ............. 34,899 0.76 5.93 0.92 5.77 14 1997 ............. 19,471 0.75 6.19 1.02 5.92 21 1996 ............. 10,277 0.75 6.05 1.25 5.55 83 ----------------------- VALUE INCOME STOCK FUND ----------------------- Trust Shares 2000 ............. $ 921,797 0.89% 2.02% 0.89% 2.02% 62% 1999 ............. 1,589,951 0.92 1.91 0.92 1.91 69 1998 ............. 1,725,418 0.92 1.85 0.92 1.85 99 1997 ............. 1,488,062 0.91 2.40 0.91 2.40 105 1996 ............. 1,244,399 0.92 2.86 0.92 2.86 134 (+) Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (1) Commenced operations on December 11, 1998. All ratios for the period have been annualized. Amounts designated as "--" are either $0 or round to $0.
PROSPECTUS 63 FINANCIAL HIGHLIGHTS
NET ASSET NET DISTRIBUTIONS VALUE INVESTMENT FROM NET NET ASSET BEGINNING INCOME INVESTMENT VALUE END TOTAL OF PERIOD (LOSS) INCOME OF PERIOD RETURN (+) --------- ---------- ------------- --------- ---------- ------------------------------- PRIME QUALITY MONEY MARKET FUND ------------------------------- Trust Shares 2000 ............. $1.00 $0.05 $(0.05) $1.00 5.20% 1999 ............. 1.00 0.05 (0.05) 1.00 4.83 1998 ............. 1.00 0.05 (0.05) 1.00 5.22 1997 ............. 1.00 0.05 (0.05) 1.00 5.01 1996 ............. 1.00 0.05 (0.05) 1.00 5.25 -------------------------------------------- U.S. GOVERNMENT SECURITIES MONEY MARKET FUND -------------------------------------------- Trust Shares 2000 ............. $1.00 $0.05 $(0.05) $1.00 4.86% 1999 ............. 1.00 0.04 (0.04) 1.00 4.57 1998 ............. 1.00 0.05 (0.05) 1.00 5.04 1997 ............. 1.00 0.05 (0.05) 1.00 4.83 1996 ............. 1.00 0.05 (0.05) 1.00 5.14 ---------------------------------- U.S. TREASURY MONEY MARKET FUND (A) ---------------------------------- Trust Shares 2000 ............. $1.00 $0.05 $(0.05) $1.00 4.81% 1999* ............ 1.00 0.02 (0.02) 1.00 2.08 For the Year Ended November 30: 1998 ............. 1.00 0.05 (0.05) 1.00 4.89 1997 ............. 1.00 0.05 (0.05) 1.00 4.91 1996 ............. 1.00 0.05 (0.05) 1.00 4.80
RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME (LOSS) TO RATIO OF INVESTMENT AVERAGE NET AVERAGE NET NET ASSETS EXPENSES TO INCOME (LOSS) ASSETS (EXCLUDING ASSETS (EXCLUDING END OF AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS ----------- ----------- ------------ ----------------- ----------------- ------------------------------- PRIME QUALITY MONEY MARKET FUND ------------------------------- Trust Shares 2000 ............. $3,311,229 0.60% 5.06% 0.75% 4.91% 1999 ............. 3,903,232 0.60 4.69 0.77 4.52 1998 ............ 1,880,229 0.59 5.10 0.77 4.92 1997 ............ 1,086,555 0.58 4.90 0.76 4.72 1996 ............ 1,050,800 0.58 5.11 0.78 4.91 -------------------------------------------- U.S. GOVERNMENT SECURITIES MONEY MARKET FUND -------------------------------------------- Trust Shares 2000 ............. $ 468,568 0.63% 4.80% 0.74% 4.69% 1999 ............. 404,459 0.63 4.47 0.76 4.34 1998 ............. 377,490 0.62 4.92 0.78 4.76 1997 ............. 344,350 0.61 4.73 0.76 4.58 1996 ............. 325,493 0.61 5.02 0.78 4.85 ----------------------------------- U.S. TREASURY MONEY MARKET FUND (A) ----------------------------------- Trust Shares 2000 ............. $ 723,277 0.63% 4.71% 0.74% 4.60% 1999* ............ 760,833 0.68 4.10 0.83 3.95 For the Year Ended November 30: 1998 ............. 699,923 0.66 4.77 0.81 4.62 1997 ............. 632,381 0.65 4.82 0.80 4.67 1996 ............. 389,051 0.66 4.69 0.81 4.54 (+) Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. * For the period December 1, 1998 to May 31, 1999. All ratios have not been annualized. (A) On May 24, 1999, the CrestFunds U.S. Treasury Money Fund exchanged all of its assets and certain liabilities for shares of the U.S. Treasury Money Market Fund. The CrestFunds U.S. Treasury Money Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights.
64 PROSPECTUS FINANCIAL HIGHLIGHTS
NET REALIZED NET ASSET NET AND DISTRIBUTIONS VALUE INVESTMENT UNREALIZED FROM NET DISTRIBUTIONS NET ASSET BEGINNING INCOME GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN (+) --------- ---------- --------------- ------------- -------------- --------- ---------- ------------------------------------- LIFE VISION AGGRESSIVE GROWTH FUND (A) ------------------------------------- Trust Shares 2000 ............. $11.31 $0.05 $0.74 $(0.05) $(0.40) $11.61 7.25% 1999(1) .......... 11.32 0.02 1.13 (0.01) (1.15) 11.31 10.99 For the years ended November 30: 1998 ............. 10.65 0.03 0.67 (0.03) -- 11.32 6.53 1997(2) .......... 10.00 0.03 0.65 (0.03) -- 10.65 6.82 ------------------------------------- LIFE VISION GROWTH AND INCOME FUND (A) ------------------------------------- Trust Shares 2000 ............. $10.33 $0.07 $0.52 $(0.17) $(0.25) $10.50 5.81% 1999(1) .......... 11.06 0.08 0.69 (0.06) (1.44) 10.33 7.75 For the years ended November 30: 1998 ............. 10.51 0.18 0.56 (0.18) (0.01) 11.06 7.12 1997(2) .......... 10.00 0.09 0.51 (0.09) -- 10.51 5.97 ------------------------------------ LIFE VISION MODERATE GROWTH FUND (A) ------------------------------------ Trust Shares 2000 ............. $10.80 $0.33 $0.13 $(0.21) $(0.44) $10.61 4.46% 1999(1) .......... 11.01 0.11 0.56 (0.09) (0.79) 10.80 6.35 For the years ended November 30: 1998 ............. 10.46 0.24 0.58 (0.24) (0.03) 11.01 7.90 1997(2) .......... 10.00 0.12 0.45 (0.11) -- 10.46 5.70
RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME (LOSS) TO RATIO OF INVESTMENT AVERAGE NET AVERAGE NET NET ASSETS EXPENSES TO INCOME (LOSS) ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO END OF AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE ------------ ----------- ------------ ----------------- ----------------- --------- ------------------------------------- LIFE VISION AGGRESSIVE GROWTH FUND (A) ------------------------------------- Trust Shares 2000 ............. $18,412 0.25% 0.48% 0.44% 0.29% 183% 1999(1) .......... 18,699 0.27 0.28 0.63 (0.08) 33 For the years ended November 30: 1998 ............. 16,230 0.25 0.23 0.66 (0.18) 75 1997(2) .......... 13,712 0.25 0.72 0.73 0.24 34 -------------------------------------- LIFE VISION GROWTH AND INCOME FUND (A) -------------------------------------- Trust Shares 2000 ............. $30,473 0.25% 1.77% 0.42% 1.60% 189% 1999(1) .......... 21,950 0.27 1.38 0.60 1.05 40 For the years ended November 30: 1998 ............. 19,042 0.25 1.68 0.59 1.34 57 1997(2) .......... 22,521 0.25 2.11 0.59 1.77 25 ----------------------------------- LIFE VISION MODERATE GROWTH FUND (A) ----------------------------------- Trust Shares 2000 ............. $69,622 0.25% 2.19% 0.37% 2.07% 151% 1999(1) .......... 88,188 0.27 1.90 0.42 1.75 48 For the years ended November 30: 1998 ............. 93,211 0.25 2.21 0.42 2.04 52 1997(2) .......... 89,442 0.25 2.66 0.42 2.49 43 (+) Returns are for the period indicated and have not been annualized. Total return figures do not include applicable sales loads. (1) For the six month period ended May 31, 1999. All ratios for the period have been annualized. (2) Commenced operations on June 30, 1997. All ratios for the period have been annualized. (A) May 24, 1999, the CrestFunds Life Vision Balanced, CrestFunds Life Vision Growth and Income, and CrestFunds Life Vision Maximum Growth portfolios exchanged all of their assets and certain liabilities for shares of the Life Vision Moderate Growth, Life Vision Growth and Income, and Life Vision Aggressive Growth Funds, respectively. The CrestFunds Life Vision Balanced, CrestFunds Life Vision Growth and Income, and CrestFunds Life Vision Maximum Growth portfolios are the accounting survivors in these transactions, and as a result, their basis of accounting for assets and liabilities and their operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. Amounts designated as "--" are either $0 or round to $0.
PROSPECTUS 65 NOTES 66 PROSPECTUS NOTES PROSPECTUS 67 NOTES 68 PROSPECTUS NOTES (THIS PAGE INTENTIONALLY LEFT BLANK) 70 PROSPECTUS HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS INVESTMENT ADVISER Trusco Capital Management, Inc. 50 Hurt Plaza Suite 1400 Atlanta, Georgia 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 2000, includes detailed information about the STI Classic Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list each Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends and their impact on Fund performance. The reports also contain detailed financial information about the Funds. TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION: BY TELEPHONE: Call 1-800-428-6970 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, Pennsylvania 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the EDGAR Database on the SEC's website ("HTTP://WWW.SEC.GOV"). You may review and copy documents at the SEC Public Reference Room in Washington, DC (for information on the operation of the Public Reference Room, call 202-942-8090). You may request documents by mail from the SEC, upon payment of a duplicating fee, by writing to: Securities and Exchange Commission, Public Reference Section, Washington, DC 20549-0102. You may also obtain this information, upon payment of a duplicating fee, by emailing the SEC at the following address: PUBLICINFO@SEC.GOV. The STI Classic Funds' Investment Company Act registration number is 811-06557. XXX-XXXX [401K Logo Omitted] PROSPECTUS October 1, 2000 STI CLASSIC FUNDS FOR THE SUNTRUST 401(K) PLAN Capital Appreciation Fund Growth and Income Fund Investment Grade Bond Fund Prime Quality Money Market Fund Short-Term Bond Fund Small Cap Growth Stock Fund Value Income Stock Fund [401K Plan Logo Omitted] Investment Adviser to the Funds: Trusco Capital Management, Inc. ("The Adviser") The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. PROSPECTUS ABOUT THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Trust Shares of each Fund that you should know before investing. Please read this prospectus and keep it for future reference. THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN THAT IS COMMON TO EACH OF THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE: 2 CAPITAL APPRECIATION FUND 4 GROWTH AND INCOME FUND 6 INVESTMENT GRADE BOND FUND 8 PRIME QUALITY MONEY MARKET FUND 10 SHORT-TERM BOND FUND 12 SMALL CAP GROWTH STOCK FUND 14 VALUE INCOME STOCK FUND 16 MORE INFORMATION ABOUT RISK 16 MORE INFORMATION ABOUT FUND INVESTMENTS 17 INVESTMENT ADVISER AND PORTFOLIO MANAGERS 18 PURCHASING AND SELLING FUND SHARES 20 DIVIDENDS, DISTRIBUTIONS AND TAXES 21 FINANCIAL HIGHLIGHTS 29 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS -------------------------------------------------------------------------------- [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING? [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION [CHART GRAPHIC OMITTED] WHAT IS AN INDEX? [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES [MOUNTAINTOP GRAPHIC OMITTED] MORE INFORMATION ABOUT FUND INVESTMENTS [MAGNIFIER GRAPHIC OMITTED] INVESTMENT ADVISER [HANDSHAKE GRAPHIC OMITTED] PURCHASING AND SELLING FUND SHARES -------------------------------------------------------------------------------- OCTOBER 1, 2000 PROSPECTUS 1 RISK/RETURN INFORMATION COMMON TO THE FUNDS Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. Each Fund has its own investment goal and strategies for reaching that goal. The Adviser invests Fund assets in a way that it believes will help a Fund achieve its goal. Still, investing in each Fund involves risk and there is no guarantee that a Fund will achieve its goal. The Adviser's judgments about the markets, the economy or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job the Adviser does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. The value of your investment in a Fund (other than a money market fund) is based on the market prices of the securities a Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, may be greater or lesser depending on the types of securities a Fund owns and the markets in which they trade. The effect on a Fund of a change in the value of a single security will depend on how widely the Fund diversifies its holdings. 2 PROSPECTUS CAPITAL APPRECIATION FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Capital appreciation -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. common stocks -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with above average growth potential -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need to receive income on their investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Capital Appreciation Fund invests primarily in U.S. common stocks and other equity securities that the Adviser believes have strong business fundamentals, such as revenue growth, cash flows and earnings trends. In selecting investments for the Fund, the Adviser chooses companies that it believes have above average growth potential. The Adviser's strategy focuses on large cap stocks with a strong growth history. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] plot points are as follows: 1993 9.89% 1994 -7.41% 1995 31.15% 1996 20.31% 1997 31.13% 1998 28.06% 1999 9.71% BEST QUARTER WORST QUARTER 22.93% -11.16% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 5.91%. PROSPECTUS 3 CAPITAL APPRECIATION FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 500 INDEX. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Capital Appreciation Fund 9.71% 23.79% 17.41%* -------------------------------------------------------------------------------- S&P 500 Index 21.04% 28.55% 21.24%** -------------------------------------------------------------------------------- * SINCE 7/1/92 ** SINCE 6/30/92 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 1.15% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.26% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5YEARS 10 YEARS $128 $400 $692 $1,523 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 1.13% and 1.24%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 4 PROSPECTUS GROWTH AND INCOME FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOALS PRIMARY Long-term capital appreciation SECONDARY Current income -------------------------------------------------------------------------------- INVESTMENT FOCUS Equity securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify securities of companies with market capitalizations of at least $1 billion with attractive valuation and/or above average earnings potential relative either to their sectors or the market as a whole -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who are looking for capital appreciation potential and income with less volatility than the equity markets as a whole -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Growth and Income Fund invests primarily in equity securities, including common stock and listed American Depositary Receipts (ADRs), of domestic and foreign companies with market capitalizations of at least $1 billion. However, the average market capitalization can vary throughout a full market cycle and will be flexible to allow the Adviser to capture market opportunities. The Adviser uses a quantitative screening process to identify companies with an attractive fundamental profile. The portfolio management team selects stocks of companies with strong financial quality and above average earnings momentum to secure the best relative values in each economic sector. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility which is the principal risk of investing in the Fund. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign countries are generally denominated in a foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of a Fund's investments. These currency movements may happen separately from and in response to events that do not otherwise affect the value of the security in the issuer's home country. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] plot points are as follows: 1993 10.20% 1994 -0.81% 1995 29.38% 1996 19.06% 1997 27.69% 1998 18.20% 1999 14.17% BEST QUARTER WORST QUARTER 17.38% -10.36% (6/30/97) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS -0.35%. PROSPECTUS 5 GROWTH AND INCOME FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 500/BARRA VALUE INDEX. PREVIOUSLY, THE FUND'S RETURNS HAD BEEN COMPARED TO THE S&P 500 INDEX, BUT THE ADVISER BELIEVES THAT S&P 500/BARRA VALUE INDEX, BECAUSE OF ITS GREATER EMPHASIS ON LARGE CAP VALUE STOCKS, MORE ACCURATELY REFLECTS THE TYPE OF SECURITIES IN WHICH THE FUND INVESTS. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Growth and Income Fund 14.17% 21.56% 16.83%* -------------------------------------------------------------------------------- S&P 500/ BARRA Value Index 12.72% 22.94% 18.54%** -------------------------------------------------------------------------------- S&P 500 Index 21.04% 28.55% 21.52%** -------------------------------------------------------------------------------- * SINCE 9/26/92 ** SINCE 9/30/92 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The previous index, the S&P 500 Index, is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. The S&P 500/BARRA Value Index is a widely-recognized index of the stocks in the S&P 500 Index that have lower price-to-book ratios. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.90% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 1.01% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $103 $322 $558 $1,236 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 6 PROSPECTUS INVESTMENT GRADE BOND FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High total return through current income and capital appreciation, while preserving the principal amount invested -------------------------------------------------------------------------------- INVESTMENT FOCUS Investment grade U.S. government and corporate debt securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify relatively inexpensive securities in a selected market index -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want to receive income from their investment, as well as an increase in the value of the investment -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Investment Grade Bond Fund invests primarily in investment grade corporate debt securities, U.S. Treasury obligations and mortgage-backed securities. In selecting investments for the Fund, the Adviser tries to minimize risk while attempting to outperform selected market indices. Currently, the Adviser's selected index is the Lehman Brothers U.S. Government/Credit Index, a widely-recognized, unmanaged index of investment grade government and corporate debt securities. The Adviser seeks to invest more in portions of the Index that seem relatively inexpensive, and less in those that seem expensive. The Adviser allocates the Fund's investments among various market sectors based on the Adviser's analysis of historical data, yield information and credit ratings. The Adviser anticipates that the Fund's average weighted maturity will range from 4 to 10 years. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. Mortgage-backed securities are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THE BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] plot points are as follows: 1993 10.84% 1994 -3.32% 1995 17.80% 1996 2.34% 1997 9.08% 1998 9.19% 1999 -1.53% BEST QUARTER WORST QUARTER 6.11% -2.67% (6/30/95) (3/31/94) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 0.45%. PROSPECTUS 7 INVESTMENT GRADE BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN BROTHERS U.S. GOVERNMENT/CREDIT INDEX, LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX AND THE LIPPER INTERMEDIATE INVESTMENT GRADE DEBT FUNDS AVERAGE. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Investment Grade Bond Fund -1.53% 7.17% 6.07%* -------------------------------------------------------------------------------- Lehman Brothers U.S. Government/ Credit Index -2.15% 7.60% 6.38%** -------------------------------------------------------------------------------- Lehman Brothers U.S. Aggregate Bond Index -0.83% 7.73% 6.40%** -------------------------------------------------------------------------------- Lipper Intermediate Investment Grade Debt Funds Average -1.31% 6.79% 5.81%** -------------------------------------------------------------------------------- * SINCE 7/16/92 ** SINCE 7/31/92 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers U.S. Government/Credit Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, corporate debt backed by the U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least 1 year. The Lehman Brothers U.S. Aggregate Bond Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index that combines the Lehman Brothers U.S. Government/Credit Index and the Lehman Brothers Mortgage-Backed Securities Index. The Lehman Brothers U.S. Government/Credit Index consists of U.S. government obligations and corporate debt securities. The Lehman Brothers Mortgage-Backed Securities Index consists of mortgage-backed securities rated AAA. The Lehman Brothers U.S. Aggregate Bond Index includes fixed income securities rated investment grade (BBB) or higher, with maturities of at least one-year. The securities in the Index have outstanding par values of at least $100 million for U.S. government obligations and $25 million for the others. The Lipper Intermediate Investment Grade Debt Funds Average is a composite of mutual funds with investment goals similar to the Fund's goals. It reports the average return of the intermediate term investment grade bond mutual funds tracked by Lipper Analytical Services, Inc. The number of funds in the Average varies. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.74% Other Expenses 0.10% ----- Total Annual Fund Operating Expenses 0.84% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $86 $268 $466 $1,037 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.72% and 0.82%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 8 PROSPECTUS PRIME QUALITY MONEY MARKET FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital and liquidity -------------------------------------------------------------------------------- INVESTMENT FOCUS Money market instruments -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify money market instruments with the most attractive risk/return trade-off -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors who want to receive current income -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Prime Quality Money Market Fund invests exclusively in high quality U.S. money market instruments and foreign money market instruments denominated in U.S. dollars. In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk. The Adviser analyzes maturity, yields, market sectors and credit risk. Investments are made in money market instruments with the most attractive risk/return trade-off. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THE BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] plot points are as follows: 1993 2.77% 1994 3.77% 1995 5.47% 1996 4.99% 1997 5.15% 1998 5.10% 1999 4.74% BEST QUARTER WORST QUARTER 1.37% 0.68% (6/30/95) (6/30/93) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.83%. PROSPECTUS 9 PRIME QUALITY MONEY MARKET FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE IMONEYNET, INC. FIRST TIER AVERAGE. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Prime Quality Money Market Fund 4.74% 5.09% 4.45%* -------------------------------------------------------------------------------- iMoneyNet, Inc. First Tier Average 4.57% 4.97% 4.33%** -------------------------------------------------------------------------------- * SINCE 6/8/92 ** SINCE 5/31/92 To obtain information about the Fund's yield, call 1-800-814-3397. [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN AVERAGE? -------------------------------------------------------------------------------- An average is a composite of mutual funds with similar investment goals. The iMoneyNet, Inc. First Tier Average is a widely-recognized composite of money market funds which invest in securities rated in the highest category by at least two recognized rating agencies. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.65% Other Expenses 0.10% ----- Total Annual Fund Operating Expenses 0.75% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $77 $240 $417 $930 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.54% and 0.64%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 10 PROSPECTUS SHORT-TERM BOND FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital -------------------------------------------------------------------------------- INVESTMENT FOCUS Investment grade U.S. government and corporate debt securities -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Low -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify securities that offer a comparably better return than similar securities for a given level of credit risk -------------------------------------------------------------------------------- INVESTOR PROFILE Income oriented investors who are willing to accept increased risk for the possibility of returns greater than money market investing -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Short-Term Bond Fund invests primarily in a diversified portfolio of short- to medium-term investment grade U.S. Treasury, corporate debt, mortgage-backed and asset-backed securities. The Fund expects that it will normally maintain an average weighted maturity of approximately 3 years. In selecting investments for the Fund, the Adviser attempts to identify securities that offer a comparably better investment return for a given level of credit risk. For example, short-term bonds generally have better returns than money market instruments, with a fairly modest increase in credit risk and/or volatility. The Adviser manages the Fund from a total return perspective. That is, the Adviser makes day-to-day investment decisions for the Fund with a view towards maximizing returns. The Adviser analyzes yields, market sectors and credit risk in an effort to identify attractive investments with the best risk/reward trade-off. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. Mortgage-backed and asset-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans or underlying assets such as truck and auto loans, leases and credit card receivables. Mortgage-backed and asset-backed securities are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loan, receivables or other assets underlying these securities. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed or asset-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in the market place. When interest rates fall, however, mortgage-backed and asset-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayment or prepayment of the underlying asset that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of the portfolio of mortgage-backed or asset-backed securities and, therefore, to assess the volatility risk of the portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own. resources. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THE BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] plot points are as follows: 1994 -0.07% 1995 11.77% 1996 3.90% 1997 6.78% 1998 6.84% 1999 0.92% BEST QUARTER WORST QUARTER 3.76% -0.58% (6/30/95) (3/31/94) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.83%. PROSPECTUS 11 SHORT-TERM BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE SALOMON 1-3 YEAR TREASURY/GOVERNMENT SPONSORED/CORPORATE INDEX. TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION -------------------------------------------------------------------------------- Short-Term Bond Fund 0.92% 5.98% 4.97%* -------------------------------------------------------------------------------- Salomon 1-3 Year Treasury/Government Sponsored/Corporate Index 3.29% 6.56% 5.41%** -------------------------------------------------------------------------------- * SINCE 3/15/93 ** SINCE 2/28/93 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Salomon 1-3 Year Treasury/Government Sponsored/Corporate Index is a widely-recognized index of U.S. Treasury securities, government agency obligations, and corporate debt securities rated at least investment grade (BBB). The securities in the index have maturities of 1 year or greater and less than 3 years. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.65% Other Expenses 0.11% ----- Total Annual Fund Operating Expenses 0.76% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $78 $243 $422 $942 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.60% and 0.71%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 12 PROSPECTUS SMALL CAP GROWTH STOCK FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOAL Long-term capital appreciation -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. small cap common stocks of growth companies -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY High -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Identifies small cap companies with above average growth potential -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need current income -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Small Cap Growth Stock Fund invests primarily in small U.S. companies with market capitalizations between $50 million and $3 billion in size. The Fund's investment philosophy is based on the premise that a portfolio of small cap stocks with positive earnings trends, reasonable valuation, and strong fundamentals will provide superior returns over time. The Adviser selects companies with strong current earnings growth, improving profitability, a strong balance sheet, strong current and projected business fundamentals, and priced at reasonable valuations. The Adviser believes in executing a very disciplined and objective investment process and in controlling risk through a broadly diversified portfolio. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and the potential for capital gains tax liabilities for taxable investors. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases common stocks, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the stock markets have moved in cycles, and the value of the Fund's common stocks may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of stocks issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The Fund is also subject to the risk that small capitalization growth stocks may underperform other equity market segments or the equity markets as a whole. The smaller capitalization companies the Fund invests in may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these small companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. Therefore, small cap stocks may be more volatile than those of larger companies. These securities may be traded over-the-counter or listed on an exchange. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS THE PERFORMANCE OF THE FUND'S TRUST SHARES FOR ONE YEAR.* [Bar Chart Omitted] Plot points are as follows: 1999 20.55% BEST QUARTER WORST QUARTER 20.77% -11.36% (6/30/99) (3/31/99) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 16.26%. PROSPECTUS 13 SMALL CAP GROWTH STOCK FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 600 SMALL CAP INDEX. TRUST SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Small Cap Growth Stock Fund 20.55% 58.61%* -------------------------------------------------------------------------------- S&P 600 Small Cap Index 12.41% 25.01%** -------------------------------------------------------------------------------- * SINCE 10/8/98 ** SINCE 9/30/98 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 600 Small Cap Index is a widely-recognized, capitalization-weighted (companies with larger market capitalizations have more influence than those with smaller market capitalizations) index of 600 domestic small cap stocks. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 1.15% Other Expenses 0.08% ----- Total Annual Fund Operating Expenses 1.23% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $125 $390 $676 $1,489 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 14 PROSPECTUS VALUE INCOME STOCK FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOALS PRIMARY Current income SECONDARY Capital appreciation -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. common stocks -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify high dividend- paying, undervalued stocks -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who are looking for current income and capital appreciation with less volatility than the average stock fund -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Value Income Stock Fund invests primarily in common stocks and other equity securities of U.S. companies. In selecting investments for the Fund, the Adviser primarily chooses companies that have a market capitalization of at least $500 million and that have a history of paying regular dividends. The Adviser focuses on high dividend-paying stocks that trade below their historical value. The Adviser's "bottom-up" approach to stock selection emphasizes individual stocks over economic trends. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The periods prior to February 1993, when the Fund began operating, represent the performance of the Adviser's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Adviser's collective fund was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the collective fund's performance would have been lower. THE BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [Bar Chart Omitted] Plot points are as follows: 1990 -4.93% 1991 39.30% 1992 20.05% 1993 11.14% 1994 3.54% 1995 35.93% 1996 19.46% 1997 27.08% 1998 10.58% 1999 -2.93% BEST QUARTER WORST QUARTER 18.56% -14.86% (3/31/91) (9/30/90) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS -6.33%. PROSPECTUS 15 VALUE INCOME STOCK FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE S&P 500/BARRA VALUE INDEX. SINCE TRUST SHARES 1 YEAR 5 YEARS 10 YEARS INCEPTION -------------------------------------------------------------------------------- Value Income Stock Fund -2.93% 17.24% 15.02% 15.06%* -------------------------------------------------------------------------------- S&P 500/BARRA Value Index 12.72% 22.94% 15.37% 15.46%* -------------------------------------------------------------------------------- * SINCE 10/31/89 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P 500/BARRA Value Index is a widely-recognized index of the stocks in the S&P 500 Index that have lower price-to-book ratios. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.80% Other Expenses 0.09% ----- Total Annual Fund Operating Expenses 0.89% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $91 $284 $493 $1,096 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. For more information about these fees, see "Investment Adviser." 16 PROSPECTUS MORE INFORMATION ABOUT RISK [INNERTUBE GRAPHIC OMITTED] MORE INFORMATION ABOUT RISK EQUITY RISK CAPITAL APPRECIATION FUND GROWTH AND INCOME FUND SMALL CAP GROWTH STOCK FUND VALUE INCOME STOCK FUND Equity securities include public and privately issued equity securities, common and preferred stocks, warrants, rights to subscribe to common stock and convertible securities, as well as instruments that attempt to track the price movement of equity indices. Investments in equity securities and equity derivatives in general are subject to market risks that may cause their prices to fluctuate over time. The value of securities convertible into equity securities, such as warrants or convertible debt, is also affected by prevailing interest rates, the credit quality of the issuer and any call provision. Fluctuations in the value of equity securities in which a mutual fund invests will cause a fund's net asset value to fluctuate. An investment in a portfolio of equity securities may be more suitable for long-term investors who can bear the risk of these share price fluctuations. FIXED INCOME RISK INVESTMENT GRADE BOND FUND SHORT-TERM BOND FUND The market value of fixed income investments changes in response to interest rate changes and other factors. During periods of falling interest rates, the values of outstanding fixed income securities generally rise. Moreover, while securities with longer maturities tend to produce higher yields, the prices of longer maturity securities are also subject to greater market fluctuations as a result of changes in interest rates. In addition to these fundamental risks, different types of fixed income securities may be subject to the following additional risk: CREDIT RISK The possibility that an issuer will be unable to make timely payments of either principal or interest. FOREIGN SECURITY RISKS GROWTH AND INCOME FUND Investments in securities of foreign companies or governments can be more volatile than investments in U.S. companies or governments. Diplomatic, political, or economic developments, including nationalization or appropriation, could affect investments in foreign countries. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets. In addition, the value of securities denominated in foreign currencies, and of dividends from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign companies or governments generally are not subject to uniform accounting, auditing, and financial reporting standards comparable to those applicable to domestic U.S. companies or governments. Transaction costs are generally higher than those in the U.S. and expenses for custodial arrangements of foreign securities may be somewhat greater than typical expenses for custodial arrangements of similar U.S. securities. Some foreign governments levy withholding taxes against dividend and interest income. Although in some countries a portion of these taxes are recoverable, the non-recovered portion will reduce the income received from the securities comprising the portfolio. [MOUNTAINTOP GRAPHIC OMITTED] MORE INFORMATION ABOUT FUND INVESTMENTS This prospectus describes the Funds' primary strategies, and the Funds will normally invest in the types of securities described in this prospectus. However, in addition to the investments and strategies described in this prospectus, each Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). The investments and strategies described in this prospectus are those that the Adviser uses under normal conditions. During unusual economic or PROSPECTUS 17 INVESTMENT ADVISER AND PORTFOLIO MANAGERS market conditions, or for temporary defensive or liquidity purposes, each Fund (except the Prime Quality Money Market Fund) may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and short-term obligations that would not ordinarily be consistent with a Fund's objectives. In addition, the Investment Grade Bond and Short-Term Bond Funds each may shorten its average weighted maturity to as little as 90 days. A Fund (other than the Prime Quality Money Market Fund) will do so only if the Adviser believes that the risk of loss outweighs the opportunity for capital gains or higher income. Of course, a Fund cannot guarantee that it will achieve its investment goal. [MAGNIFIER GRAPHIC OMITTED] INVESTMENT ADVISER The Investment Adviser (the "Adviser") makes investment decisions for the Funds and continuously reviews, supervises and administers each Fund's respective investment program. The Board of Trustees supervises the Adviser and establishes policies that the Adviser must follow in its management activities. Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Funds. As of July 1, 2000, Trusco had approximately $47 billion in assets under management. For the fiscal period ended May 31, 2000, the Adviser received advisory fees of: CAPITAL APPRECIATION FUND 1.06% GROWTH AND INCOME FUND 0.90% INVESTMENT GRADE BOND FUND 0.67% PRIME QUALITY MONEY MARKET FUND 0.50% SHORT-TERM BOND FUND 0.56% SMALL CAP GROWTH STOCK FUND 1.12% VALUE INCOME STOCK FUND 0.80% The Adviser may use its affiliates as brokers for Fund transactions. For periods prior to January 1, 2000, STI Capital Management, N.A. ("STI"), a subsidiary of SunTrust Banks, Inc. served as investment adviser to the Capital Appreciation Fund, Investment Grade Bond Fund and Value Income Stock Fund. On January 1, 2000, SunTrust Bank (formerly SunTrust Bank, Atlanta), a subsidiary of SunTrust Banks, Inc., succeeded STI as the Investment Adviser to those Funds. On July 1, 2000, SunTrust Banks, Inc. reorganized its money management units, including those of SunTrust Bank, into Trusco Capital Management, Inc. As a result, Trusco now serves as the Investment Adviser to each STI Classic Fund. PORTFOLIO MANAGERS The Capital Appreciation Fund is managed by Mr. Robert J. Rhodes, CFA. Mr. Rhodes is an Executive Vice President and head of the Equity Funds group at Trusco. He has been employed by Trusco since 1973 and was Director of Research at Trusco from 1980 to 2000. Mr. Rhodes has more than 27 years of investment experience. Mr. Jeffrey E. Markunas, CFA, has served as Lead Portfolio Manager of the Growth and Income Fund since it began operating in September 1992. From 1992 until July 2000, he served as Senior Vice President and Director of Equity Management for Crestar Asset Management Company. Additionally, he was named Senior Vice President of Trusco in January 1999 and Managing Director in July 2000. Mr. Markunas has more than 17 years of investment experience. The Investment Grade Bond Fund is co-managed by Mr. L. Earl Denney, CFA, and Mr. Dave E. West, CFA. Mr. Denney has served as Managing Director of STI since 1983. In January 2000, Mr. Denney was named Managing Director of SunTrust Bank and is now Managing Director of Trusco. Mr. Denney has co-managed the Investment Grade Bond Fund since it began operating in June 1992. Mr. Denney has more than 21 years of investment experience. Mr. West has served as a Managing Director of STI and has worked there since 1985. In January 2000, Mr. West was named Managing Director of SunTrust Bank and is now a Managing Director of Trusco. Mr. West has co-managed the Investment Grade Bond Fund since it began operating in June 1992. Mr. West has more than 14 years of investment experience. Mr. David S. Yealy has served as a Managing Director of Trusco since July 2000. He has managed 18 PROSPECTUS PURCHASING AND SELLING FUND SHARES the Prime Quality Money Market Fund since it began operating in June 1992. Prior to July 2000, Mr. Yealy was a First Vice President of Trusco and has worked there since 1991. He has more than 15 years of investment experience Ms. Agnes G. Pampush, CFA, has served as a Managing Director of Trusco since July 2000, after serving as a Vice President of Trusco since 1998. Ms. Pampush was employed by Trusco from 1988 to 1996, and rejoined the firm in 1998. She has managed the Short-Term Bond Fund since February 1999. She has more than 18 years of investment experience. Mr. Mark D. Garfinkel, CFA, has served as a Portfolio Manager of Trusco since 1994. He has managed the Small Cap Growth Stock Fund since it began operating in October 1998. He has more than 13 years of investment experience. The Value Income Stock Fund is co-managed by Mr. Mills Riddick, CFA, and Mr. Dan Lewis. Mr. Riddick has served as a Managing Director of Trusco since July 2000, after serving as a Managing Director of STI since 1994. He has managed the Value Income Stock Fund since April 1995. Mr. Riddick has more than 18 years of investment experience. Mr. Lewis has served as a Portfolio Manager of Trusco since July 2000, after serving as a Portfolio Manager for STI since 1993. He has been an analyst of the Value Income Stock Fund since 1995. He has more than 9 years of investment experience. [HANDSHAKE GRAPHIC OMITTED] PURCHASING AND SELLING FUND SHARES This section tells you how to purchase or sell (sometimes called "redeem") Trust Shares of the Funds. HOW TO PURCHASE FUND SHARES The Funds offer Trust Shares only to financial institutions or intermediaries, including subsidiaries of SunTrust Banks, Inc. (SunTrust), for their own or their customers' accounts for which they act as fiduciary, agent, investment adviser, or custodian. As a result, you, as a customer of a financial institution may purchase Trust Shares through accounts made with financial institutions. Trust Shares will be held of record by (in the name of) your financial institution. Depending upon the terms of your account, however, you may have, or be given, the right to vote your Trust Shares. The Funds may reject any purchase order if it is determined that accepting the order would not be in the best interests of the STI Classic Funds or its shareholders. WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange is open for business (a Business Day). But you may not do so for shares of the Prime Quality Money Market Fund on federal holidays. The price per share (the offering price) will be the net asset value per share (NAV) next determined after the funds receive your purchase order. Each Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, for you to receive the current Business Day's NAV for each Fund (except the Prime Quality Money Market Fund), generally the Funds must receive your purchase order before 4:00 p.m. Eastern time. The Prime Quality Money Market Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, for you to be eligible to receive dividends declared on the day you submit your purchase order, the Prime Quality Money Market Fund must generally receive your order before 3:00 p.m. Eastern time and federal funds (readily available funds) before 4:00 p.m. Eastern time. Otherwise, your purchase order will be effective the following Business Day, as long as the Prime Quality Money Market Fund receives federal funds before calculating its NAV the following day. FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES, AND OTHER FINANCIAL INSTITUTIONS YOU MAY HAVE TO TRANSMIT YOUR PURCHASE AND SALE REQUESTS TO SUNTRUST OR OTHER FINANCIAL INSTITUTIONS AT AN EARLIER TIME FOR YOUR PROSPECTUS 19 PURCHASING AND SELLING FUND SHARES TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS THE FINANCIAL INSTITUTION TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE OR SELL FUND SHARES, INCLUDING SPECIFIC SUNTRUST OR OTHER FINANCIAL INSTITUTIONS INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR FINANCIAL INSTITUTION DIRECTLY. HOW THE FUNDS CALCULATE NAV In calculating NAV, a Fund (except the Prime Quality Money Market Fund) generally values its investment portfolio at market price. In calculating NAV for the Prime Quality Money Market Fund, the Fund generally values its investment portfolio using the amortized cost valuation method, which is described in detail in the SAI. If market prices are unavailable or a Fund thinks that the market price or amortized cost valuation method is unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. The Prime Quality Money Market Fund expects its NAV to remain constant at $1.00 per share, although the Fund cannot guarantee this. The Growth and Income Fund holds securities that are listed on foreign exchanges. These securities may trade on weekends or other days when the Fund does not calculate NAV. As a result, the market value of the Fund's investments may change on days when you cannot purchase or sell Fund shares. NET ASSET VALUE NAV for one Fund share is the value of that share's portion of the net assets of the Fund. HOW TO SELL YOUR FUND SHARES You may sell (sometimes called "redeem") your shares on any Business Day by contacting SunTrust or your financial institution. SunTrust or your financial institution will give you information about how to sell your shares including any specific cut-off times required. Holders of Trust Shares may sell shares by following the procedures established when they opened their account or accounts with the Funds or with their financial institution or intermediary. The sale price of each share will be the next NAV determined after the Funds receive your request. Redemption orders must be received by the Prime Quality Money Market Fund on a Business Day before 3:00 p.m. Eastern time. Orders received after 3:00 p.m. Eastern time will be executed the following Business Day. RECEIVING YOUR MONEY Normally, the Funds will send your sale proceeds within five Business Days after the Funds receive your request but it may take up to seven days. REDEMPTIONS IN KIND The Funds generally pay sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Funds' remaining shareholders) the Funds might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES The Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. TELEPHONE TRANSACTIONS Purchasing and selling Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believes to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. 20 PROSPECTUS DIVIDENDS, DISTRIBUTIONS AND TAXES DIVIDENDS AND DISTRIBUTIONS Each Fund distributes its income as follows: DECLARED DAILY AND DISTRIBUTED MONTHLY -------------------------------------------------------------------------------- INVESTMENT GRADE BOND FUND PRIME QUALITY MONEY MARKET FUND SHORT-TERM BOND FUND QUARTERLY -------------------------------------------------------------------------------- CAPITAL APPRECIATION GROWTH AND INCOME FUND SMALL CAP GROWTH STOCK FUND VALUE INCOME STOCK FUND Each Fund makes distributions of capital gains, if any, at least annually. If the SunTrust 401(k) Plan owns Fund shares on a Fund's record date, the Plan is entitled to receive the distribution. As Plan participants, you will receive dividends and distributions in the form of additional Fund shares if you own shares of the Fund on the date the dividend or distribution is allocated by the Plan. You will, therefore, not receive a dividend or distribution if you do not own shares of the Fund on the date the dividend or distribution is allocated. TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Funds have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Dividends and distributions will accumulate on a tax-deferred basis if you are investing through the SunTrust 401(k) Plan. Generally, you will not owe taxes on these distributions until you begin withdrawals from the Plan. Withdrawals from the Plan are subject to special tax rules and may be subject to a penalty in the case of premature withdrawals. If you have questions about the tax consequences of Plan withdrawals, you should consult your tax adviser; the Plan's Summary Plan Description in the SunTrust Employee Handbook; BENE, the SunTrust Benefits Service Center, at 1-800-818-2363; or the Plan Administrator, SunTrust Human Resources, P.O. Box 4418, Center 636, Atlanta, Georgia 30302. MORE INFORMATION ABOUT TAXES IS IN THE SAI. PROSPECTUS 21 FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS The tables that follow present performance information about Trust Shares of each Fund. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. This information for each Fund, except the Growth and Income Fund for the periods ended prior to May 31, 1999, have been audited by Arthur Andersen LLP, independent public accountants. The financial highlights for the Growth and Income Fund for the periods ended prior to May 31, 1999 have been audited by Deloitte & Touche LLP, independent public accountants. The report of Arthur Andersen LLP, along with each Fund's financial statements, appears in the annual report that accompanies the SAI. You can obtain the annual reports, which contains more performance information, at no charge by calling 1-800-428-6970. For the Periods Ended May 31, (unless otherwise indicated) For a Share Outstanding Throughout the Periods
NET REALIZED NET ASSET AND DISTRIBUTIONS VALUE NET UNREALIZED FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD INCOME ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN (+) --------- ---------- -------------- ------------- ------------- --------- ---------- CAPITAL APPRECIATION FUND TRUST SHARES 2000 ........ $16.62 $0.02 $ 1.40 $ -- $(0.92) $17.12 8.98% 1999 ........ 16.48 0.05 2.70 (0.06) (2.55) 16.62 17.83 1998 ........ 15.09 0.09 3.96 (0.09) (2.57) 16.48 29.51 1997 ........ 14.90 0.12 3.13 (0.12) (2.94) 15.09 24.66 1996 ........ 12.18 0.12 3.32 (0.13) (0.59) 14.90 28.97 GROWTH AND INCOME FUND (A) Trust Shares 2000 ........ $16.09 $0.11 $ 0.55 $(0.10) $(1.12) $15.53 4.11% 1999(1) ..... 15.10 0.04 1.97 (0.02) (1.00) 16.09 14.24 For the years ended November 30: 1998 ........ $16.55 0.09 1.64 (0.09) (3.09) 15.10 13.64 1997 ........ 13.39 0.14 3.24 (0.15) (0.07) 16.55 25.41 1996 ........ 11.60 0.17 2.38 (0.17) (0.59) 13.39 22.68 INVESTMENT GRADE BOND FUND Trust Shares 2000 ........ $10.36 $0.61 $(0.78) $(0.61) $ -- $ 9.58 (1.76)% 1999 ........ 10.65 0.56 (0.11) (0.56) (0.18) 10.36 4.25 1998 ........ 10.16 0.60 0.49 (0.60) -- 10.65 10.92 1997 ........ 10.07 0.60 0.09 (0.60) -- 10.16 6.99 1996 ........ 10.26 0.60 (0.19) (0.60) -- 10.07 4.02
RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME TO RATIO OF INVESTMENT AVERAGE NET AVERAGE NET NET ASSETS EXPENSES TO INCOME ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO END OF AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE ------------ ------------ ------------ ----------------- ----------------- -------- CAPITAL APPRECIATION FUND TRUST SHARES 2000 ........ $1,296,927 1.17% 0.10% 1.26% 0.01% 129% 1999 ........ 1,966,842 1.17 0.29 1.26 0.20 147 1998 ........ 1,532,587 1.16 0.61 1.27 0.50 194 1997 ........ 1,085,128 1.15 0.83 1.25 0.73 141 1996 ........ 981,498 1.15 0.90 1.27 0.78 156 GROWTH AND INCOME FUND (A) Trust Shares 2000 ........ $ 885,109 1.01% 0.76% 1.01% 0.76% 53% 1999(1) ..... 634,279 1.14 0.49 1.43 0.20 31 FOR THE YEARS ENDED NOVEMBER 30: 1998 ........ $ 577,042 1.03 0.63 1.21 0.45 71 1997 ........ 590,824 1.02 0.92 1.17 0.77 100 1996 ........ 553,648 1.02 1.38 1.17 1.23 82 INVESTMENT GRADE BOND FUND Trust Shares 2000 ........ $ 998,596 0.77% 6.05% 0.84% 5.98% 202% 1999 ........ 1,149,068 0.77 5.25 0.85 5.17 221 1998 ........ 793,488 0.76 5.67 0.86 5.57 109 1997 ........ 633,646 0.75 5.89 0.85 5.79 298 1996 ........ 599,514 0.75 5.81 0.87 5.69 184 (+) Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (1) For the six month period ended May 31, 1999. All ratios for the period have been annualized. (A) On May 24, 1999, the CrestFunds Value Fund exchanged all of its assets and certain liabilities for shares of the Growth and Income Fund. The CrestFunds Value Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. Amounts designated as "--" are either 0 or round to $0.
22 PROSPECTUS FINANCIAL HIGHLIGHTS For the Periods Ended May 31, (unless otherwise indicated) For a Share Outstanding Throughout the Periods
NET REALIZED NET ASSET AND DISTRIBUTIONS VALUE NET UNREALIZED FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN (+) --------- ------------ -------------- ------------- ------------- --------- ---------- PRIME QUALITY MONEY MARKET FUND Trust Shares 2000 ........ $ 1.00 $ 0.05 $ -- $(0.05) $ -- $ 1.00 5.20% 1999 ........ 1.00 0.05 -- (0.05) -- 1.00 4.83 1998 ........ 1.00 0.05 -- (0.05) -- 1.00 5.22 1997 ........ 1.00 0.05 -- (0.05) -- 1.00 5.01 1996 ........ 1.00 0.05 -- (0.05) -- 1.00 5.25 SHORT-TERM BOND FUND Trust Shares 2000 ........ $ 9.91 $ 0.53 $(0.25) $(0.53) $(0.01) $ 9.65 2.87% 1999 ........ 10.05 0.51 (0.10) (0.52) (0.03) 9.91 4.06 1998 ........ 9.90 0.55 0.16 (0.55) (0.01) 10.05 7.31 1997 ........ 9.86 0.53 0.07 (0.53) (0.03) 9.90 6.30 1996 ........ 9.98 0.54 (0.10) (0.54) (0.02) 9.86 4.45 SMALL CAP GROWTH STOCK FUND Trust Shares 2000 ........ $14.55 $(0.08) $ 4.02 $ -- $(0.19) $18.30 27.24% 1999(1) ..... 10.00 (0.05) 4.62 -- (0.02) 14.55 45.70 VALUE INCOME STOCK FUND Trust Shares 2000 ........ $12.85 $ 0.23 $(1.49) $(0.22) $(0.99) $10.38 (10.52)% 1999 ........ 13.90 0.24 1.02 (0.24) (2.07) 12.85 11.13 1998 ........ 13.71 0.26 2.62 (0.27) (2.42) 13.90 23.10 1997 ........ 13.15 0.30 2.32 (0.30) (1.76) 13.71 22.18 1996 ........ 11.59 0.35 2.71 (0.34) (1.16) 13.15 27.91
RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME (LOSS) TO RATIO OF INVESTMENT AVERAGE NET AVERAGE NET NET ASSETS EXPENSES TO INCOME (LOSS) ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO END OF AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE ------------ ------------ ------------ ----------------- ----------------- -------- PRIME QUALITY MONEY MARKET FUND Trust Shares 2000 ........ $3,311,229 0.60% 5.06% 0.75% 4.91% --% 1999 ........ 3,903,232 0.60 4.69 0.77 4.52 -- 1998 ........ 1,880,229 0.59 5.10 0.77 4.92 -- 1997 ........ 1,086,555 0.58 4.90 0.76 4.72 -- 1996 ........ 1,050,800 0.58 5.11 0.78 4.91 -- SHORT-TERM BOND FUND Trust Shares 2000 ........ $ 180,402 0.67% 5.40% 0.76% 5.31% 70% 1999 ........ 209,904 0.67 5.12 0.77 5.02 108 1998 ........ 120,422 0.66 5.47 0.79 5.34 87 1997 ........ 89,701 0.65 5.37 0.78 5.24 118 1996 ........ 91,156 0.65 5.39 0.81 5.23 163 SMALL CAP GROWTH STOCK FUND Trust Shares 2000 ........ $ 431,478 1.20% (0.86)% 1.23% (0.89)% 110% 1999(1) ..... 152,290 1.20 (0.48) 1.49 (0.77) 75 VALUE INCOME STOCK FUND Trust Shares 2000 ........ $ 921,797 0.89% 2.02% 0.89% 2.02% 62% 1999 ........ 1,589,951 0.92 1.91 0.92 1.91 69 1998 ........ 1,725,418 0.92 1.85 0.92 1.85 99 1997 ........ 1,488,062 0.91 2.40 0.91 2.40 105 1996 ........ 1,244,399 0.92 2.86 0.92 2.86 134 (+) Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (1) Commenced operations on October 8, 1998. All ratios for the period have been annualized. Amounts designated as "--" are either 0 or round to $0.
PROSPECTUS 23 NOTES 24 PROSPECTUS NOTES PROSPECTUS 25 NOTES 26 PROSPECTUS NOTES PROSPECTUS 27 NOTES 28 PROSPECTUS NOTES PROSPECTUS 29 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS INVESTMENT ADVISER Trusco Capital Management, Inc. 50 Hurt Plaza Suite 1400 Atlanta, Georgia 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 2000, includes detailed information about the STI Classic Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list each Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends and their impact on Fund performance. The reports also contain detailed financial information about the Funds. TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION: BY TELEPHONE: Call 1-800-428-6970 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, Pennsylvania 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the EDGAR Database on the SEC's website ("HTTP://WWW.SEC.GOV"). You may review and copy documents at the SEC Public Reference Room in Washington, DC (for information on the operation of the Public Reference Room, call 202-942-8090). You may request documents by mail from the SEC, upon payment of a duplicating fee, by writing to: Securities and Exchange Commission, Public Reference Section, Washington, DC 20549-0102. You may also obtain this information, upon payment of a duplicating fee, by e-mailing the SEC at the following address: PUBLICINFO@SEC.GOV. The STI Classic Funds' Investment Company Act registration number is 811-06557. [SunTrust Logo Omitted] [copyright] 2000 SunTrust is a registered service mark belonging exclusively to SunTrust Banks, Inc. [401K Logo Omitted] STI CLASSIC FUNDS-BALANCED FUND TRUST SHARES PROSPECTUS OCTOBER 1, 2000 BALANCED FUND FOR PARTICIPANTS OF THE DEKALB COUNTY, GEORGIA BOARD OF EDUCATION TAX SHELTERED ANNUITY PLAN INVESTMENT ADVISER TO THE FUND: TRUSCO CAPITAL MANAGEMENT, INC. (the "Adviser") [STI Logo Omitted] THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PROSPECTUS ABOUT THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Trust Shares of the Balanced Fund that you should know before investing. Please read this prospectus and keep it for future reference. THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN. FOR MORE DETAILED INFORMATION ABOUT THE FUND, PLEASE SEE: 2 PRINCIPAL INVESTMENT STRATEGIES AND RISKS, PERFORMANCE INFORMATION AND EXPENSES 4 MORE INFORMATION ABOUT RISK 4 MORE INFORMATION ABOUT FUND INVESTMENTS 4 INVESTMENT ADVISER AND PORTFOLIO MANAGERS 5 PURCHASING AND SELLING FUND SHARES 7 DIVIDENDS, DISTRIBUTIONS AND TAXES 8 FINANCIAL HIGHLIGHTS 14 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS -------------------------------------------------------------------------------- [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING? [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION [CHART GRAPHIC OMITTED] WHAT IS AN INDEX? [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES [MOUNTAINTOP GRAPHIC OMITTED] MORE INFORMATION ABOUT FUND INVESTMENTS [MAGNIFIER GRAPHIC OMITTED] INVESTMENT ADVISER [HANDSHAKE GRAPHIC OMITTED] PURCHASING AND SELLING FUND SHARES -------------------------------------------------------------------------------- OCTOBER 1, 2000 PROSPECTUS 1 RISK/RETURN INFORMATION The Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. The Fund has its own investment goal and strategies for reaching that goal. The Adviser invests Fund assets in a way that it believes will help the Fund achieve its goal. Still, investing in the Fund involves risks and there is no guarantee that the Fund will achieve its goal. The Adviser's judgments about the markets, the economy or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job the Adviser does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. The value of your investment in the Fund is based on the market prices of the securities the Fund holds. These prices change daily due to economic and other events that affect particular companies and other issuers. These price movements, sometimes called volatility, may be greater or lesser depending on the types of securities the Fund owns and the markets in which it trades. The effect on the Fund of a change in the value of a single security will depend on how widely the Fund diversifies its holdings. 2 PROSPECTUS BALANCED FUND [BRIEFCASE GRAPHIC OMITTED] FUND SUMMARY INVESTMENT GOALS Capital appreciation and current income -------------------------------------------------------------------------------- INVESTMENT FOCUS PRIMARY U.S. common stocks SECONDARY Bonds -------------------------------------------------------------------------------- SHARE PRICE VOLATILITY Moderate -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies with a history of earnings growth and bonds with minimal risk -------------------------------------------------------------------------------- INVESTOR PROFILE Investors who want income from their investment, as well as an increase in its value -------------------------------------------------------------------------------- [TELESCOPE GRAPHIC OMITTED] INVESTMENT STRATEGY The Balanced Fund invests in common and preferred stocks, convertible securities, U.S. government obligations and investment grade corporate bonds. In selecting stocks for the Fund, the Adviser attempts to identify high-quality companies with a history of above average earnings growth. In selecting bonds, the Adviser tries to minimize risk while attempting to outperform selected market indices. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs. [INNERTUBE GRAPHIC OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS FUND? Since it purchases equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund's securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund. The prices of the Fund's fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund's fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk. [BULLSEYE GRAPHIC OMITTED] PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [BAR CHART OMITTED] PLOT POINTS ARE AS FOLLOWS: 1995 25.51% 1996 12.13% 1997 21.14% 1998 19.55% 1999 4.66% BEST QUARTER WORST QUARTER 12.57% -5.70% (12/31/98) (9/30/98) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 4.24%. PROSPECTUS 3 BALANCED FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE LEHMAN BROTHERS U.S. GOVERNMENT/CREDIT INDEX AND THE S&P 500 INDEX. SINCE TRUST SHARES 1 YEAR 5 YEAR INCEPTION -------------------------------------------------------------------------------- Balanced Fund 4.66% 16.36% 12.63%* -------------------------------------------------------------------------------- Lehman Brothers U.S. Government/Credit Index -2.15% 7.60% 5.67%** -------------------------------------------------------------------------------- S&P 500 Index 21.04% 28.55% 23.55%** -------------------------------------------------------------------------------- * SINCE 1/3/94 ** SINCE 12/31/93 [CHART GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS AN INDEX? -------------------------------------------------------------------------------- An index measures the market prices of a specific group of securities in a particular market or securities in a market sector. You cannot invest directly in an index. Unlike a mutual fund, an index does not have an investment adviser and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers U.S. Government/Credit Index is a widely-recognized, market value-weighted (higher market value bonds have more influence than lower market value bonds) index of U.S. Treasury securities, U.S. government agency obligations, corporate debt backed by the U.S. government, fixed-rate nonconvertible corporate debt securities, Yankee bonds, and nonconvertible debt securities issued by or guaranteed by foreign governments and agencies. All securities in this index are rated investment grade (BBB) or higher, with maturities of at least 1 year. The S&P 500 Index is a widely-recognized, market value-weighted (higher market value stocks have more influence than lower market value stocks) index of 500 stocks designed to mimic the overall equity market's industry weightings. [COINS GRAPHIC OMITTED] FUND FEES AND EXPENSES THIS TABLE DESCRIBES THE FUND'S FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD FUND SHARES. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- TRUST SHARES Investment Advisory Fees 0.95% Other Expenses 0.12% ----- Total Annual Fund Operating Expenses 1.07% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $109 $340 $590 $1,306 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.92% and 1.04%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 4 PROSPECTUS MORE INFORMATION ABOUT RISK [INNERTUBE GRAPHIC OMITTED] MORE INFORMATION ABOUT RISK EQUITY RISK Equity securities include public and privately issued equity securities, common and preferred stocks, warrants, rights to subscribe to common stock and convertible securities, as well as instruments that attempt to track the price movement of equity indices. Investments in equity securities and equity derivatives in general are subject to market risks that may cause their prices to fluctuate over time. The value of securities convertible into equity securities, such as warrants or convertible debt, is also affected by prevailing interest rates, the credit quality of the issuer and any call provision. Fluctuations in the value of equity securities in which a mutual fund invests will cause a fund's net asset value to fluctuate. An investment in a portfolio of equity securities may be more suitable for long-term investors who can bear the risk of these share price fluctuations. FIXED INCOME RISK The market value of fixed income investments changes in response to interest rate changes and other factors. During periods of falling interest rates, the values of outstanding fixed income securities generally rise. Moreover, while securities with longer maturities tend to produce higher yields, the prices of longer maturity securities are also subject to greater market fluctuations as a result of changes in interest rates. In addition to these fundamental risks, different types of fixed income securities may be subject to the following additional risk: CREDIT RISK The possibility that an issuer will be unable to make timely payments of either principal or interest. [MOUNTAINTOP GRAPHIC OMITTED] MORE INFORMATION ABOUT FUND INVESTMENTS This prospectus describes the Fund's primary strategies, and the Fund will normally invest in the types of securities described in this prospectus. However, in addition to the investments and strategies described in this prospectus, the Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). The investments and strategies described in this prospectus are those that the Fund uses under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, the Fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and short-term obligations that would not ordinarily be consistent with a Fund's objectives. The Fund will do so only if the Adviser believes that the risk of loss outweighs the opportunity for capital gains or higher income. Of course, the Fund cannot guarantee that it will achieve its investment goal. [MAGNIFIER GRAPHIC OMITTED] INVESTMENT ADVISER The Investment Adviser (the "Adviser") makes investment decisions for the Fund and continuously reviews, supervises and administers the Fund's respective investment program. The Board of Trustees supervises the Adviser and establishes policies that the Adviser must follow in its management activities. Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Fund. As of July 1, 2000, Trusco had approximately $47 billion in assets under management. For the fiscal period ended May 31, 2000, the Adviser received advisory fees of: BALANCED FUND 0.85% PROSPECTUS 5 PURCHASING AND SELLING FUND SHARES The Adviser may use its affiliates as brokers for Fund transactions. For periods prior to January 1, 2000, STI Capital Management, N.A. ("STI"), a subsidiary of SunTrust Banks, Inc. served as the Investment Adviser to the Balanced Fund. On January 1, 2000, SunTrust Bank (formerly SunTrust Bank, Atlanta), a subsidiary of SunTrust Banks, Inc. succeeded STI as the Investment Adviser to the Fund. On July 1, 2000, SunTrust Banks, Inc. reorganized its money management units, including those of SunTrust Bank, into Trusco Capital Management, Inc. As a result, Trusco now serves as the Investment Adviser to each STI Classic Fund. PORTFOLIO MANAGERS The Balanced Fund is co-managed by Mr. Robert J. Rhodes, CFA, Mr. Earl L. Denney, CFA, and Mr. Dave E. West, CFA. Mr. Rhodes manages the equity portion of the Fund. Mr. Denney and Mr. West co-manage the fixed-income portion of the Fund. Mr. Rhodes is an Executive Vice President and head of the Equity Funds group at Trusco. Mr. Rhodes has been employed by Trusco since 1973 and was Director of Research at Trusco from 1980 to 2000. Mr. Rhodes has more than 27 years of investment experience. Mr. West has served as a Managing Director of STI and has worked there since 1985. In January 2000, Mr. West was named Managing Director of SunTrust Bank and is now a Managing Director of Trusco. Mr. West has more than 14 years of investment experience. Mr. Denney has served as Managing Director of STI since 1983. In January 2000, Mr. Denney was named Managing Director of SunTrust Bank and is now a Managing Director of Trusco. Mr. Denney has more than 21 years of investment experience. [HANDSHAKE GRAPHIC OMITTED] PURCHASING AND SELLING FUND SHARES This section tells you how to purchase and sell (sometimes called "redeem") Trust Shares of the Fund. HOW TO PURCHASE FUND SHARES The Fund offers Trust Shares only to financial institutions or intermediaries, including subsidiaries of SunTrust Banks, Inc. (SunTrust), for their own or their customers' accounts for which they act as fiduciary, agent, investment adviser, or custodian. As a result, you, as a customer of a financial institution may purchase Trust Shares through accounts made with financial institutions. Trust Shares will be held of record by (in the name of) your financial institution. Depending upon the terms of your account, however, you may have, or be given, the right to vote your Trust Shares. The Fund may reject any purchase order if it is determined that accepting the order would not be in the best interests of the STI Classic Funds or its shareholders. WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange is open for business (a Business Day). The price per share (the offering price) will be the net asset value per share (NAV) next determined after the Fund receives your purchase order. The Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, for you to receive the current Business Day's NAV for the Fund, generally the Fund must receive your purchase order before 4:00 p.m. Eastern time. 6 PROSPECTUS PURCHASING AND SELLING FUND SHARES FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES, AND OTHER FINANCIAL INSTITUTIONS YOU MAY HAVE TO TRANSMIT YOUR PURCHASE AND SALE REQUESTS TO SUNTRUST OR OTHER FINANCIAL INSTITUTIONS AT AN EARLIER TIME FOR YOUR TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS THE FINANCIAL INSTITUTION TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE OR SELL FUND SHARES, INCLUDING SPECIFIC SUNTRUST OR OTHER FINANCIAL INSTITUTIONS INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR FINANCIAL INSTITUTION DIRECTLY. HOW THE FUND CALCULATES NAV In calculating NAV, the Fund generally values its investment portfolio at market price. If market prices are unavailable or the Fund thinks that they are unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. NET ASSET VALUE NAV for one Fund share is the value of that share's portion of the net assets of the Fund. HOW TO SELL YOUR FUND SHARES You may sell (sometimes called "redeem") your shares on any Business Day by contacting SunTrust or your financial institution. SunTrust or your financial institution will give you information about how to sell your shares including any specific cut-off times required. Holders of Trust Shares may sell shares by following the procedures established when they opened their account or accounts with the Fund or with their financial institution or intermediary. The sale price of each share will be the next NAV determined after the Fund receives your request. RECEIVING YOUR MONEY Normally, the Fund will send your sale proceeds within five Business Days after the Fund receives your request, but it may take up to seven days. REDEMPTIONS IN KIND The Fund generally pays sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) the Fund might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES The Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. TELEPHONE TRANSACTIONS Purchasing and selling Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believes to be genuine. If you or your financial institution transact with the Fund over the telephone, you will generally bear the risk of any loss. PROSPECTUS 7 DIVIDENDS, DISTRIBUTIONS AND TAXES DIVIDENDS AND DISTRIBUTIONS The Balanced Fund distributes its income quarterly and makes distributions of capital gains, if any, at least annually. If you own Fund shares on the Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares. TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Fund has summarized some important tax issues that affect the Fund and its shareholders. This summary is based on current tax laws, which may change. Your dividend and capital gains distributions will be reinvested in additional Fund shares and accumulate on a tax-deferred basis if you are investing through a qualified tax sheltered annuity plan. Generally, you will not owe taxes on these distributions until you begin withdrawals from the plan. Withdrawals from the plan are subject to special tax rules and may be subject to a penalty tax in the case of premature withdrawals. You should consult your tax adviser about the tax consequences of plan withdrawals. MORE INFORMATION ABOUT TAXES IS IN THE SAI. 8 PROSPECTUS FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS The table that follows presents performance information about Trust Shares of the Fund. This information is intended to help you understand the Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in the Fund, assuming you reinvested all of your dividends and distributions. This information for the Fund has been audited by Arthur Andersen LLP, independent public accountants. Their report, along with the Fund's financial statements, appears in the annual report that accompanies the Statement of Additional Information. You can obtain the annual report, which contains more performance information, at no charge by calling 1-800-428-6970. For the Periods Ended May 31, For a Share Outstanding Throughout the Periods
NET REALIZED NET ASSET AND DISTRIBUTIONS VALUE NET UNREALIZED FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT GAINS INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD INCOME ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN (+) --------- ---------- -------------- ------------- ------------- --------- ---------- ------------- BALANCED FUND ------------- Trust Shares 2000 $13.26 $ 0.32 $0.33 $(0.30) $(0.24) $13.37 5.02% 1999 13.09 0.28 1.09 (0.28) (0.92) 13.26 10.98 1998 11.94 0.31 2.19 (0.32) (1.03) 13.09 22.15 1997 11.55 0.33 1.47 (0.32) (1.09) 11.94 16.66 1996 10.26 0.33 1.41 (0.34) (0.11) 11.55 17.26
RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME TO RATIO OF INVESTMENT AVERAGE NET AVERAGE NET NET ASSETS EXPENSES TO INCOME ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO END OF AVERAGE TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE ----------- ----------- ------------- ----------------- ----------------- --------- ------------- BALANCED FUND ------------- Trust Shares 2000 $223,634 0.97% 2.39% 1.07% 2.29% 182% 1999 251,752 0.97 2.19 1.06 2.10 179 1998 188,465 0.96 2.51 1.08 2.39 154 1997 151,358 0.95 2.89 1.08 2.76 197 1996 111,638 0.95 3.00 1.09 2.86 155
(+) Returns are for the period indicated and have not been annualized. Total return figures do not include applicable sales loads. Amounts designated as "--" are either $0 or round to $0. PROSPECTUS 9 NOTES 10 PROSPECTUS NOTES PROSPECTUS 11 NOTES 12 PROSPECTUS NOTES (THIS PAGE INTENTIONALLY LEFT BLANK) 14 PROSPECTUS HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS INVESTMENT ADVISER Trusco Capital Management, Inc. 50 Hurt Plaza Suite 1400 Atlanta, Georgia 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Fund is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 2000, includes detailed information about the STI Classic Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list the Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends and their impact on Fund performance. The reports also contain detailed financial information about the Fund. TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION: BY TELEPHONE: Call 1-800-428-6970 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, Pennsylvania 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the EDGAR Database on the SEC's website ("HTTP://WWW.SEC.GOV"). You may review and copy documents at the SEC Public Reference Room in Washington, DC (for information on the operation of the Public Reference Room, call 202-942-8090). You may request documents by mail from the SEC, upon payment of a duplicating fee, by writing to: Securities and Exchange Commission, Public Reference Section, Washington, DC 20549-0102. You may also obtain this information, upon payment of a duplicating fee, by e-mailing the SEC at the following address: PUBLICINFO@SEC.GOV. The STI Classic Funds' Investment Company Act registration number is 811-06557. PROSPECTUS INSTITUTIONAL SHARES CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND October 1, 2000 Investment Adviser to the Funds: Trusco Capital Management, Inc. (THE "ADVISER") The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. (THIS PAGE LEFT INTENTIONALLY BLANK) ABOUT THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Institutional Shares of the Classic Institutional Money Market Funds that you should know before investing. Please read this prospectus and keep it for future reference. THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. FOLLOWING THE TABLE OF CONTENTS, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN THAT IS COMMON TO EACH OF THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE: Page CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND ............... 2 CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND .... 4 CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND ...... 6 MORE INFORMATION ABOUT FUND INVESTMENTS ............................... 8 INVESTMENT ADVISER AND PORTFOLIO MANAGERS ............................. 8 PURCHASING AND SELLING FUND SHARES .................................... 8 DIVIDENDS AND DISTRIBUTIONS ........................................... 10 TAXES ................................................................. 10 FINANCIAL HIGHLIGHTS .................................................. 11 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS .... Back Cover -------------------------------------------------------------------------------- RISK/RETURN INFORMATION COMMON TO THE FUNDS Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. Each Fund has its own investment goal and strategies for reaching that goal. The Adviser invests Fund assets in a way that it believes will help a Fund achieve its goal. Still, investing in each Fund involves risk and there is no guarantee that a Fund will achieve its goal. The Adviser's judgments about the markets, the economy or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job the Adviser does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. -------------------------------------------------------------------------------- 2 CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND -------------------------------------------------------------------------------- FUND SUMMARY -------------------------------------------------------------------------------- INVESTMENT GOAL As high a level of current income as is consistent with preservation of capital and liquidity -------------------------------------------------------------------------------- INVESTMENT FOCUS Money market instruments -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without adding undue risk -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors seeking current income through a liquid investment -------------------------------------------------------------------------------- INVESTMENT STRATEGY The Classic Institutional Cash Management Money Market Fund invests in high quality U.S. dollar-denominated money market instruments. The Fund invests in obligations of (i) the U.S. Treasury, (ii) agencies and instrumentalities of U.S. and foreign governments, (iii) domestic and foreign banks, (iv) domestic and foreign corporate issuers, and (v) supranational entities, as well as repurchase agreements. In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk by analyzing maturity, yields, market sectors and credit risk. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or the agency's own resources. Investing in foreign countries poses additional risks since political and economic events unique to a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INSTITUTIONAL SHARES FROM YEAR TO YEAR.* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS: 1996 5.47% 1997 5.63% 1998 5.52% 1999 5.12% BEST QUARTER WORST QUARTER 1.41% 1.19% (12/31/97) (6/30/99) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.97%. 3 -------------------------------------------------------------------------------- THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE IMONEYNET, INC. FIRST TIER INSTITUTIONS-ONLY AVERAGE. INSTITUTIONAL SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Classic Institutional Cash Management Money Market Fund 5.12% 5.46%* -------------------------------------------------------------------------------- iMoneyNet, Inc. First Tier Institutions-Only Average 4.94% 5.24%** -------------------------------------------------------------------------------- * SINCE 10/25/95 ** SINCE 10/31/95 TO OBTAIN INFORMATION ABOUT THE FUND'S YIELD, CALL 1-800-814-3397. -------------------------------------------------------------------------------- WHAT IS AN AVERAGE? -------------------------------------------------------------------------------- An average is a composite of mutual funds with similar investment goals. The iMoneyNet, Inc. First Tier Institutions-Only Average is a widely-recognized composite of money market funds which invest in securities rated Prime-1 by Moody's or A-1 by Standard & Poor's. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INSTITUTIONAL SHARES Investment Advisory Fees 0.20% Other Expenses 0.10% -------------------------------------------------------------------------------- Total Annual Fund Operating Expenses 0.30% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $31 $97 $169 $381 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.17% and 0.25%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 4 CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND -------------------------------------------------------------------------------- FUND SUMMARY -------------------------------------------------------------------------------- INVESTMENT GOAL High current income to the extent consistent with the preservation of capital and the maintenance of liquidity -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. Treasury and government agency securities, and repurchase agreements -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without adding undue risk by analyzing yields -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors seeking current income through a liquid investment -------------------------------------------------------------------------------- INVESTMENT STRATEGY The Classic Institutional U.S. Government Securities Money Market Fund invests exclusively in U.S. Treasury obligations, obligations issued or guaranteed as to principal and interest by agencies or instrumentalities of the U.S. government, repurchase agreements involving these securities, and shares of registered money market funds that invest in the foregoing. In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk by analyzing yields. The Adviser actively manages the maturity of the Fund and its portfolio to maximize the Fund's yield based on current market interest rates and the Adviser's outlook on the market. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. Mortgage-backed securities are fixed income securities representing an interest in a pool of underlying mortgage loans. Mortgage-backed securities are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase, exacerbating its decrease in market price. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because of the expectation of additional mortgage prepayments that must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of a portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio. Although the Fund's U.S. government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Obligations issued by some U.S. government agencies are backed by the U.S. Treasury, while others are backed solely by the ability of the agency to borrow from the U.S. Treasury or by the agency's own resources. PERFORMANCE INFORMATION The following bar chart and the performance table illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. 5 -------------------------------------------------------------------------------- THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INSTITUTIONAL SHARES FROM YEAR TO YEAR.* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS: 1995 5.89% 1996 5.31% 1997 5.50% 1998 5.36% 1999 4.99% BEST QUARTER WORST QUARTER 1.49% 1.17% (6/30/95) (6/30/99) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.88%. THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE IMONEYNET, INC. GOVERNMENT-ONLY INSTITUTIONS-ONLY AVERAGE. SINCE INSTITUTIONAL SHARES 1 YEAR 5 YEARS INCEPTION -------------------------------------------------------------------------------- Classic Institutional U.S. Government Securities Money Market Fund 4.99% 5.41% 5.37%* -------------------------------------------------------------------------------- iMoneyNet, Inc. Government-Only Institutions-Only Average 4.68% 5.13% 5.10%** -------------------------------------------------------------------------------- * SINCE 8/1/94 ** SINCE 7/31/94 TO OBTAIN INFORMATION ABOUT THE FUND'S YIELD, CALL 1-800-814-3397. -------------------------------------------------------------------------------- WHAT IS AN AVERAGE? -------------------------------------------------------------------------------- An average is a composite of mutual funds with similar investment goals. The iMoneyNet, Inc. Government-Only Institutions-Only Average is a widely-recognized composite of money market funds which invest in U.S. Treasury Bills, repurchase agreements, or securities issued by agencies of the U.S. government. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INSTITUTIONAL SHARES Investment Advisory Fees 0.20% Other Expenses 0.10% -------------------------------------------------------------------------------- Total Annual Fund Operating Expenses 0.30% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $31 $97 $169 $381 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional Advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.19% and 0.27%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 6 CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND -------------------------------------------------------------------------------- FUND SUMMARY -------------------------------------------------------------------------------- INVESTMENT GOAL As high a level of current income as is consistent with preservation of capital and liquidity -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. Treasury securities and repurchase agreements -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without adding undue risk by analyzing yields -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors seeking current income through a liquid investment -------------------------------------------------------------------------------- INVESTMENT STRATEGY The Classic Institutional U.S. Treasury Securities Money Market Fund invests exclusively in U.S. Treasury Bills, Notes, Bonds and components of these securities, and repurchase agreements collateralized by these securities. The Fund limits its investments so as to obtain the highest investment quality rating by a nationally recognized statistical rating organization (AAA by Standard & Poor's). In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk by analyzing yields for various maturities. The Adviser actively manages the maturity of the Fund and its portfolio to maximize the Fund's yield based on current market interest rates and the Adviser's outlook on the market. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. Although the Fund's U.S. Treasury securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INSTITUTIONAL SHARES FROM YEAR TO YEAR.* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS: 1997 5.44% 1998 5.30% 1999 4.83% BEST QUARTER WORST QUARTER 1.37% 1.13% (9/30/97) (6/30/99) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.82%. 7 -------------------------------------------------------------------------------- THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999, TO THOSE OF THE IMONEYNET, INC. U.S. TREASURY & REPO AVERAGE. INSTITUTIONAL SHARES 1 YEAR SINCE INCEPTION -------------------------------------------------------------------------------- Classic Institutional U.S. Treasury Securities Money Market Fund 4.83% 5.19%* -------------------------------------------------------------------------------- iMoneyNet, Inc. U.S. Treasury and Repo Average 4.36% 4.69%** -------------------------------------------------------------------------------- * SINCE 12/12/96 ** SINCE 11/30/96 TO OBTAIN INFORMATION ABOUT THE FUND'S YIELD, CALL 1-800-814-3397. -------------------------------------------------------------------------------- WHAT IS AN AVERAGE? -------------------------------------------------------------------------------- An average is a composite of mutual funds with similar investment goals. The iMoneyNet, Inc. U.S. Treasury & Repo Average is a widely-recognized composite of money market funds which invest in U.S. Treasury securities and repurchase agreements backed by these securities. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- INSTITUTIONAL SHARES Investment Advisory Fees 0.20% Other Expenses 0.10% -------------------------------------------------------------------------------- Total Annual Fund Operating Expenses 0.30% -------------------------------------------------------------------------------- EXAMPLE -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $31 $97 $169 $381 -------------------------------------------------------------------------------- FUND EXPENSES -------------------------------------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses are lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.19% and 0.27%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 8 -------------------------------------------------------------------------------- MORE INFORMATION ABOUT FUND INVESTMENTS This prospectus describes the Funds' primary strategies, and the Funds will normally invest in the types of securities described in this prospectus. However, in addition to the investments and strategies described in this prospectus, each Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). THE INVESTMENT ADVISER The Investment Adviser (the "Adviser") makes investment decisions for the Funds and continuously reviews, supervises and administers each Fund's respective investment program. The Board of Trustees supervises the Adviser and establishes policies that the Adviser must follow in its management activities. Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Funds. As of July 1, 2000, Trusco had approximately $47 billion in assets under management. For the fiscal period ended May 31, 2000, the Adviser received advisory fees of: CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND 0.17% CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND 0.17% CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND 0.16% The Adviser may use its affiliates as brokers for Fund transactions. PORTFOLIO MANAGERS Mr. Robert S. Bowman, CFA, has served as a Vice President of Trusco since January 1999. He has managed the Classic Institutional Cash Management Money Market Fund since it began operating in October 1995, and has managed the Classic Institutional U.S. Government Securities Money Market Fund since 1995. Prior to joining Trusco, Mr. Bowman served as an assistant trader from 1994 to 1995 and Vice President of Crestar Asset Management Company since 1995. He has more than 6 years of investment experience. Mr. David S. Yealy has served as a Managing Director of Trusco since July 2000. He has managed the Classic Institutional U.S. Treasury Securities Money Market Fund since it began operating in December 1996. Prior to July 2000, Mr. Yealy was a First Vice President of Trusco and has worked there since 1991. He has more than 15 years of investment experience. PURCHASING AND SELLING FUND SHARES This section tells you how to purchase and sell (sometimes called "redeem") Institutional Shares of the Funds. HOW TO PURCHASE FUND SHARES The Funds offer Institutional Shares primarily to various institutional investors, including subsidiaries of SunTrust Banks, Inc. (SunTrust), for their own or their customers' accounts for which they act as fiduciary, agent, investment adviser, or custodian. Shares are sold without a sales charge, although institutions may charge their customers for services provided in connection with the purchase of shares. Institutional shares will be held of record by (in the name of) your institution. Depending upon the terms of your account, however, you may have, or be given, the right to vote your Institutional Shares. The Funds may reject any purchase order if it is determined that accepting the order would not be in the best interest of the STI Classic Funds or its shareholders. 9 -------------------------------------------------------------------------------- WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange and the Federal Reserve are open for business (a Business Day). The price per share (the offering price) will be the net asset value per share (NAV) next determined after the Funds receive your purchase order. Each Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m., Eastern time). So, for you to be eligible to receive dividends declared on the day you submit your purchase order, the Funds must generally receive your order before 3:00 p.m. Eastern time and federal funds (readily available funds) before 4:00 p.m. Eastern time. FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES AND OTHER INSTITUTIONS YOU MAY HAVE TO TRANSMIT YOUR PURCHASE AND SALE REQUESTS TO YOUR INSTITUTION, INCLUDING SUBSIDIARIES OF SUNTRUST AND ITS AFFILIATES, AT AN EARLIER TIME FOR YOUR TRANSACTION TO BECOME EFFECTIVE THAT DAY. THIS ALLOWS YOUR INSTITUTION TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOUT HOW TO PURCHASE OR SELL FUND SHARES, INCLUDING SPECIFIC ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT YOUR INSTITUTION DIRECTLY. HOW THE FUNDS CALCULATE NAV In calculating NAV, the Funds generally value their investment portfolio using the amortized cost valuation method, which is described in detail in the SAI. If this method is determined to be unreliable during certain market conditions or for other reasons, a Fund may value its portfolio at market price or fair value prices may be determined in good faith using methods approved by the Board of Trustees. NET ASSET VALUE NAV for one Fund share is the value of that share's portion of the net assets of the Fund. MINIMUM PURCHASES To purchase shares for the first time, you must invest at least $10,000,000. HOW TO SELL YOUR FUND SHARES You may sell (sometimes called "redeem") your shares on any Business Day by contacting the Funds. If you are a customer of SunTrust or another institution, you must contact that institution directly for information about how to sell your shares including any specific cut-off times required. Redemption orders must be sent to the Funds by the institutional investor as the record owner of shares. If you own Institutional Shares through an institution, you may sell shares by following the procedures established when you opened your account or accounts with your institution. Redemption orders must be received by the Funds on a Business Day before 3:00 p.m. Eastern time. Orders received after 3:00 p.m. Eastern time will be executed the following Business Day. RECEIVING YOUR MONEY Normally, the Funds will send your sale proceeds within five Business Days after the Funds receive your request, but it may take up to seven days. REDEMPTIONS IN KIND The Funds generally pay sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) a Fund might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price 10 -------------------------------------------------------------------------------- (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES A Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. TELEPHONE TRANSACTIONS Purchasing and selling Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believes to be genuine. If you transact with the Fund over the telephone, you will generally bear the risk of any loss. DIVIDENDS AND DISTRIBUTIONS Each Fund declares dividends daily and distributes its income monthly. Each Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Fund in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Fund receives your written notice. To cancel your election, simply send the Fund written notice. TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Funds have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from a Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE OR EXCHANGE OF FUND SHARES IS A TAXABLE EVENT. MORE INFORMATION ABOUT TAXES IS IN THE SAI. 11 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS The tables that follow present performance information about Institutional Shares of each Classic Institutional Money Market Fund. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. The financial highlights for each Fund, except the Classic Institutional Cash Management Money Market Fund and Classic Institutional U.S. Government Securities Money Market Fund for periods prior to May 31, 1999, have been audited by Arthur Andersen LLP, independent public accountants. The financial highlights for the Classic Institutional Cash Management Money Market Fund and the Classic Institutional U.S. Government Securities Money Market Fund for the periods from inception through January 31, 1999 have been audited by PricewaterhouseCoopers LLP, independent public accountants. The report of Arthur Andersen LLP, along with each Fund's financial statements, appears in the annual reports that accompanies the SAI. You can obtain the annual report, which contains more performance information, at no charge by calling 1-800-428-6970. 12 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS For the Periods Ended May 31, (unless otherwise noted) For a Share Outstanding Throughout the Periods
Ratio of Net Ratio of Investment Ratio of Expenses to Income to Ratio of Net Average Net Average Net Net Asset Distributions Expenses Investment Assets Assets Value Net from Net Net Asset Net Assets to Average Income to (Excluding (Excluding Beginning Investment Investment Value End Total End of Net Average Waivers and Waivers and of Period Income Income of Period Return(+) Period (000) Assets Net Assets Reimbursements) Reimbursements) --------- ---------- ------------- --------- --------- ------------ ---------- ---------- --------------- ---------------- ----------------------------------------------------------- CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND (A) ----------------------------------------------------------- Institutional Shares 2000 $1.00 $0.05 $(0.05) $1.00 5.56% $2,311,685 0.25% 5.42% 0.30% 5.37% 1999* 1.00 0.02 (0.02) 1.00 1.58 1,888,483 0.25 4.79 0.35 4.69 For the years ended January 31: 1999 1.00 0.05 (0.05) 1.00 5.46 884,490 0.23 5.31 0.35 5.19 1998 1.00 0.06 (0.06) 1.00 5.66 740,837 0.20 5.52 0.36 5.36 1997 1.00 0.05 (0.05) 1.00 5.45 477,435 0.20 5.33 0.38 5.15 1996(B) 1.00 0.02 (0.02) 1.00 5.82 382,632 0.20 5.61 0.40 5.41 ---------------------------------------------------------------------- CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND (C) ---------------------------------------------------------------------- Institutional Shares 2000 $1.00 $0.05 $(0.05) $1.00 5.39% $ 650,626 0.25% 5.27% 0.29% 5.23% 1999* 1.00 0.02 (0.02) 1.00 1.56 617,089 0.25 4.73 0.36 4.62 For the years ended January 31: 1999 1.00 0.05 (0.05) 1.00 5.30 688,031 0.23 5.18 0.36 5.05% 1998 1.00 0.05 (0.05) 1.00 5.52 789,410 0.20 5.39 0.37 5.22% 1997 1.00 0.05 (0.05) 1.00 5.29 586,731 0.20 5.17 0.37 5.00% 1996 1.00 0.06 (0.06) 1.00 5.88 514,870 0.20 5.72 0.37 5.55% ---------------------------------------------------------------- CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND ---------------------------------------------------------------- Institutional Shares 2000 $1.00 $0.05 $(0.05) $1.00 5.25% $ 329,725 0.25% 5.17% 0.31% 5.11% 1999 1.00 0.05 (0.05) 1.00 4.97 283,525 0.20 4.83 0.47 4.56 1998 1.00 0.05 (0.05) 1.00 5.50 140,334 0.18 5.34 0.38 5.14 1997(D) 1.00 0.02 (0.02) 1.00 2.46 20,238 0.09 5.27 0.51 4.85
(A) On May 17, 1999, the Arbor Prime Obligations Fund exchanged all of its assets and certain liabilities for shares of the Classic Institutional Cash Management Money Market Fund. The Arbor Prime Obligations Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 17, 1999 have been carried forward in these financial highlights. (B) Commenced operations on October 25, 1995. All ratios for the period have been annualized. (C) On May 24, 1999, the Arbor U.S. Government Securities Money Fund exchanged all of its assets and certain liabilities for shares of the Classic Institutional U.S. Government Securities Money Market Fund. The Arbor U.S. Government Securities Money Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. (D) Commenced operations on December 12, 1996. All ratios for the period have been annualized. (+) Returns are for the period indicated and have not been annualized. * For the period February 1, 1999 to May 31, 1999. All ratios for the period have been annualized. -------------------------------------------------------------------------------- NOTES STI CLASSIC FUNDS INVESTMENT ADVISER Trusco Capital Management, Inc. 50 Hurt Plaza Suite 1400 Atlanta, Georgia 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 2000, includes detailed information about the STI Classic Institutional Money Market Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list each Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends and their impact on Fund performance. The reports also contain detailed financial information about the Funds. TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION: BY TELEPHONE: Call 1-800-428-6970 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, Pennsylvania 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the EDGAR Database on the SEC's website ("HTTP://WWW.SEC.GOV"). You may review and copy documents at the SEC Public Reference Room in Washington, DC (for information on the operation of the Public Reference Room, call 202-942-8090). You may request documents by mail from the SEC, upon payment of a duplicating fee, by writing to: Securities and Exchange Commission, Public Reference Section, Washington, DC 20549-0102. You may also obtain this information, upon payment of a duplicating fee, by e-mailing the SEC at the following address: PUBLICINFO@SEC.GOV. The STI Classic Funds' Investment Company Act registration number is 811-06557. XXX-XXXX PROSPECTUS CORPORATE TRUST SHARES CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND October 1, 2000 Investment Adviser to the Fund: Trusco Capital Management, Inc. (THE "ADVISER") The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. (THIS PAGE LEFT INTENTIONALLY BLANK) ABOUT THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Corporate Trust Shares of the Classic Institutional U.S. Treasury Securities Money Market Fund that you should know before investing. Please read this prospectus and keep it for future reference. THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY REVIEW THIS IMPORTANT INFORMATION. FOLLOWING THE TABLE OF CONTENTS, THERE IS SOME GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN. FOR MORE DETAILED INFORMATION ABOUT THE FUND, PLEASE SEE: Page PRINCIPAL INVESTMENT STRATEGIES AND RISKS, PERFORMANCE INFORMATION AND EXPENSES ........................... 2 MORE INFORMATION ABOUT FUND INVESTMENTS ........................ 4 INVESTMENT ADVISER AND PORTFOLIO MANAGER ....................... 4 PURCHASING AND SELLING FUND SHARES ............................. 4 DIVIDENDS AND DISTRIBUTIONS .................................... 6 TAXES .......................................................... 6 FINANCIAL HIGHLIGHTS ........................................... 7 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS .....Back Cover -------------------------------------------------------------------------------- RISK/RETURN INFORMATION The Fund is a mutual fund. A mutual fund pools shareholders' money and, using professional investment managers, invests it in securities. The Fund has an investment goal and strategies for reaching that goal. The Adviser invests Fund assets in a way that it believes will help the Fund achieve its goal. Still, investing in the Fund involves risk and there is no guarantee that the Fund will achieve its goal. The Adviser's judgments about the markets, the economy or companies may not anticipate actual market movements, economic conditions or company performance, and these judgments may affect the return on your investment. In fact, no matter how good a job the Adviser does, you could lose money on your investment in the Fund, just as you could with other investments. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. -------------------------------------------------------------------------------- 2 CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND -------------------------------------------------------------------------------- FUND SUMMARY -------------------------------------------------------------------------------- INVESTMENT GOAL As high a level of current income as is consistent with preservation of capital and liquidity -------------------------------------------------------------------------------- INVESTMENT FOCUS U.S. Treasury securities and repurchase agreements -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT STRATEGY Attempts to increase income without adding undue risk by analyzing yields -------------------------------------------------------------------------------- INVESTOR PROFILE Conservative investors seeking current income through a liquid investment -------------------------------------------------------------------------------- INVESTMENT STRATEGY The Classic Institutional U.S. Treasury Securities Money Market Fund invests exclusively in U.S. Treasury Bills, Notes, Bonds and components of these securities and repurchase agreements collateralized by these securities. The Fund limits its investments so as to obtain the highest investment quality rating by a nationally recognized statistical rating organization (AAA by Standard & Poor's). In selecting investments for the Fund, the Adviser tries to increase income without adding undue risk by analyzing yields for various maturities. The Adviser actively manages the maturity of the Fund and its portfolio to maximize the Fund's yield based on current market interest rates and the Adviser's outlook on the market. As a money market fund, the Fund follows strict rules about credit risk, maturity and diversification of its investments. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? An investment in the Fund is subject to income risk, which is the possibility that the Fund's yield will decline due to falling interest rates. A Fund share is not a bank deposit and is not insured or guaranteed by the FDIC or any government agency. In addition, although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in the Fund. Although the Fund's U.S. Treasury securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INSTITUTIONAL SHARES FROM YEAR TO YEAR FOR THE PAST THREE YEARS. SINCE INSTITUTIONAL SHARES ARE INVESTED IN THE SAME PORTFOLIO OF SECURITIES, RETURNS FOR CORPORATE TRUST SHARES WILL BE SUBSTANTIALLY SIMILAR TO THOSE OF THE INSTITUTIONAL SHARES, SHOWN HERE, AND WILL DIFFER ONLY TO THE EXTENT THAT EACH CLASS HAS DIFFERENT EXPENSES.* [BAR GRAPH OMITTED] Points are as follows: 1997 5.44% 1998 5.30% 1999 4.83% BEST QUARTER WORST QUARTER 1.37% 1.13% (9/30/97) (6/30/99) * THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/00 TO 6/30/00 WAS 2.82%. 3 -------------------------------------------------------------------------------- THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999 TO THOSE OF THE IMONEYNET, INC. U.S. TREASURY & REPO AVERAGE. INSTITUTIONAL SHARES 1 YEAR SINCE INCEPTION ----------------------------------------------------- Classic Institutional U.S. Treasury Securities Money Market Fund 4.83% 5.19%* ----------------------------------------------------- iMoneyNet, Inc. U.S. Treasury & Repo Average 4.36% 4.69%** ----------------------------------------------------- * SINCE 12/12/96 ** SINCE 11/30/96 TO OBTAIN INFORMATION ABOUT THE FUND'S YIELD, CALL 1-800-814-3397. ----------------------------------------------------- WHAT IS AN AVERAGE? ----------------------------------------------------- An average is a composite of mutual funds with similar investment goals. The iMoneyNet, Inc. U.S. Treasury & Repo Average is a widely-recognized composite of money market funds which invest in U.S. Treasury securities and repurchase agreements backed by these securities. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay if you buy and hold Fund shares. ----------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) ----------------------------------------------------- CORPORATE TRUST SHARES Investment Advisory Fees 0.20% Other Expenses 0.30% ----------------------------------------------------- Total Annual Fund Operating Expenses 0.50% ----------------------------------------------------- EXAMPLE ----------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of the period. The Example also assumes that each year your investment has a 5% return, Fund operating expenses remain the same and you reinvest all dividends and distributions. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $51 $160 $280 $628 ----------------------------------------------------- FUND EXPENSES ----------------------------------------------------- Every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. These expenses are deducted from Fund assets. The table shows the highest expenses that could be currently charged to the Fund. Actual expenses will be lower because the Adviser is voluntarily waiving a portion of its fees. Actual Investment Advisory Fees and Total Operating Expenses are 0.19% and 0.47%, respectively. The Adviser could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Adviser." 4 -------------------------------------------------------------------------------- MORE INFORMATION ABOUT FUND INVESTMENTS This prospectus describes the Fund's primary strategies, and the Fund will normally invest in the types of securities described in this prospectus. However, in addition to the investments and strategies described in this prospectus, the Fund also may invest in other securities, use other strategies and engage in other investment practices. These investments and strategies, as well as those described in this prospectus, are described in detail in the Statement of Additional Information (SAI). INVESTMENT ADVISER The Investment Adviser (the "Adviser") makes investment decisions for the Fund and continuously reviews, supervises and administers its Fund's investment program. The Board of Trustees supervises the Adviser and establishes policies that the Adviser must follow in its management activities. Trusco Capital Management, Inc. (Trusco) 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Adviser to the Fund. As of July 1, 2000, Trusco had approximately $47 billion in assets under management. For the period ended May 31, 2000, the Adviser received advisory fees of 0.16% for the Fund. The Adviser may use its affiliates as brokers for Fund transactions. PORTFOLIO MANAGER Mr. David S. Yealy has served as a Managing Director of Trusco since July 2000. He has managed the Classic Institutional U.S. Treasury Securities Money Market Fund since it began operating in December 1996. Prior to July 2000, Mr. Yealy was a First Vice President of Trusco and has worked there since 1991. He has more than 15 years of investment experience. PURCHASING AND SELLING FUND SHARES This section tells you how to purchase and sell (sometimes called "redeem") Corporate Trust Shares of the Fund. HOW TO PURCHASE FUND SHARES The Fund offers Corporate Trust Shares only to accounts of various banking subsidiaries of SunTrust Banks, Inc. which are administered by the Corporate Trust Division (SunTrust). Shares are sold without a sales charge. Corporate Trust Shares will be held of record by (in the name of) SunTrust. Depending upon the terms of your account, however, you may have, or be given, the right to vote your Corporate Trust Shares. The Fund may reject any purchase order if it is determined that accepting the order would not be in the best interest of the STI Classic Funds or its shareholders. WHEN CAN YOU PURCHASE SHARES? You may purchase shares on any day that the New York Stock Exchange and the Federal Reserve are open for business (a Business Day). The price per share (the offering price) will be the net asset value per share (NAV) next determined after the Fund receives the purchase order. The Fund calculates its NAV once each Business Day at the regularly-scheduled close of normal trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time). So, for you to be eligible to receive dividends declared on the day that purchase order is submitted, the Fund must generally receive that order before 3:00 p.m. Eastern time and federal funds (readily available funds) before 4:00 p.m. Eastern time. 5 -------------------------------------------------------------------------------- FOR CUSTOMERS OF SUNTRUST, ITS AFFILIATES AND OTHER FINANCIAL INSTITUTIONS YOU MAY HAVE TO TRANSMIT YOUR PURCHASE AND SALE REQUESTS TO SUNTRUST AT AN EARLIER TIME THAN THOSE LISTED ABOVE FOR YOUR TRANSACTION TO BE BECOME EFFECTIVE THAT DAY. THIS ALLOWS SUNTRUST TIME TO PROCESS YOUR REQUEST AND TRANSMIT IT TO THE ADMINISTRATOR OR THE TRANSFER AGENT IN TIME TO MEET THE ABOVE STATED FUND CUT-OFF TIMES. FOR MORE INFORMATION ABOVE HOW TO PURCHASE OR SELL FUND SHARES THROUGH YOUR ACCOUNT, INCLUDING SPECIFIC INTERNAL ORDER ENTRY CUT-OFF TIMES, PLEASE CONTACT SUNTRUST DIRECTLY. HOW THE FUND CALCULATES NAV In calculating NAV, the Fund generally values its investment portfolio using the amortized cost valuation method, which is described in detail in the SAI. If this method is determined to be unreliable during certain market conditions or for other reasons, the Fund may value its portfolio at market price or fair value prices may be determined in good faith using methods approved by the Board of Trustees. NET ASSET VALUE NAV for one Fund share is the value of that share's portion of the net assets of the Fund. HOW TO SELL YOUR FUND SHARES You may sell (sometimes called "redeem") your shares on any Business Day by contacting SunTrust. SunTrust will provide information about how to sell your shares including any specific cut-off times required. Redemption orders must be sent to the Fund by SunTrust as the record owner of shares. If you own Corporate Trust Shares through a subsidiary of SunTrust you may sell shares by following the procedures established when you opened your account or accounts. Redemption orders must be received by the Fund on a Business Day before 3:00 p.m. Eastern time. Orders received after 3:00 p.m. Eastern time will be executed the following Business Day. RECEIVING YOUR MONEY Normally, the Fund will send your sale proceeds within five Business Days after the Fund receives your request, but it may take up to seven days. REDEMPTIONS IN KIND The Fund generally pays sale (redemption) proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) the Fund might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). It is highly unlikely that your shares would ever be redeemed in kind, but if they were you would probably have to pay transaction costs to sell the securities distributed to you, as well as taxes on any capital gains from the sale as with any redemption. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES The Fund may suspend your right to sell your shares if the New York Stock Exchange restricts trading, the SEC declares an emergency or for other reasons. More information about this is in the SAI. TELEPHONE TRANSACTIONS Purchasing and selling Fund shares over the telephone is extremely convenient, but not without risk. Although the Fund has certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, the Fund is not responsible for any losses or costs incurred by following telephone instructions the Fund reasonably believes to be genuine. If you transact with the Fund over the telephone, you will generally bear the risk of any loss. 6 -------------------------------------------------------------------------------- DIVIDENDS AND DISTRIBUTIONS The Fund declares dividends daily and distributes its income monthly. The Fund makes distributions of capital gains, if any, at least annually. If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. You will receive dividends and distributions in the form of additional Fund shares unless you elect to receive payment in cash. To elect cash payment, you must notify the Fund in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after the Fund receives your written notice. To cancel your election, simply send the Fund written notice. TAXES PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below the Fund has summarized some important tax issues that affect the Fund and its shareholders. This summary is based on current tax laws, which may change. The Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Distributions you receive from the Fund may be taxable whether or not you reinvest them. Income distributions are generally taxable at ordinary income tax rates. Capital gains distributions are generally taxable at the rates applicable to long-term capital gains. EACH SALE OR EXCHANGE OF FUND SHARES IS A TAXABLE EVENT. MORE INFORMATION ABOUT TAXES IS IN THE SAI. 7 -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS The table that follows presents performance information about Corporate Trust Shares of the Classic Institutional U.S. Treasury Securities Money Market Fund. This information is intended to help you understand the Fund's financial performance for the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. The financial highlights for this Fund have been audited by Arthur Andersen LLP, independent public accountants. The report of Arthur Andersen LLP, along with the Fund's financial statements, appears in the annual reports that accompanies the SAI. You can obtain the annual report, which contains more performance information, at no charge by calling 1-800-428-6970. 8 FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- For the Periods Ended May 31, For a Share Outstanding Throughout the Periods
Ratio of Net Ratio of Investment Ratio of Expenses to Income to Ratio of Net Average Net Average Net Net Asset Net Distributions Expenses Investment Assets Assets Value Investment from Net Net Asset Net Assets to Average Income to (Excluding (Excluding Beginning Income Investment Value End Total End of Net Average Waivers and Waivers and of Period (Loss) Income of Period Return(+) Period (000) Assets Net Assets Reimbursements) Reimbursements) --------- ---------- ------------- --------- --------- ------------ ---------- ---------- --------------- --------------- ------------------------------------------------------------------------------------------------------------------------------------ CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND ------------------------------------------------------------------------------------------------------------------------------------ Corporate Trust Shares 2000* $1.00 $0.05 $(0.05) $1.00 5.02% $1,138,541 0.45% 4.93% 0.49% 4.89% (+) Returns are for the period indicated and have not been annualized. * Commenced operations on June 3, 1999. All ratios for the period have been annualized.
-------------------------------------------------------------------------------- NOTES STI CLASSIC FUNDS INVESTMENT ADVISER Trusco Capital Management, Inc. 50 Hurt Plaza Suite 1400 Atlanta, Georgia 30303 DISTRIBUTOR SEI Investments Distribution Co. One Freedom Valley Drive Oaks, Pennsylvania 19456 LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Fund is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI dated October 1, 2000, includes detailed information about the STI Classic Institutional Money Market Funds. The SAI is on file with the SEC and is incorporated by reference into this prospectus. This means that the SAI, for legal purposes, is a part of this prospectus. ANNUAL AND SEMI-ANNUAL REPORTS These reports list the Fund's holdings and contain information from the Fund's managers about strategies, and recent market conditions and trends and their impact on Fund performance. The reports also contain detailed financial information about the Fund. TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION: BY TELEPHONE: Call 1-800-428-6970 BY MAIL: Write to the Funds c/o SEI Investments Distribution Co. Oaks, Pennsylvania 19456 FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports, as well as other information about the STI Classic Funds, from the EDGAR Database on the SEC's website ("HTTP://WWW.SEC.GOV"). You may review and copy documents at the SEC Public Reference Room in Washington, DC (for information on the operation of the Public Reference Room, call 202-942-8090). You may request documents by mail from the SEC, upon payment of a duplicating fee, by writing to: Securities and Exchange Commission, Public Reference Section, Washington, DC 20549-0102. You may also obtain this information, upon payment of a duplicating fee, by e-mailing the SEC at the following address: PUBLICINFO@SEC.GOV. The STI Classic Funds' Investment Company Act registration number is 811-06557. STI CLASSIC FUNDS INVESTMENT ADVISER: TRUSCO CAPITAL MANAGEMENT, INC. This Statement of Additional Information is not a prospectus. It is intended to provide additional information regarding the activities and operations of the STI Classic Funds (the "Trust") and should be read in conjunction with the Trust's prospectuses dated October 1, 2000. Prospectuses may be obtained through the Distributor, SEI Investments Distribution Co., One Freedom Valley Drive, Oaks, Pennsylvania 19456. TABLE OF CONTENTS PAGE THE TRUST...................................................................B-2 ADDITIONAL INFORMATION ABOUT CERTAIN FUNDS..................................B-3 DESCRIPTION OF PERMITTED INVESTMENTS.......................................B-18 INVESTMENT POLICIES........................................................B-34 PROPOSED FUNDAMENTAL INVESTMENT POLICIES...................................B-37 INVESTMENT ADVISER.........................................................B-38 THE ADMINISTRATOR..........................................................B-41 THE DISTRIBUTOR............................................................B-43 THE TRANSFER AGENT.........................................................B-49 THE CUSTODIAN..............................................................B-49 CODES OF ETHICS............................................................B-50 INDEPENDENT PUBLIC ACCOUNTANTS.............................................B-50 LEGAL COUNSEL..............................................................B-50 TRUSTEES AND OFFICERS OF THE TRUST.........................................B-50 PERFORMANCE INFORMATION....................................................B-53 COMPUTATION OF YIELD.......................................................B-53 CALCULATION OF TOTAL RETURN................................................B-58 PURCHASING SHARES..........................................................B-63 REDEEMING SHARES...........................................................B-63 DETERMINATION OF NET ASSET VALUE...........................................B-64 TAXES ..................................................................B-65 FUND TRANSACTIONS..........................................................B-67 TRADING PRACTICES AND BROKERAGE............................................B-68 DESCRIPTION OF SHARES......................................................B-73 SHAREHOLDER LIABILITY......................................................B-73 LIMITATION OF TRUSTEES' LIABILITY..........................................B-74 5% AND 25% SHAREHOLDERS....................................................B-74 APPENDIX ...................................................................A-1 FINANCIAL STATEMENTS........................................................F-1 B-1 THE TRUST STI Classic Funds (the "Trust") is a diversified, open-end management investment company established under Massachusetts law as a Massachusetts business trust under a Declaration of Trust dated January 15, 1992. The Declaration of Trust permits the Trust to offer separate series (each a "Fund" and collectively, the "Funds") of units of beneficial interest ("shares") and different classes of shares of each Fund. Shareholders at present may purchase shares of the Funds through one, two or three separate classes (Trust Shares, Investor Shares and Flex Shares), which provide for variations in sales charges, distribution costs, transfer agent fees, voting rights and dividends. Except for these differences, each share of each Fund represents an equal proportionate interest in that Fund. See "Description of Shares." This Statement of Additional Information relates to each class of the following Funds:
TRUST SHARES INVESTOR SHARES FLEX SHARES ------------ --------------- ----------- EQUITY FUNDS ------------ Capital Appreciation Fund [check mark omitted] [check mark omitted] [check mark omitted] Core Equity Fund [check mark omitted] [check mark omitted] E-Commerce Opportunity Fund [check mark omitted] [check mark omitted] Growth and Income Fund [check mark omitted] [check mark omitted] [check mark omitted] International Equity Fund [check mark omitted] [check mark omitted] [check mark omitted] International Equity Index Fund [check mark omitted] [check mark omitted] [check mark omitted] Mid-Cap Equity Fund [check mark omitted] [check mark omitted] [check mark omitted] Small Cap Value Equity Fund [check mark omitted] [check mark omitted] Small Cap Growth Stock Fund [check mark omitted] [check mark omitted] [check mark omitted] Tax Sensitive Growth Stock Fund [check mark omitted] [check mark omitted] Value Income Stock Fund [check mark omitted] [check mark omitted] [check mark omitted] BALANCED FUND ------------- Balanced Fund [check mark omitted] [check mark omitted] [check mark omitted] BOND FUNDS ---------- High Income Fund [check mark omitted] Investment Grade Bond Fund [check mark omitted] [check mark omitted] [check mark omitted] Limited-Term Federal Mortgage Securities Fund [check mark omitted] [check mark omitted] [check mark omitted] Short-Term Bond Fund [check mark omitted] [check mark omitted] [check mark omitted] Short-Term U.S. Treasury Securities Fund [check mark omitted] [check mark omitted] [check mark omitted] U.S. Government Securities Fund [check mark omitted] [check mark omitted] [check mark omitted] TAX-EXEMPT BOND FUNDS --------------------- Florida Tax-Exempt Bond Fund [check mark omitted] [check mark omitted] [check mark omitted] Georgia Tax-Exempt Bond Fund [check mark omitted] [check mark omitted] [check mark omitted] Investment Grade Tax-Exempt Bond Fund [check mark omitted] [check mark omitted] [check mark omitted] Maryland Municipal Bond Fund [check mark omitted] [check mark omitted] Virginia Intermediate Municipal Bond Fund [check mark omitted] [check mark omitted] Virginia Municipal Bond Fund [check mark omitted] [check mark omitted]
B-2
TRUST SHARES INVESTOR SHARES FLEX SHARES ------------ --------------- ----------- MONEY MARKET FUNDS ------------------ Prime Quality Money Market Fund [check mark omitted] [check mark omitted] [check mark omitted] Tax-Exempt Money Market Fund [check mark omitted] [check mark omitted] U.S. Government Securities Money Market Fund [check mark omitted] [check mark omitted] U.S. Treasury Money Market Fund [check mark omitted] Virginia Tax-Free Money Market Fund [check mark omitted] [check mark omitted] LIFE VISION FUNDS ----------------- Life Vision Moderate Growth Fund [check mark omitted] Life Vision Growth and Income Fund [check mark omitted] Life Vision Aggressive Growth Fund [check mark omitted]
These various series are collectively referred to herein as the "Funds." The Trust pays its expenses, including fees of its service providers, audit and legal expenses, expenses of preparing prospectuses, proxy solicitation material and reports to shareholders, costs of custodial services, and registering the shares under federal and state securities laws, pricing, insurance expenses, litigation, and other extraordinary expenses, brokerage costs, interest charges, taxes, and organization expenses. ADDITIONAL INFORMATION ABOUT CERTAIN FUNDS EQUITY FUNDS CAPITAL APPRECIATION FUND The Capital Appreciation Fund invests primarily (at least 65% of its assets) in a diversified portfolio of common stocks, warrants, and securities convertible into common stocks of companies which the Adviser believes have strong business fundamentals, such as revenue growth, cash flows and earnings trends. In selecting securities for the Fund, the Adviser will evaluate factors believed to affect capital appreciation such as the issuer's background, industry position, historical returns on equity and experience and qualifications of the management team. Dividend and interest income should be considered incidental to the growth of capital. Under normal conditions, at least 65% of the total assets of the Fund will be invested in common stocks. All of the common stocks in which the Fund invests are traded on registered exchanges or on the over-the-counter market in the United States. Assets of the Fund not invested in the securities described above may be invested in U.S. dollar denominated equity securities of foreign issuers (including sponsored American Depositary Receipts ("ADRs") that are traded on exchanges or listed on National Association of Securities Dealers Automated Quotations ("NASDAQ"); securities issued by money market mutual funds; pay-in-kind securities; and bonds. The bonds that the Fund may purchase may be rated in any rating category or may be unrated, provided that no more than 10% of the Fund's total assets will be invested in bonds rated below BBB by Standard & Poor's Corporation ("S&P"), rated below Baa by Moody's Investors Services, Inc. ("Moody's"), or of comparable quality not rated by S&P or Moody's. In addition, the Fund may invest up to 10% of its assets in restricted securities. B-3 GROWTH AND INCOME FUND The Growth and Income Fund's primary objective is to provide long-term capital appreciation and, as a secondary objective, current income, by investing primarily in income producing equity securities of companies with large market capitalizations. The Fund's investments will be broadly diversified among major economic sectors and among those securities with above-average total return potential. A number of valuation criteria are considered in the equity selection process, the principal one being the issue's price to earnings ("P/E") ratio in relation to other stocks in the same industry. Stocks with the lowest P/E ratios, along with strong financial quality and above-average earnings potential, are selected to secure the best relative values in each economic sector. The Adviser believes that this approach will produce a portfolio with less volatility and greater dividend yield than the market as a whole. The Fund will invest primarily in the income producing equity securities of companies with market capitalizations of at least $1 billion. The Fund will invest primarily (at least 65% of its assets) in domestic and foreign common stock and in securities convertible into common stock, such as convertible bonds and convertible preferred stock rated investment-grade. The Adviser will select stocks for this Fund from a list of companies traded in the U.S. securities markets, including sponsored ADRs of qualifying foreign companies. A qualitative screening process is employed to exclude companies with poor earnings results or highly leveraged balance sheets in an effort to construct a portfolio with low risk characteristics relative to the major stock market indices, although it is not the intention of the Fund to match the risk or performance characteristics of any index. As a non-fundamental investment policy, the Fund may, to the extent consistent with its investment objective, invest in any debt security in which the Investment Grade Bond Fund or the Short Term Bond Fund may invest. As a non-fundamental investment policy, the Fund may also invest up to 10% of its assets in the U.S. Treasury obligations. Although the Fund intends, under normal circumstances, to be fully invested at all times in the securities mentioned above, the Fund may make substantial temporary investments in high-quality, short-term debt securities and money market instruments, including repurchase agreements, and in shares of other open-end management investment companies which invest primarily in money market instruments, when the Adviser believes market conditions warrant a defensive position. Should the Fund elect to purchase shares of money market funds, it will incur additional expenses charged by that money market fund, such as management fees. INTERNATIONAL EQUITY FUND The International Equity Fund, under normal market conditions, will invest at least 65% of its assets in equity securities of foreign issuers consisting of: common and preferred stocks, warrants, options and securities convertible into common stock. Securities of foreign issuers purchased by the Fund may be purchased in foreign markets, on United States registered exchanges, the over-the-counter market or in the form of sponsored or unsponsored ADRs traded on registered exchanges or NASDAQ, or sponsored or unsponsored European Depositary Receipts ("EDRs"). The Fund may enter into forward foreign currency contracts as a hedge against possible variations in foreign exchange rates. A forward foreign currency contract is a commitment to purchase or sell a specified currency, at a specified future date, at a specified price. The Fund may enter into forward foreign currency contracts to hedge a specific security transaction or to hedge a portfolio position. The Fund also may purchase and write put and call options on foreign currencies (traded on U.S. and foreign exchanges or over-the-counter markets) to manage the portfolios exposure to changes in dollar exchange rates. The Fund expects to be fully invested in the investments described above, but may invest up to 35% of its total assets in bonds and debentures issued by non-U.S. or U.S. companies, securities issued or guaranteed by foreign or U.S. governments and foreign and U.S. commercial paper. The Fund may invest in futures contracts, including B-4 stock index futures contracts, and options on futures contracts. The bonds that the Fund may purchase may be rated in any rating category or may be unrated provided that no more than 10% of the Fund's total assets will be invested in bonds rated below BBB by S&P, rated below Baa by Moody's, or of comparable quality not rated by S&P or Moody's. When investing in bonds, the Fund may seek capital gains by taking advantage of price appreciation caused by interest rate and credit quality changes. The Fund may also purchase shares of closed-end investment companies that invest in the securities of issuers in a single country or region. The Fund is also permitted to acquire floating and variable rate securities, purchase securities on a when-issued basis and purchase illiquid securities. The Fund will invest in the foreign issues of at least three different countries outside the United States. A foreign issue is one the issuer of which (i) is organized under the laws of a specific country, or for which the principal securities trading market is in a specific country or (ii) derives a significant proportion (at least 50%) of its revenues or profits from goods produced or sold, investments made, or services performed in a specific country or which have at least 50% of its assets situated in that country. The Fund will invest primarily in developed countries (for example Japan, Canada and the United Kingdom). In addition, the Fund may invest in securities of issuers whose principal activities are in countries with emerging markets. The Fund defines an emerging market country as any country the economy and market of which the World Bank or the United Nations considers to be emerging or developing. INTERNATIONAL EQUITY INDEX FUND The International Equity Index Fund will invest substantially all and, under normal market conditions, at least 65% of its assets in: common and preferred stocks; warrants; options; and securities convertible into common stock of companies headquartered or based in the approximately twenty foreign countries included in the MSCI EAFE-GDP Weighted Index (the "Index"). The Fund will invest only in the over 900 companies included in the Index. However, because it is impractical to invest in every company included in the Index, the Fund will select a representative sample of securities in each country using a statistically-based optimization process. The Fund will be constructed to have aggregate investment characteristics similar to those of the Index. The Fund will invest in a statistically selected sample of the securities included in the Index, although not all countries or all companies within a country will be represented in the Fund's portfolio of securities at any time. The Fund expects to invest in approximately 300 stocks so that the results fall within a targeted tracking error range. From time to time, adjustments may be made in the Fund's portfolio because of changes in the composition of the Index. No attempt will be made to manage the portfolio using traditional economic, financial and market analyses. The Fund expects that there will be a close correlation between the Fund's performance and that of the Index. A correlation of 1.00 would be achieved when the net asset value of the Fund, including the value of its dividend and capital gains distributions, increases or decreases in exact proportion to changes in the Index. The correlation between the Fund and the Index is expected to be over 0.95 on an annual basis. The Fund's ability to track the Index, however, may be affected by, among other things, transaction costs, changes in either the composition of the Index or number of shares outstanding for the component companies of the Index, and the timing and amount of purchases and redemptions. Securities of foreign issuers purchased by the Fund may be purchased in foreign markets, on United States registered exchanges, the over-the-counter market or in the form of sponsored or unsponsored ADRs traded on registered exchanges or NASDAQ, or sponsored or unsponsored EDRs. The Fund may enter into forward foreign currency contracts as a hedge against possible variations in foreign exchange rates. A forward foreign currency contract is a commitment to purchase or sell a specified currency, at a specified future date, at a specified price. The Fund may enter into forward foreign currency contracts to hedge a specific security transaction or to hedge a portfolio position. These contracts may be bought or sold to try to protect the Fund, to some degree, against a possible loss resulting from an adverse change in the relationship between foreign currencies and the U.S. dollar. B-5 The Fund expects to be fully invested in the investments described above, but may invest up to 35% of its total assets in: U.S. and non-U.S. denominated money market instruments; repurchase agreements; futures contracts, including stock index futures contracts; and options on futures contracts. Obligations relating to futures contracts will be limited to 20% of the Fund's total assets. The Fund is also permitted to acquire floating and variable rate securities, purchase securities on a when-issued basis, and purchase illiquid securities. MID-CAP EQUITY FUND The Mid-Cap Equity Fund invests primarily in a diversified portfolio of common stocks, preferred stocks, and securities convertible into common stocks of small to mid-size companies, (I.E., $500 million to $10 billion, respectively, as measured by their market capitalization), with above-average growth of earnings. Under normal conditions, at least 80% of the total assets of the Fund will be invested in equity securities, and as a matter of non- fundamental policy, the Fund will invest (at least 65% of its assets) in mid-size companies. Current income will not be an important criterion of investment selection and any such income should be considered incidental. In selecting securities for the Fund, the Adviser will evaluate factors such as the issuer's background, industry position, historical returns on equity, and the experience and qualifications of the management team. Most of the common stocks in which the Fund invests are traded on registered exchanges or on the over-the-counter market in the United States. Assets of the Fund not invested in the securities described above may be invested in: U.S. dollar denominated equity securities of foreign issuers (including sponsored ADRs that are traded on exchanges or listed on NASDAQ); securities issued by mutual funds; repurchase agreements; and bonds. The bonds that the Fund may purchase, including any variable or floating rate instruments, must be rated B or better by S&P or Moody's. This requirement shall not apply to (i) the Fund's purchase of bonds issued by the government of Canada or by various supranational entities; and (ii) no more than 10% of the Fund's total assets will be invested in bonds rated below BBB by S&P, rated below Baa by Moody's, or of comparable quality not rated by S&P or Moody's. The Fund may invest up to 10% of its assets in restricted securities. SMALL CAP VALUE EQUITY FUND The Small Cap Value Equity Fund invests substantially all, and under normal market conditions, at least 65% of its assets, in the equity securities of smaller companies (I.E., companies with market capitalizations of less than $1 billion) which, in the Adviser's opinion, are undervalued for above-average capital growth. Any remaining assets may be invested in the equity securities of companies with larger market capitalizations which the Adviser believes are also undervalued. The Fund may also invest in U.S. dollar denominated equity securities of foreign issuers (including ADRs). Equity securities include common stock, preferred stock, warrants and rights to subscribe to common stock and, in general, any security that is convertible into or exchangeable for common stock. In order to meet liquidity needs, or for temporary defensive purposes, the Fund may invest all or a portion of its assets in common stocks of larger, more established companies, fixed income securities, repurchase agreements, cash or money market securities. Fixed income securities will only be purchased if they are rated investment grade or better by one or more NRSROs. Investment grade bonds include securities rated at least BBB by S&P or Baa by Moody's. Money market securities will only be purchased if they have been given one of the two top ratings by two or more NRSROs, or if not rated, determined to be of comparable quality by the Adviser. To the extent the Fund is engaged in temporary defensive investing, the Fund may not be pursuing its investment objective. The Fund may engage in options transactions for hedging purposes only. The Fund will not invest more than 20% of its total assets in unsponsored ADR facilities. VALUE INCOME STOCK FUND The Value Income Stock Fund seeks to provide current income by attempting to identify high dividend-paying, undervalued stocks. The Adviser primarily chooses companies that have a market capitalization of at least $500 B-6 million and have a history of paying regular dividends. A secondary consideration of the Fund will be capital appreciation. The Fund will invest at least 80% of its total assets in equity securities. Investments will consist primarily of common stocks, and, under normal market conditions, at least 65% of the Fund's assets will be invested in common stocks issued by corporations which have a history of paying regular dividends, although there can be no assurance that such corporations will continue to pay dividends. Other equity securities in which the Fund may invest are: convertible debt securities; preferred stocks and warrants which are convertible into or exchangeable for common stocks; and U.S. dollar denominated equity securities of foreign issuers (including sponsored ADRs that are traded on exchanges or listed on NASDAQ). All of the common stocks in which the Fund invests are traded on registered exchanges such as the New York or American Stock Exchange or on the over-the-counter market in the United States (I.E., NASDAQ). The Fund may also purchase debt securities (corporate debt obligations and U.S. Treasury obligations) which may be rated in any rating category or may be unrated, provided that no more than 10% of the Fund's total assets will be invested in bonds rated below BBB by S&P, rated below Baa by Moody's, or of comparable quality not rated by S&P or Moody's. The Fund may also invest in futures and options. The Fund will invest primarily in stocks of companies operating in all aspects of the U.S. and world economies that have a market capitalization of at least $500 million, and that the Adviser believes possess fundamentally favorable long-term characteristics. However, stocks of companies with smaller market capitalizations and stocks that are out of favor in the financial community, and in which little opportunity for price appreciation is recognized by the financial community may also be purchased if the Adviser believes they are undervalued. BALANCED FUND The Balanced Fund seeks to provide capital appreciation and current income through investments in a diversified portfolio of common and preferred stocks, warrants, securities convertible into common stocks, and investment grade fixed income securities. Under normal conditions, no more than 70% of the total assets of the Fund will be invested in common stocks and other equity securities, and no more than 60% of the Fund's total assets will be invested in bonds and other fixed income securities. The Fund will maintain at least 25% of its total assets in senior fixed income securities. In selecting equity securities for the Fund, the Adviser will evaluate factors believed to affect capital appreciation such as the issuer's background, industry position, historical returns on equity and experience and qualifications of the management team. In selecting stocks for the Fund, the Adviser attempts to identify high-quality companies with a history of above average earnings growth. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities. All of the common stocks in which the Fund invests are traded on registered exchanges or on NASDAQ. Assets of the Fund not invested in the securities described above may be invested in U.S. dollar denominated equity securities of foreign issuers (including sponsored ADRs that are traded on exchanges or listed on NASDAQ), securities issued by investment companies, and bonds. The Fund will invest in investment grade fixed income securities rated BBB or better by S&P or Baa or better by Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of purchase as determined by the Adviser, including: corporate debt obligations; mortgage-backed securities, collateralized mortgage obligations and asset-backed securities; obligations issued or guaranteed as to principal and interest by the U.S. government, its agencies or instrumentalities; custodial receipts involving U.S. Treasury obligations; securities of the government of Canada and its provincial and local governments; securities issued or guaranteed by foreign governments, their political subdivisions, agencies or instrumentalities; and obligations of supranational entities. No more than 25% of the Fund's assets will be invested in securities rated BBB by S&P or Baa by Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of purchase as determined by the Adviser. B-7 The Fund may purchase mortgage-backed securities issued or guaranteed as to the payment of principal and interest by the U.S. government, its agencies or instrumentalities or, subject to a limit of 25% of the Fund's assets, mortgage-backed securities issued by private issuers. These mortgage-backed securities may be backed or collateralized by fixed, adjustable or floating rate mortgages. The Fund may also invest in asset backed securities which consist of securities backed by company receivables, truck and auto loans, leases, credit card receivables and home equity loans. In order to reduce interest rate risk, the Fund may purchase floating or variable rate securities. It may also buy securities on a when-issued basis, putable securities, pay-in-kind securities and zero coupon securities. The Fund may also invest in futures and options. Some floating or variable rate securities will be subject to interest rate "caps" or "floors." BOND FUNDS HIGH INCOME FUND The High Income Fund's primary investment objective is a high level of current income, with a secondary objective of total return. The Fund invests primarily in corporate, government and other debt instruments of U.S. and non-U.S. issuers. Under normal market conditions, at least 65% of the Fund's total assets will be invested in income-producing debt securities. Investments in foreign securities will be limited to 35% of its total assets. Up to 100% of the Fund's assets may be invested in "junk bonds." Junk bonds are securities that are rated below investment grade - I.E., that are rated below BBB by Moody's or below Baa by S&P - or that, if unrated, are deemed of comparable quality. Junk bonds also include securities that are in default (rated D by S&P), although such holdings by the Fund are expected to be minimal. The Adviser will take a value-oriented approach in choosing the Fund's investments, seeking out companies with good fundamentals and potentially strong future prospects that are currently out of favor with investors. The Adviser employs a bottom-up approach of research to identify investment opportunities that represent the most attractive value and that have strong prospects for consistent income and growth. Potential and current investments are also subject to continual research, which includes regular, vigorous analysis to identify issues that are overvalued and those that should be sold to reinvest in better opportunities. The Adviser strives to preserve capital in attempting to achieve the Fund's investment objective. The Adviser's investing discipline focuses on total return over a full market/economic cycle. The Adviser prefers to invest in full-coupon, interest-paying securities for their cash flow advantage and usually lower volatility than deferred interest or zero coupon bonds. INVESTMENT GRADE BOND FUND The Investment Grade Bond Fund will invest only in those obligations deemed investment grade obligations rated BBB or better by S&P or Baa or better by Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of purchase as determined by the Adviser, including: corporate debt obligations; mortgage-backed securities, collateralized mortgage obligations ("CMOs") and asset-backed securities; obligations issued or guaranteed as to principal and interest by the U.S. government, its agencies or instrumentalities; custodial receipts involving U.S. Treasury obligations; securities of the government of Canada and its provincial and local governments; securities issued or guaranteed by foreign governments, their political subdivisions, agencies or instrumentalities; obligations or supranational entities and sponsored ADRs that are traded on exchanges or listed on NASDAQ. Under normal market conditions, at least 65% of the Fund's total assets will be invested in corporate and government bonds and debentures. No more than 25% of the Fund's assets will be invested in securities rated BBB by S&P or Baa by Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of purchase as determined by the Adviser. B-8 The Fund may purchase mortgage-backed securities issued or guaranteed as to the payment of principal and interest by the U.S. government, its agencies or instrumentalities or, subject to a limit of 35% of the Fund's assets, mortgage-backed securities issued by private issuers. These mortgage-backed securities may be backed or collateralized by fixed, adjustable or floating rate mortgages. The Fund may also invest in asset-backed securities which consist of securities backed by company receivables, truck and auto loans, leases, credit card receivables and home equity loans. In order to reduce interest rate risk, and subject to a general limit of 25% of the Fund's assets, the Fund may purchase floating or variable rate securities. Some floating or variable rate securities will be subject to interest rate "caps" or "floors." It may also buy securities on a when-issued basis, putable securities, medium term notes, and zero coupon securities. The Fund may also invest up to 10% of its assets in restricted securities, and may engage in futures and options. Under normal market conditions, it is anticipated that the Fund's average weighted maturity will range from four to ten years. In the case of mortgage related securities and asset-backed securities, maturity will be determined based on the expected average life of the security. The Fund may shorten its average weighted maturity to as little as 90 days if deemed appropriate for temporary defensive purposes. By so limiting the maturity of its investments, the Fund expects that its net asset value will experience less price movement in response to changes in interest rates than the net asset values of mutual funds investing in similar credit quality securities with longer maturities. LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND Under normal market conditions, the Limited-Term Federal Mortgage Securities Fund will invest at least 65% of its assets in obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities, including mortgage-backed securities issued or guaranteed by U.S. government agencies, such as the Government National Mortgage Association ("GNMA"), the Federal National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC"). Mortgage-backed securities consisting of CMOs and real estate mortgage investment conduits ("REMICs") purchased by the Fund will be issued or guaranteed as to payment of principal and interest by the U.S. government, its agencies or instrumentalities or, if issued by private issuers, rated in one of the two highest rating categories by a NRSRO. The principal governmental issuers or guarantors of mortgage-backed securities are GNMA, FNMA and FHLMC. Obligations of GNMA are backed by the full faith and credit of the U.S. government while obligations of FNMA and FHLMC are supported only by the respective agency. The Fund may purchase mortgage-backed securities that are backed or collateralized by fixed, adjustable or floating rate mortgages. Mortgage-backed securities that are not issued or guaranteed by the U.S. government, its agencies or instrumentalities, including securities normally issued by a governmental entity (such as the Resolution Trust Corporation), are not obligations of a governmental entity and thus may bear a risk of nonpayment. The timely payment of principal and interest normally is supported, at least partially, by various forms of insurance or guarantees. There can be no assurance, however, that such credit enhancement will support full payment of the principal and interest on such obligations. The average maturity of the Fund's investment portfolio will typically range from 7 to 14 years. With respect to the remaining 35% of its assets, the Fund may invest in corporate or government bonds that carry a rating of Baa or better by Moody's or BBB or better by S&P, or that are deemed by the Adviser to be of comparable quality, including: commercial paper rated at the time of purchase within the two highest ratings categories of an NRSRO; bankers' acceptances; certificates of deposit and time deposits; and U.S. Treasury obligations, which include custodial receipts and repurchase agreements involving securities that constitute permissible investments for the Fund. The Fund intends to invest in privately issued, mortgage-backed securities only if they are rated in one of the two highest rating categories by an NRSRO. B-9 The Fund may purchase securities on a forward commitment or when-issued basis, which means that delivery and payment for such securities generally takes place after the customary securities settlement period. The Fund may purchase floating or variable rate securities, and may engage in dollar rolls. SHORT-TERM BOND FUND Under normal market conditions, the Short-Term Bond Fund will invest solely in investment grade obligations rated BBB or better by S&P or Baa or better by Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of purchase as determined by the Adviser, consisting of: debt obligations of U.S. and foreign corporations; mortgage-backed securities; CMOs; asset-backed securities; obligations (including mortgage-backed securities) issued or guaranteed as to principal and interest by the U.S. government, its agencies or instrumentalities; and custodial receipts involving U.S. Treasury obligations; (including Separately Traded Registered Interest and Principal Securities ("STRIPS") and Coupon Under Book Entry System ("CUBES")). Under normal market conditions, at least 65% of the Fund's total assets will be invested in corporate and government bonds and debentures. No more than 25% of the Fund's assets will be invested in securities rated BBB by S&P or Baa by Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of purchase by the Adviser. The Fund may purchase, without limitation, mortgage-backed securities issued or guaranteed as to the payment of principal and interest by the U.S. government, its agencies or instrumentalities and, subject to a limit of 25% of the Fund's assets, mortgage-backed securities issued by private issuers. These mortgage-backed securities may be backed or collateralized by fixed, adjustable or floating rate mortgages. The Fund may also invest in asset-backed securities, which consist of securities backed by company receivables, including: truck and auto loans; leases; credit card receivables; and home equity loans. The Fund will purchase mortgage-backed and asset-backed securities only if they are rated at least AA by S&P or Aa by Moody's or, if unrated, determined to be of comparable quality at the time of purchase by the Adviser. The Fund may purchase securities on a when-issued basis and may acquire floating or variable rate securities, medium term notes, putable securities, and zero coupon securities. The Fund may also purchase securities issued by foreign governments and supranational agencies. The Fund may also invest in municipal securities when the Adviser feels it is consistent with the Fund's investment objective. The Fund will not invest in municipal securities unless the Adviser believes that the yield will be higher than the yield for comparable taxable investments in which the Fund is permitted to invest. The following quality criteria apply to the Fund's investments in municipal securities. The Fund's investments in municipal notes will be limited to those obligations (i) where both principal and interest are backed by the full faith and credit of the United States, (ii) which are rated MIG-2, V-MIG-2 or better at the time of investment by Moody's, (iii) which are rated SP-2 or better at the time of investment by S&P, or (iv) which, if not rated, are of equivalent quality to MIG-2, V-MIG-2, SP-2 or better in the Adviser's judgment. The Fund's investment in municipal bonds will be limited to bonds rated BBB or better by S&P or Baa or better by Moody's, or, if not rated by S&P or Moody's, deemed by the Adviser to be of comparable quality. For the Fund's investments in other types of tax-exempt municipal investments, such as participation interests in municipal lease/purchase agreements, the quality of the underlying credit or of the bank providing a credit support arrangement must, in the Adviser's opinion, be equivalent to the municipal note or bond ratings stated above. The Fund is also authorized to invest up to 10% of its assets in restricted securities, including Rule 144A securities, that the Adviser determines are liquid under guidelines adopted by the Trust's Board of Trustees. The Fund may also enter into bond futures contracts and options on bond futures contracts and engage in securities lending. The Fund intends to maintain a dollar-weighted average maturity of 4 years or less, and the maximum remaining maturity for any security held by the Fund is 7 1/2 years. Under normal market conditions, it is anticipated that the Fund's dollar-weighted average maturity will range from two to four years. In the case of mortgage-related securities and asset-backed securities, maturity will be determined based on the expected average life of the security. The Fund may shorten its average weighted maturity to as little as 90 days if deemed appropriate for temporary defensive purposes. By so limiting the maturity of its investments, the Fund expects that its net asset B-10 value will experience less price movement in response to changes in interest rates than the net asset values of mutual funds investing in similar credit quality securities with longer maturities. SHORT-TERM U.S. TREASURY SECURITIES FUND The Short-Term U.S. Treasury Securities Fund will invest exclusively in obligations issued by the U.S. Treasury with maximum remaining maturities of 3 years or less. U.S. Treasury securities are considered to be among the safest, as to timely principal and interest payments, investments available. The Fund will not invest in repurchase agreements. The Fund may borrow money for temporary or emergency purposes in an amount not exceeding one-third of its total assets, but has no present intention to do so. Under normal market conditions, it is anticipated that the Fund's average maturity will range from 1 to 2 years. Furthermore, for temporary defensive purposes during periods when the Adviser determines that market conditions warrant, the Short-Term U.S. Treasury Securities Fund may reduce its average weighted maturity to less than one-year. U.S. GOVERNMENT SECURITIES FUND Under normal market conditions, the Fund will invest primarily (at least 65% of its assets) in obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities, including mortgage-backed securities issued or guaranteed by U.S. government agencies such as the GNMA, the FNMA or the FHLMC. Mortgage- backed securities consisting of CMOs and REMICs purchased by the Fund will be issued or guaranteed as to payment of principal and interest by the U.S. government, its agencies or instrumentalities or, if issued by private issuers, rated in one of the two highest rating categories by a NRSRO. The principal governmental issuers or guarantors of mortgage-backed securities are GNMA, FNMA and FHLMC. Obligations of GNMA are backed by the full faith and credit of the U.S. government while obligations of FNMA and FHLMC are supported by the respective agency only. The Fund may purchase mortgage-backed securities that are backed or collateralized by fixed, adjustable or floating rate mortgages. Mortgage-backed securities that are not issued or guaranteed by the U.S. government, its agencies or instrumentalities, including securities normally issued by a governmental entity (such as the Resolution Trust Corporation), are not obligations of a governmental entity and thus may bear a risk of nonpayment. The timely payment of principal and interest normally is supported, at least partially, by various forms of insurance or guarantees. There can be no assurance, however, that such credit enhancement will support full payment of the principal and interest on such obligations. The average maturity of the Fund's investment portfolio will typically range from seven to 14 years. With respect to the remaining 35% of its assets, the Fund may invest in corporate or government bonds that carry a rating of Baa or better by Moody's or BBB or better by S&P, or that are deemed by the Adviser to be of comparable quality, including: commercial paper rated at the time of purchase within the two highest ratings categories of an NRSRO; bankers' acceptances; certificates of deposit and time deposits; and U.S. Treasury obligations, which include custodial receipts and repurchase agreements involving securities that constitute permissible investments for the Fund. The Fund intends to invest in privately issued, mortgage-backed securities only if they are rated in one of the two highest rating categories by an NRSRO. The Fund may purchase securities on a forward commitment or when-issued basis, which means that delivery and payment for such securities generally takes place after the customary securities settlement period. The Fund may purchase floating or variable rate securities, and may engage in dollar rolls. B-11 TAX-EXEMPT BOND FUNDS FLORIDA TAX-EXEMPT BOND FUND The Florida Tax-Exempt Bond Fund intends to be fully invested in municipal securities the interest on which is exempt from regular federal income taxes based on opinions from bond counsel to the issuers. The issuers of these securities can be located in Florida, the District of Columbia, Puerto Rico and other U.S. territories and possessions. It is a fundamental policy of the Fund to invest at least 80% of its total assets in securities the income on which is exempt from regular federal income tax and not treated as a preference item for purposes of the alternative minimum tax. At least 65% of the Fund's assets will be invested in Florida municipal bonds and debentures, and at least 75% of its total assets invested in municipal bonds will be in securities rated A or better by S&P or Moody's. Municipal securities must be rated: BBB or better by S&P or Baa or better by Moody's in the case of bonds; SP-1, SP-2 or MIG-1, MIG-2 in the case of notes; A-1, A-2, or P-1, P-2 in the case of tax-exempt commercial paper; and VMIG-1 or VMIG-2 in the case of variable rate demand obligations. No more than 25% of the Fund's assets will be invested in bonds rated BBB by S&P or Baa by Moody's. The Fund will only acquire securities not rated by S&P or Moody's if, at the time of purchase, the Adviser determines that such unrated obligations are of comparable quality to rated obligations that may be acquired by the Fund. The Fund may invest in commitments to purchase the above securities on a when-issued or delayed delivery basis, floating or variable rate securities, and may purchase municipal forwards, putable securities, medium term notes, and zero coupon securities. The Adviser has discretion to invest up to 20% of the Fund's total assets in taxable debt securities rated at least BBB or better by S&P or Baa or better by Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of purchase as determined by the Adviser, repurchase agreements, and securities subject to the alternative minimum tax. The Fund may also invest in futures and options, but has no present intention to do so for purposes other than hedging. Under normal market conditions, it is anticipated that the Fund's average weighted maturity will range from 6 to 25 years. The Fund may shorten its average weighted maturity to as little as 90 days if deemed appropriate for temporary defensive purposes. GEORGIA TAX-EXEMPT BOND FUND The Georgia Tax-Exempt Bond Fund intends to be fully invested in municipal securities the interest on which is exempt from regular federal income taxes and substantially exempt from State of Georgia income taxes based on opinions from bond counsel to the issuers. The issuers of these securities can be located in Georgia, the District of Columbia, Puerto Rico and other U.S. territories and possessions. It is a fundamental policy of the Fund to invest at least 80% of its total assets in securities the income from which is exempt from regular federal income tax and not treated as a preference items for purposes of the alternative minimum tax. At least 65% of the Fund's assets will be invested in Georgia municipal bonds and debentures, and at least 75% of its total assets invested in municipal bonds will be in securities rated A or better by S&P or Moody's. Municipal securities must be rated BBB or better by S&P or Baa or better by Moody's in the case of bonds; SP-1, SP-2 or MIG-1, MIG-2 in the case of notes; A-1, A-2, or P-1, P-2 in the case of tax-exempt commercial paper; and VMIG-1 or VMIG-2 in the case of variable rate demand obligations. No more than 25% of the Fund's assets will be invested in bonds rated BBB by S&P or Baa by Moody's. The Fund will only acquire securities not rated by S&P or Moody's if, at the time of purchase, the Adviser determines that such unrated obligations are of comparable quality to rated obligations that may be acquired by the Fund. The Fund may invest in commitments to purchase the above-mentioned securities on a when-issued or delayed delivery basis, floating or variable rate securities, and may purchase municipal forwards, putable securities, medium term notes, and zero coupon securities. The Adviser has discretion to invest up to 20% of the Fund's total assets in taxable debt securities rated at least BBB or better by S&P or Baa or better by Moody's or, if not rated by S&P or Moody's, of comparable quality at the time of purchase as determined by the Adviser, repurchase agreements, B-12 and securities subject to the alternative minimum tax. The Fund may also invest in futures and options, but has no present intention to do so for purposes other than hedging. Under normal market conditions, it is anticipated that the Fund's average weighted maturity will range from 6 to 25 years. The Fund may shorten its average weighted maturity to as little as 90 days if deemed appropriate for temporary defensive purposes. INVESTMENT GRADE TAX-EXEMPT BOND FUND The Investment Grade Tax-Exempt Bond Fund intends to be fully invested in municipal securities, the interest on which is exempt from regular federal income taxes in the opinion of bond counsel to the issuer. The issuers of these securities can be located in all fifty states, the District of Columbia, Puerto Rico and other U.S. territories and possessions. It is a fundamental policy of the Investment Grade Tax-Exempt bond Fund to invest at least 80% of its total assets in securities the income from which is exempt from regular federal income tax and not treated as a preference item for purposes of the alternative minimum tax. At least 65% of the Fund's assets will be invested in municipal bonds and debentures, and at least 75% of its total assets invested in municipal bonds will be in securities rated A or better by S&P or Moody's. Municipal securities must be rated BBB or better by S&P or Baa or better by Moody's in the case of bonds; SP-1, SP-2 or MIG-1, MIG-2 in the case of notes; A-1, A-2, P-1, P-2 in the case of tax-exempt commercial paper; and VMIG-1 or VMIG-2 in the case of variable rate demand obligations. The Fund will only acquire unrated securities if, at the time of purchase, the Adviser determines that such unrated obligations are of comparable quality to rated obligations that may be acquired by the Fund. The Fund may invest in commitments to purchase the above-mentioned securities on a when-issued or delayed delivery basis, floating or variable rate securities, and may purchase municipal forwards, medium term notes, putable securities, and zero coupon securities. The Adviser has discretion to invest up to 20% of the Fund's total assets in taxable debt securities rated at least BBB or better by S&P or Baa or better by Moody's or, if unrated, of comparable quality at the time of purchase as determined by the Adviser, repurchase agreements, and securities subject to the alternative minimum tax. The Fund may also invest up to 10% of its assets in restricted securities that the Adviser determines are liquid under guidelines adopted by the Trust's Board of Trustees and may engage in futures and options transactions. Under normal market conditions, it is anticipated that the Fund's average weighted maturity will range from four to ten years. The Fund may shorten its average weighted maturity to as little as 90 days if deemed appropriate for temporary defensive purposes. By so limiting the maturity of its investments, the Fund's net asset value is expected to experience less price movement in response to changes in interest rates than the net asset values of mutual funds investing in similar credit quality securities with longer maturities. MARYLAND MUNICIPAL BOND FUND The Maryland Municipal Bond Fund seeks to provide high current income exempt from federal and Maryland income tax in a manner consistent with the preservation of capital by investing in municipal bonds of investment- grade quality. There are no limits on the dollar-weighted average portfolio maturity of the Fund, and the Fund may acquire individual securities without regard to their remaining maturities. The Fund is non-diversified, which means that it has greater latitude than a diversified fund with respect to the investment of its assets in the securities of a relatively few municipal issuers. As a non-diversified fund, the Fund may present greater risks than a diversified fund. At least 80% of the Fund's income will, under normal circumstances, be exempt from regular federal income taxes. Interest on some "private activity" municipal obligations is subject to the federal alternative minimum tax ("AMT bonds"). AMT bonds are municipal obligations that benefit a private or industrial user or finance a private facility. The Fund reserves the right to invest up to 100% of its assets in AMT bonds. B-13 As a non-fundamental policy, at least 65% of the Fund's assets will be invested in bonds that will, under normal circumstances, produce income that is exempt from Maryland income taxes. VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND The Virginia Intermediate Municipal Bond Fund seeks to provide high current income exempt from federal and Virginia income tax in a manner consistent with the preservation of capital by investing in municipal bonds of investment-grade quality. The Fund is managed to maintain a dollar-weighted average portfolio maturity of between 5 to ten years. The Fund may hold individual securities with remaining maturities of more than ten years, as long as the dollar-weighted average maturity is no more than ten years. Stability and growth of principal will also be considered when choosing securities. The Fund is non-diversified, which means that it has greater latitude than a diversified fund with respect to the investment of its assets in the securities of a relatively few municipal issuers. As a non-diversified fund, the Fund may present greater risks than a diversified fund. At least 80% of the Fund's income will, under normal circumstances, be exempt from regular federal income taxes. Interest on some "private activity" municipal obligations is subject to the federal AMT bonds. AMT bonds are municipal obligations that benefit a private or industrial user or finance a private facility. The Fund reserves the right to invest up to 100% of its assets in AMT bonds, although the Fund has no current intention of investing in such securities. As a non-fundamental policy, at least 65% of the Fund's assets will be invested in bonds that will, under normal market conditions, produce income that is exempt from Virginia income tax. VIRGINIA MUNICIPAL BOND FUND The Virginia Municipal Bond Fund seeks to provide high current income exempt from federal and Virginia income tax in a manner consistent with the preservation of capital by investing in municipal bonds of investment-grade quality. There are no limits on the dollar-weighted average portfolio maturity of the Fund, and the Fund may acquire individual securities without regard to their remaining maturities. The Fund is non-diversified, which means that it has greater latitude than a diversified fund with respect to the investment of its assets in the securities of a relatively few municipal issuers. As a non-diversified fund, the Fund may present greater risks than a diversified fund. At least 80% of the Fund's income will, under normal circumstances, be exempt from regular federal income taxes. Interest on some "private activity" municipal obligations is subject to the federal AMT bonds. AMT bonds are municipal obligations that benefit a private or industrial user or finance a private facility. The Fund reserves the right to invest up to 100% of its assets in AMT bonds, although the Fund has no current intention of investing in such securities. As a non-fundamental policy, at least 65% of the Fund's assets will be invested in bonds that will, under normal circumstances, produce income that is exempt from Virginia income taxes. MONEY MARKET FUNDS PRIME QUALITY MONEY MARKET FUND The Prime Quality Money Market Fund will invest in money market instruments denominated in U.S. dollars consisting of (i) U.S. Treasury obligations; (ii) custodial receipts representing interests in component parts of U.S. Treasury obligations; (iii) obligations issued or guaranteed as to principal and interest by agencies and B-14 instrumentalities of the U.S. government; (iv) commercial paper issued by domestic and foreign issuers rated in the highest short-term rating category by one or more NRSROs or, if not rated, determined by the Adviser to be of comparable quality; (v) high quality obligations (including certificates of deposit, time deposits, bankers' acceptances, Eurodollar and Yankee bank obligations) of U.S. commercial banks (including foreign branches of such banks), and U.S. and London branches of foreign banks or savings and loan and thrift institutions that are members of the Federal Reserve System, the Federal Deposit Insurance Corporation, or the Federal Savings and Loan Insurance Corporation; (vi) high quality short-term corporate obligations issued by companies with commercial paper meeting the ratings indicated in (iv), above, or, if not rated, determined by the Adviser to be of comparable quality; (vii) repurchase agreements involving such obligations; (viii) high quality obligations of supranational entities satisfying the credit ratings described in (iv), above, or, if not rated, determined by the Adviser to be of comparable quality; and (ix) medium term notes. The Fund may not invest more than 25% of its total assets in obligations issued by foreign branches of U.S. Banks and London branches of foreign banks. The Fund may purchase securities subject to standby commitments. As a money market fund, the Fund is subject to limitations on the percentage of its assets that may be invested in any one issuer and on the percentage that may be invested in securities carrying the second highest rating assigned by the requisite NRSROs. TAX-EXEMPT MONEY MARKET FUND The Tax-Exempt Money Market Fund intends to be fully invested in securities the interest on which is exempt from regular federal income taxes in the opinion of bond counsel to the issuer. It is a fundamental policy of the Tax- Exempt Money Market Fund to invest at least 80% of its total assets in securities the income from which is exempt from regular federal income taxes and not treated as a preference item for purposes of the alternative minimum tax. The Fund may invest in high quality, U.S. dollar denominated municipal securities of issuers located in all fifty states, the District of Columbia, Puerto Rico and other U.S. territories rated in one of the two highest short-term rating categories by S&P or Moody's or, if not rated, determined by the Adviser to be of comparable quality. The Fund will primarily purchase municipal bonds with a remaining maturity of 397 days or less, and will also acquire municipal notes and tax-exempt commercial paper with similar maturities. The Fund may agree to purchase short-term securities on a when-issued basis and may invest in securities subject to standby commitments. Securities purchased on a when-issued basis are subject to settlement within 45 days of the purchase date. The Adviser has discretion to invest up to 20% of the Fund's assets in U.S. dollar denominated obligations consisting of taxable money market instruments, obligations issued or guaranteed by the U.S. government or its agencies and instrumentalities, repurchase agreements and securities subject to the alternative minimum tax. VIRGINIA TAX-FREE MONEY MARKET FUND Virginia Tax-Free Money Market Fund invests only in high-quality municipal securities that have remaining maturities at the time of purchase of 397 days or less. Although the Fund will attempt to invest 100% of its assets in tax-exempt municipal securities, the interest on which is exempt from federal income tax, including the federal alternative minimum tax, the Fund reserves the right to invest up to 20% of the value of its net assets in securities, including private activity bonds, the interest on which is fully taxable or subject to the alternative minimum tax. At least 80% of the Fund's income will, under normal market conditions, be exempt from federal income including the federal alternative minimum tax. As a non-fundamental policy, at least 65% of the Fund's assets will be invested in bonds that will, under normal market conditions, produce income that is exempt from Virginia income tax. The Fund will invest in municipal obligations whose interest payments are exempt from federal income tax. Municipal obligations, which are issued by states, cities, municipalities or municipal agencies, will include variable rate demand obligations ("VRDOs"), tax anticipation notes ("TANS"), revenue anticipation notes ("RANS"), bond anticipation notes ("BANS"), construction loan notes, and tax-exempt commercial paper. The Fund may also invest B-15 in municipal bonds within the maturity limitations discussed above and may enter into commitments to purchase these securities on a delayed-delivery basis. U.S. GOVERNMENT SECURITIES MONEY MARKET FUND The U.S. Government Securities Money Market Fund will invest exclusively in U.S. Treasury obligations, U.S. Government Subsidiary Corporation securities (E.G., GNMA Securities) and repurchase agreements with dealers selected pursuant to guidelines adopted by the Trust's Board of Trustees and collateralized by U.S. Treasury securities and U.S. Government Subsidiary Corporation securities. U.S. TREASURY MONEY MARKET FUND The U.S. Treasury Money Market Fund's investments are limited to obligations having a remaining maturity of 397 days or less that are issued by the U.S. Treasury and repurchase agreements that provide for repurchase within 397 days and that are collateralized by obligations issued or guaranteed by the U.S. Treasury. The investment policies of the Fund may result in a lower yield than that of other money market funds, such as the Prime Quality Money Market Fund, which may invest in other types of instruments. The U.S. Treasury Money Market Fund limits its investments so as to obtain the highest investment quality rating by an NRSRO. These quality ratings are based on, but not limited to, an analysis of the Fund's operational policies, investment strategies and management. These rating organizations also many undertake an ongoing analysis and assessment of these criteria in order to continually update the Fund's rating. LIFE VISION FUNDS The Life Vision Funds provide investors with the opportunity to pursue three distinct asset allocation strategies implemented through investments in shares of selected STI Classic Funds. By investing in the Life Vision Funds, investors have the opportunity to diversify and allocate their assets among the broad range of Funds in STI Classic Funds. The Adviser simplifies the diversification and asset allocation process by reviewing, analyzing, selecting, monitoring, reallocating and rebalancing each Life Vision Fund's holdings of STI Classic Funds for investors. The assets of each Life Vision Fund will be allocated among underlying STI Classic Funds in accordance with its investment objective, the Adviser's outlook for the economy, the financial markets and the relative market valuations of the underlying STI Classic Funds. Each Life Vision Fund has the ability to invest its assets allocated to a particular asset class in one or more of the underlying STI Classic Funds, which have differing investment objectives, policies and risk characteristics. The risks associated with investing in a Life Vision Fund will vary depending upon how the assets within its asset classes are allocated from time to time among the underlying STI Classic Funds. Although the Life Vision Funds currently expect to invest in one or more of the underlying STI Classic Funds identified below, the Adviser has the discretion to change the particular STI Classic Funds used as underlying investments for the Life Vision Funds. If the Adviser determines in the future that it is in a Life Vision Fund's best interest, the Adviser may substitute or include other underlying STI Classic Funds, including STI Classic Funds that do not currently exist. Core Equity Fund Growth and Income Fund International Equity Fund International Equity Index Fund Investment Grade Bond Fund Limited-Term Federal Mortgage Securities Fund Mid-Cap Equity Fund Prime Quality Money Market Fund Short-Term Bond Fund Small Cap Growth Stock Fund Small Cap Value Equity Fund Value Income Stock Fund B-16 The investment objective of each Life Vision Fund is set forth below. Each Life Vision Fund's objective, the asset allocation percentage ranges described below, the list of underlying STI Classic Funds described above, and those policies identified as non-fundamental may be changed by the Trust's Board of Trustees without shareholder approval. A Life Vision Fund's investment policies identified as fundamental may not be changed except by approval of the majority of the outstanding shares of that Life Vision Fund. The Adviser will manage each Life Vision Fund in a manner consistent with that Life Vision Fund's investment objective and policies. There is no assurance that a Life Vision Fund will achieve its investment objective. LIFE VISION AGGRESSIVE GROWTH FUND The Life Vision Aggressive Growth Fund seeks to provide a high level of capital appreciation, without regard to current income. Under normal market conditions, at least 80% of the Fund's total assets will be invested in shares of underlying STI Classic Funds that invest primarily in equity securities that seek capital appreciation. The Fund's remaining assets may be invested in shares of underlying STI Classic Funds that invest primarily in fixed-income securities, shares of underlying STI Classic Funds that are money market funds, securities issued by the U.S. government, its agencies or instrumentalities, repurchase agreements and short-term paper. In general, relative to the other Life Vision Funds, the Life Vision Aggressive Growth Fund should offer investors the potential for a high level of capital growth, and the potential for a lower level of current income, while subjecting investors to a medium to high level of principal risk. LIFE VISION GROWTH AND INCOME FUND The Life Vision Growth and Income Fund seeks to provide long-term capital appreciation, with current income as a secondary objective. Under normal market conditions, at least 50% of the Fund's total assets will be invested in shares of underlying STI Classic Funds that invest primarily in equity securities that seek capital appreciation, but at least 25% of the Fund's total assets will be invested in shares of underlying STI Classic Funds that invest primarily in fixed-income securities that seek income (20%-50%). The Fund's remaining assets may be invested in shares of underlying STI Classic Funds that are money market funds, securities issued by the U.S. government, its agencies or instrumentalities, repurchase agreements and short-term paper. In general, relative to the other Life Vision Funds, the Life Vision Growth and Income Fund should offer investors the potential for a medium to high level of capital growth and the potential for a medium level of income, while subjecting investors to a medium level of principal risk. LIFE VISION MODERATE GROWTH FUND The Life Vision Moderate Growth Fund seeks both capital appreciation and current income. Under normal market conditions, the Fund will invest primarily in shares of underlying STI Classic Funds that invest primarily in equity securities (35%-65%), but at least 35% of the Fund's total assets will be invested in shares of underlying STI Classic Funds that invest primarily in fixed-income securities (35%-65%). The Fund's remaining assets may be invested in shares of underlying STI Classic Funds that are money market funds, securities issued by the U.S. government, its agencies or instrumentalities, repurchase agreements and short-term paper (0%-20%). In general, relative to the other Life Vision Funds, the Life Vision Moderate Growth Fund should offer investors a balanced level of income and capital appreciation, while subjecting investors to a lower level of principal risk. GENERAL INVESTMENT POLICIES OF THE LIFE VISION FUNDS To achieve each Life Vision Fund's investment objective, the Adviser will attempt to identify and select a diversified portfolio of underlying STI Classic Funds. In the selection process, the Adviser analyzes many factors, including the underlying STI Classic Funds' investment objectives, total return, volatility and expenses. Each Life B-17 Vision Fund invests a percentage of its assets, within percentage ranges the Adviser believes appropriate, in select underlying STI Classic Funds, which are separately-managed series of the Trust. The percentages will reflect the extent to which each Life Vision Fund invests in the particular market segment represented by each underlying STI Classic Funds, and the varying degrees of potential investment risk and reward represented by each Life Vision Fund's investments in those corresponding underlying STI Classic Funds. These percentage ranges may change when it is appropriate in light of each Life Vision Fund's investment objective. Each Life Vision Fund may invest up to 100% of its assets in shares of the underlying STI Classic Funds. In addition, when the Adviser deems it appropriate, for temporary defensive purposes, each Life Vision Fund may invest 100% of its assets directly in securities issued by the U.S. government or its agencies or instrumentalities, repurchase agreements, short-term paper and shares of underlying STI Classic Funds that are money market funds (and shares of unaffiliated money market funds, as permitted by the SEC). To the extent that a Life Vision Fund is engaged in temporary defensive investing, it will not be pursuing its investment objective. The following risk factors are associated with the Life Vision Funds' investments in underlying STI Classic Funds: - When a Life Vision Fund invests in underlying STI Classic Funds, those shareholders will be exposed to the risks associated with investing in those underlying STI Classic Funds. Those risks include risks associated with investing in foreign securities, asset-backed securities, delayed delivery transactions, ADRs, mortgage-backed securities, repurchase agreements and reverse repurchase agreements. - The Life Vision Funds and the underlying STI Classic Funds have the same officers, Trustees and Adviser, which may give rise to certain conflicts of interest. - Each Life Vision Fund's investment performance is substantially related to the investment performance of the underlying STI Classic Funds. - Investing in the underlying STI Classic Funds involves certain additional expenses that would not be present in a direct investment in the underlying STI Classic Funds. When a Life Vision Fund invests in underlying STI Classic Funds, shareholders bear not only that Life Vision Fund's expenses, but also the expenses of the underlying STI Classic Funds. DESCRIPTION OF PERMITTED INVESTMENTS AMERICAN DEPOSITARY RECEIPTS (ADRS), EUROPEAN DEPOSITARY RECEIPTS (EDRS) AND GLOBAL DEPOSITARY RECEIPTS (GDRS) ADRs, EDRs, and GDRs are securities, typically issued by a U.S. financial institution or a non-U.S. financial institution in the case of an EDR or GDR (a "depositary"). The institution has ownership interests in a security, or a pool of securities, issued by a foreign issuer and deposited with the depositary. ADRs, EDRs and GDRs may be available through "sponsored" or "unsponsored" facilities. A sponsored facility is established jointly by the issuer of the security underlying the receipt and a depositary. An unsponsored facility may be established by a depositary without participation by the issuer of the underlying security. Holders of unsponsored depositary receipts generally bear all the costs of the unsponsored facility. The depositary of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the issuer of the deposited security or to pass through, to the holders of the receipts, voting rights with respect to the deposited securities. ASSET-BACKED SECURITIES Asset-backed securities are securities backed by non-mortgage assets such as company receivables, truck and auto loans, leases and credit card receivables. Other asset-backed securities may be created in the future. These securities may be traded over-the-counter and typically have a short-intermediate maturity structure depending on the pay down characteristics of the underlying financial assets which are passed through to the security holder. B-18 These securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in the underlying pool of assets. Asset-backed securities may also be debt obligations, which are known as collateralized obligations and are generally issued as the debt of a special purpose entity, such as a trust, organized solely for the purpose of owning these assets and issuing debt obligations. Asset-backed securities are not issued or guaranteed by the U.S. government, its agencies or instrumentalities; however, the payment of principal and interest on such obligations may be guaranteed up to certain amounts and, for a certain period, by a letter of credit issued by a financial institution (such as a bank or insurance company) unaffiliated with the issuers of such securities. The purchase of asset-backed securities raises risk considerations peculiar to the financing of the instruments underlying such securities. For example, there is a risk that another party could acquire an interest in the obligations superior to that of the holders of the asset-backed securities. There also is the possibility that recoveries on repossessed collateral may not, in some cases, be available to support payments on those securities. Asset-backed securities entail prepayment risk, which may vary depending on the type of asset, but is generally less than the prepayment risk associated with mortgage-backed securities. In addition, credit card receivables are unsecured obligations of the card holder. The market for asset-backed securities is at a relatively early stage of development. Accordingly, there may be a limited secondary market for such securities. BANKERS' ACCEPTANCES Bankers' acceptances are bills of exchange or time drafts drawn on and accepted by a commercial bank. Bankers' acceptances are used by corporations to finance the shipment and storage of goods. Maturities are generally six months or less. BANK OBLIGATIONS Bank obligations are short-term obligations issued by U.S. and foreign banks, including bankers' acceptances, certificates of deposit, custodial receipts, and time deposits. Eurodollar and Yankee Bank Obligations are U.S. dollar-denominated certificates of deposit or time deposits issued outside the U.S. by foreign branches of U.S. banks or by foreign banks. CERTIFICATES OF DEPOSIT Certificates of deposit are interest bearing instruments with a specific maturity. They are issued by banks and savings and loan institutions in exchange for the deposit of funds and normally can be traded in the secondary market prior to maturity. Certificates of deposit with penalties for early withdrawal will be considered illiquid. COMMERCIAL PAPER Commercial paper is a term used to describe unsecured short-term promissory notes issued by banks, municipalities, corporations and other entities. Maturities on these issues vary from a few to 270 days. COMMON AND PREFERRED STOCKS Common and preferred stocks represent units of ownership in a corporation. Owners of common stock typically are entitled to vote on important matters. Owners of preferred stock ordinarily do not have voting rights, but are entitled to dividends at a specified rate. Preferred stock has a prior claim to common stockholders with respect to dividends. B-19 CONVERTIBLE SECURITIES Convertible securities are securities issued by corporations that are exchangeable for a set number of another security at a prestated price. The market value of a convertible security tends to move with the market value of the underlying stock. The value of a convertible security is also affected by prevailing interest rates, the credit quality of the issuer, and any call option provisions. CUSTODIAL RECEIPTS The custodian arranges for the issuance of the certificates or receipts evidencing ownership and maintains the register. Receipts include Treasury Receipts ("TRs"), Treasury Investment Growth Receipts ("TIGRs"), and Certificates of Accrual on Treasury Securities ("CATS"). TRs, TIGRs and CATS are sold as zero coupon securities. DEBT SECURITIES Debt securities represent money borrowed that obligates the issuer (E.G., a corporation, municipality, government, government agency) to repay the borrowed amount at maturity (when the obligation is due and payable) and usually to pay the holder interest at specific times (E.G., bonds, notes, debentures). DOLLAR ROLLS Dollar rolls are transactions in which securities are sold for delivery in the current month and the seller contracts to repurchase substantially similar securities on a specified future date. Any difference between the sale price and the purchase price (plus interest earned on the cash proceeds of the sale) is applied against the past interest income on the securities sold to arrive at an implied borrowing rate. Dollar rolls may be renewed prior to cash settlement and initially may involve only a firm commitment agreement by the Fund to buy a security. If the broker-dealer to whom a Fund sells the security becomes insolvent, the Fund's right to repurchase the security may be restricted. Other risks involved in entering into dollar rolls include the risk that the value of the security may change adversely over the term of the dollar roll and that the security the Fund is required to repurchase may be worth less than the security that the Fund originally held. To avoid any leveraging concerns, the Fund will place U.S. government or other liquid, high grade assets in a segregated account in an amount sufficient to cover its repurchase obligation. EURO-DENOMINATED SECURITIES Effective January 1, 1999, 11 of the 15 member states of the European Union introduced the "euro" as a common currency. During a three-year transitional period, the euro will coexist with each member state's currency. By July 1, 2002, the euro will have replaced the national currencies of the following member countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. During the transition period, each Fund will treat the euro as a separate currency from that of any member state. Currently, the exchange rate of the currencies of each of these countries is fixed to the euro. The euro trades on currency exchanges and is available for non-cash transactions. The participating countries currently issue sovereign debt exclusively in euro. By July 1, 2002, euro-denominated bills and coins will replace the bills and coins of the participating countries. The new European Central Bank has control over each country's monetary policies. Therefore, the participating countries no longer control their own monetary policies by directing independent interest rates for their currencies. B-20 The national governments of the participating countries, however, have retained the authority to set tax and spending policies and public debt levels. The conversion may impact the trading in securities of issuers located in, or denominated in the currencies of, the member states, as well as foreign exchanges, payments, the settlement process, custody of assets and accounting. The introduction of the euro is also expected to affect derivative and other financial contracts in which a Fund may invest insofar as price sources based upon current currencies of the member states will be replaced, and market conventions, such as day-count fractions or settlement dates applicable to underlying instruments may be changed to conform to the conventions applicable to euro currency. The overall impact of the transition of the member states' currencies to the euro cannot be determined with certainty at this time. In addition to the effects described above, it is likely that more general short- and long-term consequences can be expected, such as changes in economic environment and change in behavior of investors, all of which will impact each Fund's euro-denominated investments. EURODOLLAR AND YANKEE DOLLAR OBLIGATIONS Eurodollar bank obligations are U.S. dollar denominated certificates of deposit or time deposits issued outside the United States by foreign branches of U.S. banks or by foreign banks. Yankee dollar obligations are U.S. dollar denominated obligations issued in the United States by foreign banks. FOREIGN SECURITIES Foreign securities include equity securities of foreign entities, obligations of foreign branches of U.S. banks and of foreign banks, including, without limitation, European Certificates of Deposit, European Time Deposits, European Bankers' Acceptances, Canadian Time Deposits, Europaper and Yankee Certificates of Deposit, and investments in Canadian Commercial Paper and foreign securities. These instruments have investment risks that differ in some respects from those related to investments in obligations of U.S. domestic issuers. Such risks include future adverse political and economic developments, the possible imposition of withholding taxes on interest or other income, possible seizure, nationalization, or expropriation of foreign deposits, the possible establishment of exchange controls or taxation at the source, greater fluctuations in value due to changes in exchange rates, or the adoption of other foreign governmental restrictions which might adversely affect the payment of principal and interest on such obligations. Such investments may also entail higher custodial fees and sales commissions than domestic investments. Foreign issuers of securities or obligations are often subject to accounting treatment and engage in business practices different from those respecting domestic issuers of similar securities or obligations. Foreign branches of U.S. banks and foreign banks may be subject to less stringent reserve requirements than those applicable to domestic branches of U.S. banks. In making investment decisions for the Funds, the Adviser evaluates the risks associated with investing Fund assets in a particular country, including risks stemming from a country's financial infrastructure and settlement practices; the likelihood of expropriation, nationalization or confiscation of invested assets; prevailing or developing custodial practices in the country; the country's laws and regulations regarding the safekeeping, maintenance and recovery of invested assets, the likelihood of government-imposed exchange control restrictions which could impair the liquidity of Fund assets maintained with custodians in that country, as well as risks from political acts of foreign governments ("country risks"). Of course, the Adviser cannot assure that the Fund will not suffer losses resulting from investing in foreign countries. Holding Fund assets in foreign countries through specific foreign custodians presents additional risks, including but not limited to the risks that a particular foreign custodian or depository will not exercise proper care with respect to Fund assets or will not have the financial strength or adequate practices and procedures to properly safeguard Fund assets. B-21 By investing in foreign securities, the Funds attempt to take advantage of differences between both economic trends and the performance of securities markets in the various countries, regions and geographic areas as prescribed by each Fund's investment objective and policies. During certain periods the investment return on securities in some or all countries may exceed the return on similar investments in the United States, while at other times the investment return may be less than that on similar U.S. securities. Shares of the International Equity Index and International Equity Funds, when included in appropriate amounts in a portfolio otherwise consisting of domestic securities, may provide a source of increased diversification. The International Equity Index and International Equity Funds seek increased diversification by combining securities from various countries and geographic areas that offer different investment opportunities and are affected by different economic trends. The international investments of the International Equity Index and International Equity Funds may reduce the effect that events in any one country or geographic area will have on its investment holdings. Of course, negative movement by a Fund's investments in one foreign market represented in its portfolio may offset potential gains from the Fund's investments in another country's markets. Emerging countries are all countries that are considered to be developing or emerging countries by the World Bank or the International Finance Corporation, as well as countries classified by the United Nations or otherwise regarded by the international financial community as developing. Currently, the countries excluded from this category are Ireland, Spain, New Zealand, Australia, the United Kingdom, Italy, the Netherlands, Belgium, Austria, France, Canada, Germany, Denmark, the United States, Sweden, Finland, Norway, Japan, and Switzerland. FORWARD FOREIGN CURRENCY CONTRACTS Forward foreign currency contracts involve obligations to purchase or sell a specific currency amount at a future date, agreed upon by the parties, at a price set at the time of the contract. A Fund may also enter into a contract to sell, for a fixed amount of U.S. dollars or other appropriate currency, the amount of foreign currency approximating the value of some or all of the Fund's securities denominated in the foreign currency. A Fund may realize a gain or loss from currency transactions. FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS Futures contracts provide for the future sale by one party and purchase by another party of a specified amount of a specific security at a specified future time and at a specified price. An option on a futures contract gives the purchase the right, in exchange for a premium, to assume a position in a futures contract at a specified exercise price during the term of the option. A Fund may use futures contracts, and related options for bona fide hedging purposes, to offset changes in the value of securities held or expected to be acquired. They may also be used to minimize fluctuations in foreign currencies or to gain exposure to a particular market or instrument. A Fund will minimize the risk that it will be unable to close out a futures contract by only entering into futures contracts which are traded on national futures exchanges and for which there appears to be a liquid secondary market. Index futures are futures contracts for various indices that are traded on registered securities exchanges. An index futures contract obligates the seller to deliver (and the purchaser to take) an amount of cash equal to a specific dollar amount times the difference between the value of a specific index at the close of the last trading day of the contract and the price at which the agreement is made. Although futures contracts by their terms call for actual delivery or acceptance of the underlying securities, in most cases the contracts are closed out before the settlement date without the making or taking of delivery. Closing out an open futures position is done by taking an opposite position ("buying" a contract which has previously been "sold" or "selling" a contract which has previously been "purchased") in an identical contract to terminate the position. Brokerage commissions are incurred when a futures contract is bought or sold. B-22 Futures traders are required to make a good faith margin deposit in cash or government securities with or for the account of a broker or custodian to initiate and maintain open secondary market will exist for any particular futures contract at any specific time. Thus, it may not be possible to close a futures position. In the event of adverse price movements, a Fund would continue to be required to make daily cash payments to maintain its required margin. In such situations, if a Fund has insufficient cash, it may have to sell portfolio securities to meet daily margin requirements at a time when it may be disadvantageous to do so. In addition, the Funds may be required to make delivery of the instruments underlying the futures contracts they hold. The inability to close options and futures positions also could have an adverse impact on the ability to effectively hedge the underlying securities. The risk of loss in trading futures contracts can be substantial, due both to the low margin deposits required and the extremely high degree of leverage involved in futures pricing. As a result, a relatively small price movement in a futures contract may result in immediate and substantial loss (or gain) to a Fund. For example, if at the time of purchase, 10% of the value of the futures contract is deposited as margin, a subsequent 10% decrease in the value of the futures contract would result in a total loss of the margin deposit, before any deduction for the transaction costs, if the account were then closed out. A 15% decrease would result in a loss equal to 150% of the original margin deposit if the contract were closed out. Thus, a purchase or sale of a futures contract may result in losses in excess of the amount invested in the contract. However, because the Funds will be engaged in futures transactions only for hedging purposes, the Adviser do not believe that the Funds will generally be subject to the risks of loss frequently associated with futures transactions. The Funds presumably would have sustained comparable losses if, instead of the futures contract, they had invested in the underlying financial instrument and sold it after the decline. The risk of loss from the purchase of options is less as compared with the purchase or sale of futures contracts because the maximum amount at risk is the premium paid for the option. Utilization of futures transactions by the Funds does involve the risk of imperfect or no correlation where the securities underlying futures contracts have different maturities than the fund securities being hedged. It is also possible that the Funds could both lose money on futures contracts and experience a decline in value of its fund securities. There is also the risk of loss by the Funds of margin deposits in the event of the bankruptcy of a broker with whom the Funds have an open position in a futures contract or related option. Most futures exchanges limit the amount of fluctuation permitted in futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day's settlement price at the end of a trading session. Once the daily limit has been reached in a particular type of contract, no trades may be made on that day at a price beyond that limit. The daily limit governs only price movement during a particular trading day and therefore does not limit potential losses because the limit may prevent the liquidation of unfavorable positions. Futures contract prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of future positions and subjecting some futures traders to substantial losses. GICS A GIC is a general obligation of the issuing insurance company and not a separate account. The purchase price paid for a GIC becomes part of the general assets of the issuer, and the contract is paid at maturity from the general assets of the issuer. Generally, GICs are not assignable or transferable without the permission of the issuing insurance company. For this reason, an active secondary market in GICs does not currently exist and GICs are considered to be illiquid investments. HIGH YIELD SECURITIES High yield securities, commonly referred to as junk bonds, are debt obligations rated below investment grade, I.E., below BBB by S&P or Baa by Moody's, or their unrated equivalents. The risks associated with investing in high yield securities include: B-23 (i) High yield, lower rated bonds involve greater risk of default or price declines than investments in investment grade securities (E.G., securities rated BBB or higher by S&P or Baa or higher by Moody's)due to changes in the issuer's creditworthiness. (ii) The market for high risk, high yield securities may be thinner and less active, causing market price volatility and limited liquidity in the secondary market. This may limit the ability of a Fund to sell these securities at their fair market values either to meet redemption requests, or in response to changes in the economy or the financial markets. (iii) Market prices for high risk, high yield securities may also be affected by investors' perception of the issuer's credit quality and the outlook for economic growth. Thus, prices for high risk, high yield securities may move independently of interest rates and the overall bond market. (iv) The market for high risk, high yield securities may be adversely affected by legislative and regulatory developments. HEDGING TECHNIQUES Hedging is an investment strategy designed to offset investment risks. Hedging activities include, among other things, the use of options and futures. There are risks associated with hedging activities, including: (i) the success of a hedging strategy may depend on an ability to predict movements in the prices of individual securities, fluctuations in markets, and movements in interest rates; (ii) there may be an imperfect or no correlation between the changes in market value of the securities held by a Fund and the prices of futures and option on futures; (iii) there may not be a liquid secondary market for a futures contract or option; and (iv) trading restrictions or limitations may be imposed by an exchange, and government regulations may restrict trading in futures contracts and options. ILLIQUID SECURITIES Illiquid securities are securities that cannot be disposed of within seven days at approximately the price at which they are being carried on a Fund's books. INVESTMENT COMPANY SHARES The Funds may purchase shares of other mutual funds to the extent consistent with applicable law. Investment companies typically incur fees that are separate from those fees incurred directly by the Funds. A Fund's purchase of such investment company securities results in the layering of expenses, such that you would indirectly bear a proportionate share of investment company operating expenses, such as advisory fees. INVESTMENT GRADE OBLIGATIONS Investment grade obligations are debt obligations rated BBB by S&P or Baa by Moody's, or their unrated equivalents. These securities are deemed to have speculative characteristics. LOAN PARTICIPATIONS Loan participations are interest in loans to U.S. corporations which are administered by the lending bank or agent for a syndicate of lending banks. In a loan participation, the borrower corporation is the issuer of the participation interest except to the extent the Fund derives its rights from the intermediary bank. Because the intermediary bank does not guarantee a loan participation, a loan participation is subject to the credit risks associated with the underlying corporate borrower. B-24 In the event of bankruptcy or insolvency of the corporate borrower, a loan participation may be subject to certain defenses that can be asserted by the borrower as a result of improper conduct by the intermediary bank. In addition, in the event the underlying corporate borrower fails to pay principal and interest when due, the Fund may be subject to delays, expenses, and risks that are greater than those that would have been involved if the Fund had purchased a direct obligation of the borrower. Under the terms of a Loan Participation, the Fund may be regarded as a creditor of the intermediary bank (rather than of the underlying corporate borrower), so that the Fund may also be subject to the risk that the intermediary bank may become insolvent. The secondary market for loan participations is limited and any such participation purchased by the Fund may be regarded as illiquid. MORTGAGE-BACKED SECURITIES Mortgage-backed securities are instruments that entitle the holder to a share of all interest and principal payments from mortgages underlying the security. The mortgages backing these securities include conventional 30-year fixed rate mortgages, graduated payment mortgages, adjustable rate mortgages, and floating mortgages. GOVERNMENT PASS-THROUGH SECURITIES These are securities that are issued or guaranteed by a U.S. government agency representing an interest in a pool of mortgage loans. The primary issuers or guarantors of these mortgage-backed securities are the Government National Mortgage Association ("GNMA"), Fannie Mae, and the Federal Home Loan Mortgage Corporation ("FHLMC"). Fannie Mae and FHLMC obligations are not backed by the full faith and credit of the U.S. government as GNMA certificates are, but Fannie Mae and FHLMC securities are supported by the instrumentalities' right to borrow from the U.S. Treasury. GNMA, Fannie Mae, and FHLMC each guarantees timely distributions of interest to certificate holders. GNMA and Fannie Mae also guarantee timely distributions of scheduled principal. In the past, FHLMC has only guaranteed the ultimate collection of principal of the underlying mortgage loan; however, FHLMC now issues mortgage-backed securities (FHLMC Gold PCS) which also guarantee timely payment of monthly principal reductions. Government and private guarantees do not extend to the securities' value, which is likely to vary inversely with fluctuations in interest rates. Obligations of GNMA are backed by the full faith and credit of the U.S. government. Obligations of Fannie Mae and FHLMC are not backed by the full faith and credit of the U.S. government, but are considered to be of high quality since they are considered to be instrumentalities of the United States. The market value and interest yield of these mortgage-backed securities can vary due to market interest rate fluctuations and early prepayments of underlying mortgages. These securities represent ownership in a pool of federally insured mortgage loans with a maximum maturity of 30 years. However, due to scheduled and unscheduled principal payments on the underlying loans, these securities have a shorter average maturity and, therefore, less principal volatility than a comparable 30-year bond. Since prepayment rates vary widely, it is not possible to accurately predict the average maturity of a particular mortgage-backed security. The scheduled monthly interest and principal payments relating to mortgages in the pool will be "passed through" to investors. Government mortgage-backed securities differ from conventional bonds in that principal is paid back to the certificate holders over the life of the loan rather than at maturity. As a result, there will be monthly scheduled payments of principal and interest. In addition, there may be unscheduled principal payments representing prepayments on the underlying mortgages. Although these securities may offer yields higher than those available from other types of U.S. government securities, mortgage-backed securities may be less effective than other types of securities as a means of "locking in" attractive long-term rates because of the prepayment feature. For instance, when interest rates decline, the value of these securities likely will not rise as much as comparable debt securities due to the prepayment feature. In addition, these prepayments can cause the price of a mortgage-backed security originally purchased at a premium to decline in price to its par value, which may result in a loss. B-25 PRIVATE PASS-THROUGH SECURITIES Private pass-through securities are mortgage-backed securities issued by a non-governmental agency, such as a trust. While they are generally structured with one or more types of credit enhancement, private pass-through securities generally lack a guarantee by an entity having the credit status of a governmental agency or instrumentality. The two principal types of private mortgage-backed securities are collateralized mortgage obligations ("CMOs") and real estate mortgage investment conduits ("REMICs"). CMOS CMOs are securities collateralized by mortgages, mortgage pass-throughs, mortgage pay-through bonds (bonds representing an interest in a pool of mortgages where the cash flow generated from the mortgage collateral pool is dedicated to bond repayment), and mortgage-backed bonds (general obligations of the issuers payable out of the issuers' general funds and additionally secured by a first lien on a pool of single family detached properties). CMOs are rated in one of the two highest categories by S&P or Moody's. Many CMOs are issued with a number of classes or series which have different expected maturities. Investors purchasing such CMOs are credited with their portion of the scheduled payments of interest and principal on the underlying mortgages plus all unscheduled prepayments of principal based on a predetermined priority schedule. Accordingly, the CMOs in the longer maturity series are less likely than other mortgage pass-throughs to be prepaid prior to their stated maturity. Although some of the mortgages underlying CMOs may be supported by various types of insurance, and some CMOs may be backed by GNMA certificates or other mortgage pass-throughs issued or guaranteed by U.S. government agencies or instrumentalities, the CMOs themselves are not generally guaranteed. REMICS REMICs are private entities formed for the purpose of holding a fixed pool of mortgages secured by an interest in real property. REMICs are similar to CMOs in that they issue multiple classes of securities and are rated in one of the two highest categories by S&P or Moody's. Investors may purchase beneficial interests in REMICs, which are known as "regular" interests, or "residual" interests. Guaranteed REMIC pass-through certificates ("REMIC Certificates") issued by Fannie Mae or FHLMC represent beneficial ownership interests in a REMIC trust consisting principally of mortgage loans or Fannie Mae, FHLMC or GNMA-guaranteed mortgage pass-through certificates. For FHLMC REMIC Certificates, FHLMC guarantees the timely payment of interest. GNMA REMIC Certificates are backed by the full faith and credit of the U.S. government. STRIPPED MORTGAGE-BACKED SECURITIES Stripped mortgage-backed securities are securities that are created when a U.S. government agency or a financial institution separates the interest and principal components of a mortgage-backed security and sells them as individual securities. The holder of the "principal-only" security (PO) receives the Principal payments made by the underlying mortgage-backed security, while the holder of the "interest-only" security (IO) receives interest payments from the same underlying security. The prices of stripped mortgage-backed securities may be particularly affected by changes in interest rates. As interest rates fall, prepayment rates tend to increase, which tends to reduce prices of IOs and increase prices of POs. Rising interest rates can have the opposite effect. DETERMINING MATURITIES OF MORTGAGE-BACKED SECURITIES Due to prepayments of the underlying mortgage instruments, mortgage-backed securities do not have a known actual maturity. In the absence of a known maturity, market participants generally refer to an estimated average B-26 life. The Adviser believes that the estimated average life is the most appropriate measure of the maturity of a mortgage-backed security. Accordingly, in order to determine whether such security is a permissible investment for a Fund, it will be deemed to have a remaining maturity equal to its average life as estimated by the Adviser. An average life estimate is a function of an assumption regarding anticipated prepayment patterns. The assumption is based upon current interest rates, current conditions in the relevant housing markets and other factors. The assumption is necessarily subjective, and thus different market participants could produce somewhat different average life estimates with regard to the same security. There can be no assurance that the average life as estimated by the Adviser will be the actual average life. MUNICIPAL FORWARDS Municipal forwards are forward commitments for the purchase of tax-exempt bonds with a specified coupon to be delivered by an issuer at a future date, typically exceeding 45 days but normally less than one year after the commitment date. Municipal forwards are normally used as a refunding mechanism for bonds that may only be redeemed on a designated future date (see "When-Issued Securities and Municipal Forwards" for more information). MUNICIPAL LEASE OBLIGATIONS Municipal lease obligations are securities issued by state and local governments and authorities to finance the acquisition of equipment and facilities. They make take the form of a lease, an installment purchase contract, an conditional sales contract, or a participation interest in any of the above. MUNICIPAL SECURITIES MUNICIPAL BONDS include general obligation bonds, revenue or special obligation bonds, private activity and industrial development bonds and participation interests in municipal bonds. General obligation bonds are backed by the taxing power of the issuing municipality. Revenue bonds are backed by the revenues of a project or facility (for example, tolls from a bridge). Certificates of participation represent an interest in an underlying obligation or commitment, such as an obligation issued in connection with a leasing arrangement. The payment of principal and interest on private activity and industrial development bonds generally is totally dependent on the ability of a facility's user to meet its financial obligations and the pledge, if any, of real and personal property as security for the payment. MUNICIPAL NOTES consist of general obligation notes, tax anticipation notes (notes sold to finance working capital needs of the issuer in anticipation of receiving taxes on a future date), revenue anticipation notes (notes sold to provide needed cash prior to receipt of expected non-tax revenues from a specific source), bond anticipation notes, certificates of indebtedness, demand notes and construction loan notes. A Fund's investments in any of the notes described above will be limited to those obligations (i) where both principal and interest are backed by the full faith and credit of the United States, (ii) which are rated MIG-2 or V-MIG-2 at the time of investment by Moody's, (iii) which are rated SP-2 at the time of investment by S&P, or (iv) which, if not rated by S&P or Moody's, are in the Adviser's judgment, of at least comparable quality to MIG-2, VMIG-2 or SP-2. Municipal bonds must be rated at least BBB or better by S&P or at least Baa or better by Moody's at the time of purchase for the Tax-Exempt Bond Funds or in one of the two highest short-term rating categories by S&P or Moody's for the Tax-Exempt Money Market Fund or, if not rated by S&P or Moody's, must be deemed by the Adviser to have essentially the same characteristics and quality as bonds having the above ratings. A Fund may purchase industrial development and pollution control bonds if the interest paid is exempt from Federal income tax. These bonds are issued by or on behalf of public authorities to raise money to finance various privately-operated facilities for business and manufacturing, housing, sports and pollution control. These bonds are also used to finance public facilities such as airports, mass transit B-27 systems, ports and parking. The payment of the principal and interest on such bonds is dependent solely on the ability of the facility's user to meet its financial obligations and the pledge, if any, of real and personal property so financed as security for such payment. Other types of tax-exempt instruments which are permissible investments include floating rate notes. Investments in such floating rate instruments will normally involve industrial development or revenue bonds which provide that the rate of interest is set as a specific percentage of a designated base rate (such as the prime rate) at a major commercial bank, and that the Fund can demand payment of the obligation at all times or at stipulated dates on short notice (not to exceed 30 days) at par plus accrued interest. Such obligations are frequently secured by letters of credit or other credit support arrangements provided by banks. The quality of the underlying credit or of the bank, as the case may be, must, in the Adviser's opinion, be equivalent to the long-term bond or commercial paper ratings stated above. The Adviser will monitor the earning power, cash flow and liquidity ratios of the issuers of such instruments and the ability of an issuer of a demand instrument to pay principal and interest on demand. The Funds may also purchase participation interests in municipal securities (such as industrial development bonds and municipal lease/purchase agreements). A participation interest gives a Fund an undivided interest in the underlying municipal security. If it is unrated, the participation interest will be backed by an irrevocable letter of credit or guarantee of a credit-worthy financial institution or the payment obligations otherwise will be collateralized by U.S. government securities. Participation interests may have fixed, variable or floating rates of interest and may include a demand feature. A participation interest without a demand feature or with a demand feature exceeding seven days may be deemed to be an illiquid security subject to the Fund's investment limitations restricting their purchases of illiquid securities. A Fund may purchase other types of tax-exempt instruments as long as they are of a quality equivalent to the bond or commercial paper ratings stated above. Opinions relating to the validity of municipal securities and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Funds nor the Adviser will review the proceedings relating to the issuance of municipal securities or the basis for such opinions. OPTIONS A Fund may write call options on a covered basis only, and will not engage in option writing strategies for speculative purposes. A call option gives the purchaser of such option the right to buy, and the writer, in this case the Fund, the obligation to sell the underlying security at the exercise price during the option period. The advantage to the Funds of writing covered calls is that the Funds receive a premium which is additional income. However, if the security rises in value, the Funds may not fully participate in the market appreciation. During the option period, a covered call option writer may be assigned an exercise notice by the broker-dealer through whom such call option was sold requiring the writer to deliver the underlying security against payment of the exercise price. This obligation is terminated upon the expiration of the option period or at such earlier time in which the writer effects a closing purchase transaction. A closing purchase transaction is one in which the Fund, when obligated as a writer of an option, terminates its obligation by purchasing an option of the same series as the option previously written. A closing purchase transaction cannot be effected with respect to an option once the option writer has received an exercise notice for such option. Closing purchase transactions will ordinarily be effected to realize a profit on an outstanding call option, to prevent an underlying security from being called, to permit the sale of the underlying security or to enable a Fund to write another call option on the underlying security with either a different exercise price or expiration date or both. A Fund may realize a net gain or loss from a closing purchase transaction depending upon whether the net amount B-28 of the original premium received on the call option is more or less than the cost of effecting the closing purchase transaction. Any loss incurred in a closing purchase transaction may be partially or entirely offset by the premium received from a sale of a different call option on the same underlying security. Such a loss may also be wholly or partially offset by unrealized appreciation in the market value of the underlying security. If a call option expires unexercised, a Fund will realize a short-term capital gain in the amount of the premium on the option, less the commission paid. Such a gain, however, may be offset by depreciation in the market value of the underlying security during the option period. If a call option is exercised, a Fund will realize a gain or loss from the sale of the underlying security equal to the difference between the cost of the underlying security, and the proceeds of the sale of the security plus the amount of the premium on the option, less the commission paid. The market value of a call option generally reflects the market price of an underlying security. Other principal factors affecting market value include supply and demand, interest rates, the price volatility of the underlying security, and the time remaining until the expiration date. The Funds will write call options only on a covered basis, which means that a Fund will own the underlying security subject to a call option at all times during the option period. Unless a closing purchase transaction is effected, a Fund would be required to continue to hold a security which it might otherwise wish to sell, or deliver a security it would want to hold. Options written by the Funds will normally have expiration dates between one and nine months from the date written. The exercise price of a call option may be below, equal to, or above the current market value of the underlying security at the time the option is written. OTHER INVESTMENTS The Funds are not prohibited from investing in bank obligations issued by clients of SEI Investments Company ("SEI Investments"), the parent company of the Administrator and the Distributor. The purchase of Fund shares by these banks or their customers will not be a consideration in deciding which bank obligations the Funds will purchase. The Funds will not purchase obligations issued by the Adviser. PAY-IN-KIND SECURITIES Pay-In-Kind securities are debt obligations or preferred stock, that pay interest or dividends in the form of additional debt obligations or preferred stock. REPURCHASE AGREEMENTS Repurchase agreements are agreements by which a person (E.G., a Fund) obtains a security and simultaneously commits to return the security to the seller (a primary securities dealer as recognized by the Federal Reserve Bank of New York or a national member bank as defined in Section 3(d)(1) of the Federal Deposit Insurance Act, as amended) at an agreed upon price (including principal and interest) on an agreed upon date within a number of days (usually not more than seven) from the date of purchase. The resale price reflects the purchase price plus an agreed upon market rate of interest which is unrelated to the coupon rate or maturity of the underlying security. A repurchase agreement involves the obligation of the seller to pay the agreed upon price, which obligation is, in effect, secured by the value of the underlying security. Repurchase agreements are considered to be loans by a Fund for purposes of its investment limitations. The repurchase agreements entered into by a Fund will provide that the underlying security at all times shall have a value at least equal to 102% of the resale price stated in the agreement (the Adviser monitors compliance with this requirement). Under all repurchase agreements entered into by a Fund, the appropriate Custodian or its agent must take possession of the underlying collateral. However, if the seller defaults, a Fund could realize a loss on the sale of the underlying security to the extent that the proceeds of the sale including accrued interest are less than the resale price provided in the agreement including interest. In addition, even though the Bankruptcy Code provides B-29 protection for most repurchase agreements, if the seller should be involved in bankruptcy or insolvency proceedings, a Fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if the Fund is treated as an unsecured creditor and required to return the underlying security to the seller's estate. RESOURCE RECOVERY BONDS The Virginia Tax-Free Money Market Fund and the municipal bond funds may purchase resource recovery bonds, which are a type of revenue bond issued to build facilities such as solid waste incinerators or waste-to-energy plants. Typically, a private corporation will be involved, at least during the construction phase, and the revenue stream will be secured by fees or rents paid by municipalities for use of the facilities. The viability of a resource recovery project, environmental protection regulations, and project operator tax incentives may affect the value and credit quality of resource recovery bonds. RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS Investments by a money market fund are subject to limitations imposed under regulations adopted by the SEC. Under these regulations, money market funds may acquire only obligations that present minimal credit risk and that are "eligible securities," which means they are (i) rated, at the time of investment, by at least two NRSROs (one if it is the only organization rating such obligation) in the highest rating category or, if unrated, determined to be of comparable quality (a "first tier security"), or (ii) rated according to the foregoing criteria in the second highest rating category or, if unrated, determined to be of comparable quality ("second tier security"). In the case of taxable money market funds, investments in second tier securities are subject to further constraints in that (i) no more than 5% of a money market fund's assets may be invested in second tier securities and (ii) any investment in securities of any one such issuer is limited to the greater of 1% of the money market fund's total assets or $1 million. A taxable money market fund may not purchase securities of any issuer (except securities issued or guaranteed by the U.S. government, its agencies of instrumentalities) if, as a result, more than 5% of the total assets of the Fund would be invested the securities of one issuer. A taxable money market fund may also hold more than 5% of its assets in first tier securities of a single issuer for three "business days" (that is, any day other than a Saturday, Sunday or customary business holiday). RESTRICTED SECURITIES Restricted securities are securities that may not be sold to the public without registration under the Securities Act of 1933 (the "1933 Act") or an exemption from registration. The Funds may invest in restricted securities, and each such Fund may invest up to 15% of its net assets (10% for the money market funds) in illiquid securities, subject to each Fund's investment limitations on the purchase of illiquid securities. Restricted securities, including securities eligible for re-sale under 1933 Act Rule 144A, that are determined to be liquid are not subject to this limitation. This determination is to be made by the Adviser pursuant to guidelines adopted by the Trust's Board of Trustees. Under these guidelines, the Adviser will consider the frequency of trades and quotes for the security, the number of dealers in, and potential purchasers for, the securities, dealer undertakings to make a market in the security, and the nature of the security and of the marketplace trades. In purchasing such Restricted Securities, the Adviser intends to purchase securities that are exempt from registration under Rule 144A under the 1933 Act. SECURITIES LENDING All Funds may lend securities pursuant to agreements which require that the loans be continuously secured by collateral at all times equal to 100% of the market value of the loaned securities which consists of cash, securities of the U.S. government or its agencies, or any combination of cash and such securities. Such loans will not be made if, as a result, the aggregate amount of all outstanding securities loans for a Fund exceed one-third of the value of the Fund's total assets taken at fair market value. A Fund will continue to receive interest on the loaned securities while simultaneously earning interest on the investment of the collateral. However, a Fund will normally pay B-30 lending fees to such broker-dealers and related expenses from the interest earned on invested collateral. There may be risks of delay in receiving additional collateral or risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the securities fail financially. Further, loans are made only to borrowers deemed by the Adviser to be of good standing and when, in the judgment of the Adviser, the consideration which can be earned currently from such securities loans justifies the attendant risk. Any loan may be terminated by either party upon reasonable notice to the other party. The Funds may use the Distributor or a broker-dealer affiliate of the Adviser as a broker in these transactions. SHORT-TERM OBLIGATIONS Short-term obligations are debt obligations maturing (becoming payable) in 397 days or less, including commercial paper and short-term corporate obligations. Short-term corporate obligations are short-term obligations issued by corporations. STANDBY COMMITMENTS AND PUTS The Funds may purchase securities at a price which would result in a yield to maturity lower than that generally offered by the seller at the time of purchase when they can simultaneously acquire the right to sell the securities back to the seller, the issuer or a third party (the "writer") at an agreed-upon price at any time during a stated period or on a certain date. Such a right is generally denoted as a "standby commitment" or a "put." The purpose of engaging in transactions involving puts is to maintain flexibility and liquidity to permit the Funds to meet redemptions and remain as fully invested as possible in municipal securities. The Funds reserve the right to engage in put transactions. The right to put the securities depends on the writer's ability to pay for the securities at the time the put is exercised. A Fund would limit its put transactions to institutions which the Adviser believes present minimal credit risks, and the Adviser would use its best efforts to initially determine and continue to monitor the financial strength of the sellers of the options by evaluating their financial statements and such other information as is available in the marketplace. It may, however be difficult to monitor the financial strength of the writers because adequate current financial information may not be available. In the event that any writer is unable to honor a put for financial reasons, a Fund would be a general creditor (I.E., on a parity with all other unsecured creditors) of the writer. Furthermore, particular provisions of the contract between the Fund and the writer may excuse the writer from repurchasing the securities; for example, a change in the published rating of the underlying securities or any similar event that has an adverse effect on the issuer's credit or a provision in the contract that the put will not be exercised except in certain special cases, for example, to maintain portfolio liquidity. The Fund could, however, at any time sell the underlying portfolio security in the open market or wait until the portfolio security matures, at which time it should realize the full par value of the security. The securities purchased subject to a put may be sold to third persons at any time, even though the put is outstanding, but the put itself, unless it is an integral part of the security as originally issued, may not be marketable or otherwise assignable. Therefore, the put would have value only to the Fund. Sale of the securities to third parties or lapse of time with the put unexercised may terminate the right to put the securities. Prior to the expiration of any put option, the Fund could seek to negotiate terms for the extension of such an option. If such a renewal cannot be negotiated on terms satisfactory to the Fund, the Fund could, of course, sell the portfolio security. The maturity of the underlying security will generally be different from that of the put. There will be no limit to the percentage of portfolio securities that the Fund may purchase subject to a standby commitment or put, but the amount paid directly or indirectly for all standby commitments or puts which are not integral parts of the security as originally issued held in the Fund will not exceed one-half of 1% of the value of the total assets of such Fund calculated immediately after any such put is acquired. STRIPS Separately Traded Interest and Principal Securities ("STRIPS") are component parts of U.S. Treasury securities traded through the Federal Book-Entry System. An Adviser will only purchase STRIPS that it determines are liquid B-31 or, if illiquid, do not violate the affected Fund's investment policy concerning investments in illiquid securities. Consistent with Rule 2a-7 under the Investment Company Act of 1940, as amended, (the "1940 Act"), the Adviser will only purchase STRIPS for money market funds that have a remaining maturity of 397 days or less; therefore, the money market funds currently may only purchase interest component parts of U.S. Treasury securities. While there is no limitation on the percentage of a Fund's assets that may be comprised of STRIPS, the Adviser will monitor the level of such holdings to avoid the risk of impairing shareholders' redemption rights and of deviations in the value of shares of the money market funds. SUPRANATIONAL AGENCY OBLIGATIONS Supranational agency obligations are obligations of supranational entities established through the joint participation of several governments, including the Asian Development Bank, Inter-American Development Bank, International Bank for Reconstruction and Development (also known as the "World Bank"), African Development Bank, European Union, European Investment Bank, and the Nordic Investment Bank. SWAPS, CAPS, FLOORS, COLLARS Swaps, caps, floors and collars are hedging tools designed to permit a Fund to preserve a return or spread on a particular investment or portion of its portfolio. They are also used to protect against any increase in the price of securities a Fund anticipates purchasing at a later date. In a typical interest rate swap, one party agrees to make regular payments equal to a floating interest rate times a "notional principal amount." This is done in return for payments equal to a fixed rate times the same amount, for a specific period of time. If a swap agreement provides for payment in different currencies, the parties might agree to exchange the notional principal amount as well. Swaps may also depend on other prices or rates, such as the value of an index or mortgage prepayment rates. In a typical cap or floor agreement, one party agrees to make payments only under specified circumstances. This is usually in return for payment of a fee by the other party. For example, the buyer of an interest rate cap obtains the right to receive payments to the extent that a specific interest rate exceeds an agreed-upon level. Meanwhile, the seller of an interest rate floor is obligated to make payments to the extent that a specified interest rate falls below an agreed-upon level. An interest rate collar combines elements of buying a cap and selling a floor. Swap agreements are subject to risks related to the counterparty's ability to perform, and may decline in value if the counterparty's creditworthiness deteriorates. A Fund may also suffer losses if it is unable to terminate outstanding swap agreements or reduce its exposure through offsetting transactions. A obligation a Fund may have under these types of arrangements will be covered by setting aside liquid high-grade securities in a segregated account. The Funds will enter into swaps only with counterparties believed to be creditworthy. U.S. GOVERNMENT AGENCY OBLIGATIONS U.S. government agency obligations are obligations issued or guaranteed by agencies or instrumentalities of the U.S. government. Agencies of the U.S. government which issue obligations consist of, among others, the Export Import Bank of the United States, Farmers Home Administration, Federal Farm Credit Bank, Federal Housing Administration, Government National Mortgage Association ("GNMA"), Maritime Administration, Small Business Administration and The Tennessee Valley Authority. Obligations of instrumentalities of the U.S. government include securities issued by, among others, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Intermediate Credit Banks, Federal Land Banks, Fannie Mae and the U.S. Postal Service as well as government trust certificates. Some of these securities are supported by the full faith and credit of the U.S. Treasury, others are supported by the right of the issuer to borrow from the U.S. Treasury and still others are supported only by the credit of the instrumentality. Guarantees of principal by agencies or instrumentalities of the U.S. government may be a guarantee of payment at the maturity of the obligation so that in the event of a default prior to maturity there might not be a market and thus no means of realizing the value of the obligation prior to maturity. B-32 U.S. TREASURY OBLIGATIONS U.S. Treasury obligations consist of bills, notes and bonds issued by the U.S. Treasury. They also consist of separately traded interest and principal component parts of these obligations that are transferable through STRIPS or CUBES. VARIABLE AND FLOATING RATE SECURITIES Variable and floating rate instruments involve certain obligations that may carry variable or floating rates of interest, and may involve a conditional or unconditional demand feature. Such instruments bear interest at rates which are not fixed, but which vary with changes in specified market rates or indices. The interest rates on these securities may be reset daily, weekly, quarterly, or some other reset period, and may have a set floor or ceiling on interest rate changes. There is a risk that the current interest rate on such obligations may not accurately reflect existing market interest rates. A demand instrument with a demand notice exceeding seven days may be considered illiquid if there is no secondary market for such security. VARIABLE RATE MASTER DEMAND NOTES Variable rate master demand notes permit the investment of fluctuating amounts at varying market rates of interest pursuant to direct arrangements between a Fund, as lender, and a borrower. Such notes provide that the interest rate on the amount outstanding varies on a daily, weekly or monthly basis depending upon a stated short-term interest rate index. Both the lender and the borrower have the right to reduce the amount of outstanding indebtedness at any time. There is no secondary market for the notes and it is not generally contemplated that such instruments will be traded. The quality of the note or the underlying credit must, in the opinion of the Adviser, be equivalent to the ratings applicable to permitted investments for the particular Fund. The Adviser will monitor on an ongoing basis the earning power, cash flow and liquidity ratios of the issuers of such instruments and will similarly monitor the ability of an issuer of a demand instrument to pay principal and interest on demand. Variable rate master demand notes may or may not be backed by bank letters of credit. WARRANTS Warrants give holders the right, but not the obligation, to buy shares of a company at a given price, usually higher than the market price, during a specified period. WHEN-ISSUED SECURITIES AND MUNICIPAL FORWARDS When-issued securities are securities that are delivered and paid for normally within 45 days after the date of commitment to purchase. Municipal forwards call for delivery of the underlying municipal security normally after 45 days but before one year after the commitment date. Although a Fund will only make commitments to purchase when-issued securities and municipal forwards with the intention of actually acquiring the securities, a Fund may sell them before the settlement date. When-issued securities are subject to market fluctuation, and accrue no interest to the purchaser during this pre-settlement period. The payment obligation and the interest rate that will be received on the securities are each fixed at the time the purchaser enters into the commitment. Purchasing municipal forwards and when-issued securities entails leveraging and can involve a risk that the yields available in the market when the delivery takes place may actually be higher than those obtained in the transaction itself. In that case, there could be an unrealized loss at the time of delivery. Segregated accounts will be established with the appropriate custodian, and a Fund will maintain high-quality, liquid assets in an amount at least equal in value to its commitments to purchase when-issued securities and B-33 municipal forwards. If the value of these assets declines, the Fund will place additional liquid assets in the account on a daily basis so that the value of the assets in the account is equal to the amount of such commitments. ZERO COUPON OBLIGATIONS Zero coupon obligations are debt obligations that do not bear any interest, but instead are issued at a deep discount from face value or par. The value of a zero coupon obligation increases over time to reflect the interest accumulated. Such obligations will not result in the payment of interest until maturity, and will have greater price volatility than similar securities that are issued at face value or par and pay interest periodically. Investors will receive written notification at least thirty days prior to any change in a Fund's investment objective. The phrase "principally invests" as used in the prospectus means that the Fund invests at least 65% of its assets in the securities as described in the sentence. Each tax-exempt fund invests at least 80% of its total assets in securities with income exempt from federal income and alternative minimum taxes. INVESTMENT POLICIES The following are fundamental policies of each Fund and cannot be changed with respect to a Fund without the consent of the holders of a majority of that Fund's outstanding shares. The term "majority of the outstanding shares" means the vote of (i) 67% or more of a Fund's shares present at a meeting, if more than 50% of the outstanding shares of the Fund are present or represented by proxy, or (ii) more than 50% of a Fund's outstanding shares, whichever is less. FUNDAMENTAL POLICIES No Fund (except the Life Vision Funds) may: 1. Acquire more than 10% of the voting securities of any one issuer. 2. Invest in companies for the purpose of exercising control. 3. Borrow money except for temporary or emergency purposes and then only in an amount not exceeding one-third of the value of total assets. Any borrowing will be done from a bank and, to the extent that such borrowing exceeds 5% of the value of the Fund's assets, asset coverage of at least 300% is required. In the event that such asset coverage shall at any time fall below 300%, the Fund shall, within three days thereafter or such longer period as the Securities and Exchange Commission may prescribe by rules and regulations, reduce the amount of its borrowings to such an extent that the asset coverage of such borrowings shall be at least 300%. This borrowing provision is included solely to facilitate the orderly sale of portfolio securities to accommodate heavy redemption requests if they should occur and is not for investment purposes. All borrowings in excess of 5% of the value of a Fund's total assets will be repaid before making additional investments and any interest paid on such borrowings will reduce income. 4. Make loans, except that (a) a Fund may purchase or hold debt instruments in accordance with its investment objective and policies; (b) a Fund may enter into repurchase agreements, and (c) the Bond Funds, Balanced Fund, International Equity Fund, International Equity Index Fund, Limited- Term Federal Mortgage Securities Fund, U.S. Government Securities Fund, Small Cap Value Equity Fund and Value Income Stock Fund, may engage in securities lending as described in the Prospectuses and in this Statement of Additional Information. B-34 5. Pledge, mortgage or hypothecate assets except to secure temporary borrowings permitted by (3) above in aggregate amounts not to exceed 10% of the Fund's total assets, taken at current value at the time of the incurrence of such loan, except as permitted with respect to securities lending. 6. Purchase or sell real estate, real estate limited partnership interests, commodities or commodities contracts (except for financial futures contracts) and interests in a pool of securities that are secured by interests in real estate (except that each Bond Fund may purchase mortgage-backed and other mortgage-related securities, including collateralized mortgage obligations and REMICs). However, subject to their permitted investment spectrum, any Fund may invest in companies which invest in real estate, commodities or commodities contracts. 7. Make short sales of securities, maintain a short position or purchase securities on margin, except that the Trust may obtain short-term credits as necessary for the clearance of security transactions. 8. Act as an underwriter of securities of other issuers except as it may be deemed an underwriter in selling a security. 9. Purchase securities of other investment companies except for money market funds and CMOs and REMICs deemed to be investment companies and then only as permitted by the Investment Company Act of 1940 (the "1940 Act") and the rules and regulations thereunder, except that the Mid-Cap Equity, Balanced, Georgia Tax-Exempt Bond, Florida Tax-Exempt Bond, U.S. Government Securities, Limited-Term Federal Mortgage Securities, International Equity Index, International Equity, and Small Cap Value Equity Funds' purchases of investment company shares are not limited to money market funds. Under these rules and regulations, a Fund is prohibited from acquiring the securities of other investment companies if, as a result of such acquisition, the Fund owns more than 3% of the total voting stock of the company; securities issued by any one investment company represent more than 5% of the total assets of a Fund; or securities (other than U.S. Treasury stock) issued by all investment companies represent more than 10% of the total assets of the Fund. 10. Issue senior securities (as defined in the 1940 Act) except in connection with permitted borrowings as described above or as permitted by rule, regulation or order of the SEC. 11. Purchase securities of any issuer (except securities issued or guaranteed by the United States, its agencies or instrumentalities and repurchase agreements involving such securities) if as a result more than 5% of the total assets of a Fund would be invested in the securities of such issuer; provided, however, that a Fund may invest up to 25% of its total assets without regard to this restriction as permitted by applicable law. 12. Purchase any securities which would cause more than 25% of the total assets of a Fund to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that this limitation does not apply to investments in obligations issued or guaranteed by the U.S. government or its agencies and instrumentalities, repurchase agreements involving such securities or tax-exempt securities issued by governments or political subdivisions of governments and, with respect to only the money market funds, obligations issued by domestic branches of U.S. banks or U.S. branches of foreign banks subject to the same regulations as U.S. banks. For purposes of this limitation, (i) utility companies will be divided to according to their services, for example, gas, gas transmission, electric and telephone will each be considered a separate industry; (ii) financial service companies will be classified according to the end users of their services, for example, automobile finance, bank finance and diversified finance will each be considered a separate industry; and (iii) supranational entities will be considered to be a separate industry. B-35 LIFE VISION FUNDS No Life Vision Fund may: 1. Purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities or securities issued by investment companies) if, as a result, more than 5% of the total assets of a Life Vision Fund would be invested in the securities of such issuer; provided, however, that a Life Vision Fund may invest more than 25% of its assets without regard to this restrictions permitted by applicable law; 2. Borrow money, except that a Life Vision Fund (a) may borrow money for temporary or emergency purposes in an amount not exceeding 5% of the Life Vision Fund's total assets determined at the time of the borrowing and (b) may borrow money from banks or by engaging in reverse repurchase agreements. Asset coverage of at least 300% is required for all borrowings, except where a Life Vision Fund has borrowed money for temporary purposes in amounts not exceeding 5% of its total assets; 3. Underwrite securities issued by others, except to the extent that the Life Vision Fund may be considered an underwriter within the meaning of the Securities Act of 1933 (the "Securities Act") in the disposition of restricted securities; 4. Issue senior securities (as defined in the 1940 Act), except as permitted by rule, regulation or order of the Securities and Exchange Commission (the "SEC"); 5. Purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities or securities issued by investment companies) if, as a result, more than 25% of the Life Vision Fund's total assets would be invested in the securities of companies whose principal business activities are in the same industry. In addition, each Life Vision Fund may not invest more than 25% of its assets in underlying STI Classic Funds that, as a matter of policy, concentrate their assets in any one industry. However, a Life Vision Fund may indirectly invest more than 25% of its total assets in one industry through its investments in the underlying STI Classic Funds. Each Life Vision Fund may invest up to 100% of its assets in securities issued by investment companies; 6. Purchase or sell real estate, unless acquired as a result of ownership of securities or other instruments (but this shall not prevent a Life Vision Fund from investing in securities or other instruments either issued by companies that invest in real estate, backed by real estate or securities of companies engaged in the real estate business); 7. Purchase or sell physical commodities, unless acquired as a result of ownership of securities or other instruments; and 8. Lend any security or make any other loan, except as permitted by the 1940 Act. B-36 PROPOSED FUNDAMENTAL INVESTMENT POLICIES On August 15, 2000, the Board of Trustees recommended that shareholders of each Fund approve certain revisions to each Fund's fundamental investment policies. These revised policies, which are listed below, if approved, would replace each of the fundamental policies listed above. Shareholders of record on August 16, 2000 will be asked to approve the revised policies at shareholders meeting scheduled for October 27, 2000. If these revised policies are approved, they will take effect immediately. The Fund will update this SAI if the revised policies are not approved by the shareholders of each Fund. No Fund may: 1. With respect to 75% of each Fund's total assets, invest more than 5% of the value of the total assets of a Fund in the securities of any one issuer (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities, repurchase agreements involving such securities, and securities issued by investment companies), or purchase the securities of any one issuer if such purchase would cause more than 10% of the voting securities of such issuer to be held by a Fund. 2. Borrow money in an amount exceeding 33 1/3% of the value of its total assets, provided that, for the purposes of this limitation, investment strategies that either obligate a Fund to purchase securities or require a Fund to segregate assets are not considered to be borrowing. Asset coverage of at least 300% is required for all borrowing, except where the Fund has borrowed money for temporary purposes (less than 60 days), and in an amount not exceeding 5% of its total assets. 3. Underwrite securities issued by others, except to the extent that the Fund may be considered an underwriter within the meaning of the Securities Act of 1933 in the sale of portfolio securities. 4. Issue senior securities (as defined in the Investment Company Act of 1940 (the "1940 Act")), except as permitted by rule, regulation or order of the Securities and Exchange Commission. 5. Purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities and securities issued by investment companies) if, as a result, more than 25% of the Fund's total assets would be invested in the securities of companies who principal business activities are in the same industry. 5.1 With respect to the money market funds, this limitation does not apply to obligations issued by domestic branches of U.S. banks or U.S. branches of foreign banks subject to the same regulations as U.S. banks. 5.2 No Life Vision Fund may invest more than 25% of its assets in underlying STI Classic Funds that, as a matter of policy, concentrate their assets in any one industry. However, a Life Vision Fund may indirectly invest more than 25% of its total assets in one industry through its investments in the underlying STI Classic Funds. Each Life Vision Fund may invest up to 100% of its assets in securities issued by investment companies. 6. Purchase or sell real estate, unless acquired as a result of ownership of securities or other instruments (but this shall not prevent a Fund from investing in securities or other instruments either issued by companies that invest in real estate, backed by real estate or securities of companies engaged in the real estate business). 7. Purchase or sell physical commodities, unless acquired as a result of ownership of securities or other instruments. 8. Make loans, except that a Fund may: (i) purchase or hold debt instruments in accordance with its investment objectives and policies; (ii) enter into repurchase agreements; and (iii) lend its portfolio securities. B-37 NON-FUNDAMENTAL POLICIES No Fund may purchase or hold illiquid securities (I.E., securities that cannot be disposed of for their approximate carrying value in seven days or less (which term includes repurchase agreements and time deposits maturing in more than seven days) if, in the aggregate, more than 15% of its net assets (10% for the Prime Quality Money Market, U.S. Government Securities Money Market, U.S. Treasury Money Market Fund, and Tax-Exempt Money Market Funds) would be invested in illiquid securities. No Life Vision Fund currently intends to purchase securities on margin, except that a Life Vision Fund may obtain such short-term credits as are necessary for the clearance of transactions. No Life Vision Fund currently intends to sell securities short. No Life Vision Fund currently intends to purchase or sell futures contracts or put or call options. No Life Vision Fund may invest in shares of unaffiliated money market funds, except as permitted by the SEC. With the exception of the limitations on liquidity standards, the foregoing percentages will apply at the time of the purchase of a security and shall not be considered violated unless an excess occurs or exists immediately after and as a result of a purchase of such security. INVESTMENT ADVISER The investment adviser makes investment decisions for the STI Classic Funds (hereon, the "Funds") and continuously reviews, supervises and administers each Fund's respective investment program. The Board of Trustees supervises the Adviser and establishes policies that the Adviser must follow in its management activities. Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the investment adviser ("Adviser") to the Funds. As of July 1, 2000, Trusco had approximately $47 billion in assets under management. For periods prior to January 1, 2000, STI Capital Management, N.A. ("STI"), a subsidiary of SunTrust Banks, Inc. served as investment adviser to the Balanced Fund, Capital Appreciation Fund, Florida Tax-Exempt Bond Fund, International Equity Fund, Investment Grade Bond Fund, Investment Grade Tax-Exempt Bond Fund, Limited-Term Federal Mortgage Securities Fund, Mid-Cap Equity Fund, Small Cap Value Equity Fund and Value Income Stock Fund. On January 1, 2000, SunTrust Bank (formerly SunTrust Bank, Atlanta), a subsidiary of SunTrust Banks, Inc. and the investment adviser of the Georgia Tax-Exempt Bond Fund, succeeded STI as the investment adviser to those Funds. On July 1, 2000 SunTrust Banks, Inc. reorganized its money management units, including those of SunTrust Bank, into Trusco. As a result, Trusco now serves as the investment adviser to each Fund pursuant to three separate agreements. The Advisory Agreements provide that the Adviser shall not be protected against any liability to the Trust or its Shareholders by reason of willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard of its obligations or duties thereunder. The Advisory Agreements provide that if, for any fiscal year, the ratio of expenses of any Fund (including amounts payable to the Adviser but excluding interest, taxes, brokerage, litigation, and other extraordinary expenses) exceeds limitations established by certain states, the Adviser and/or the Administrator will bear the amount of such excess. The Adviser will not be required to bear expenses of the Trust to an extent which would result in a Fund's inability to qualify as a regulated investment company under provisions of the Internal Revenue Code. The continuance of the Advisory Agreements, after the first two years, must be specifically approved at least annually (i) by the vote of the Trustees, and (ii) by the vote of a majority of the Trustees who are not parties to the Agreements or "interested persons" of any party thereto, cast in person at a meeting called for the purpose of voting on such approval. The Advisory Agreements will terminate automatically in the event of its assignment, and each B-38 is terminable at any time without penalty by the Trustees of the Trust or, with respect to the Funds, by a majority of the outstanding shares of the Funds, on not less than 30 days' nor more than 60 days' written notice to the Adviser, or by the Adviser on 90 days' written notice to the Trust. For its advisory services, Trusco is entitled to a fee, which is calculated daily and paid monthly, at the annual rate of: 0.95% of the average daily net assets of the Balanced Fund, 1.15% of the average daily net assets of the Capital Appreciation Fund, 1.10% of the average daily net assets of the Core Equity Fund, 1.10% of the average daily net assets of the E-Commerce Opportunity Fund, 0.65% of the average daily net assets of the Florida Tax-Exempt Bond Fund, 0.65% of the average daily net assets of the Georgia Tax-Exempt Bond Fund, 0.90% of the average daily net assets of the Growth and Income Fund, 0.80% of the average daily net assets of the High Income Fund, 0.90% of the average daily net assets of the International Equity Index Fund, 1.25% of the average daily net assets of the International Equity Fund, 0.74% of the average daily net assets of the Investment Grade Bond Fund, 0.74% of the average daily net assets of the Investment Grade Tax-Exempt Bond Fund, 0.65% of the average daily net assets of the Limited-Term Federal Mortgage Securities Fund, 0.65% of the average daily net assets of the Maryland Municipal Bond Fund, 1.15% of the average daily net assets of the Mid-Cap Equity Fund, 0.65% of the average daily net assets of the Prime Quality Money Market Fund, 0.65% of the average daily net assets of the Short-Term Bond Fund, 0.65% of the average daily net assets of the Short-Term U.S. Treasury Securities Fund, 1.15% of the average daily net assets of the Small Cap Growth Stock Fund, 1.15% of the average daily net assets of the Small Cap Value Equity Fund, 1.15% of the average daily net assets of the Tax Sensitive Growth Stock Fund, 0.55% of the average daily net assets of the Tax-Exempt Money Market Fund, 0.40% of the average daily net assets of the Virginia Tax-Free Money Market Fund, 0.65% of the average daily net assets of the U.S. Government Securities Money Market Fund, 0.65% of the average daily net assets of the U.S. Treasury Money Market Fund, 0.74% of the average daily net assets of the U.S. Government Securities Fund, 0.80% of the average daily net assets of the Value Income Stock Fund, 0.65% of the average daily net assets of the Virginia Municipal Bond Fund, 0.65% of the average daily net assets of the Virginia Intermediate Municipal Bond Fund, 0.25% of the average daily net assets of the Life Vision Aggressive Growth Fund, 0.25% of the average daily net assets of the Life Vision Growth and Income Fund, and 0.25% of the average daily net assets of the Life Vision Moderate Growth Fund. For the fiscal years ended May 31, 2000, 1999, and 1998, the Funds paid the following advisory fees:
------------------------------- -------------------------------------------- ---------------------------------------- Fees Paid Fees Waived or Reimbursed (Net After Waivers or Reimbursements) FUND ------------------------------ -------------------------------------------- ---------------------------------------- 2000 1999 1998 2000 1999 1998 ------------------------------ -------------------------------------------- ---------------------------------------- Balanced Fund $2,779,000 $2,546,000 $1,561,000 $335,000 $248,000 $226,000 ------------------------------------------------------------------------------------------------------------------------ Capital Appreciation Fund $21,951,000 $23,291,000 $17,608,000 $1,750,000 $1,878,000 $1,818,000 ------------------------------------------------------------------------------------------------------------------------ Core Equity Fund $857,000 * * $63,000 * * ------------------------------------------------------------------------------------------------------------------------ E-Commerce Opportunity Fund $469,000 * * $69,000 * * ------------------------------------------------------------------------------------------------------------------------ Florida Tax-Exempt Bond Fund $650,000 $804,000 $419,000 $130,000 $133,000 $121,000 ------------------------------------------------------------------------------------------------------------------------ Georgia Tax-Exempt Bond Fund $524,000 $575,000 $330,000 $113,000 $96,000 $94,000 ------------------------------------------------------------------------------------------------------------------------ Growth and Income Fund $7,269,000 $2,558,000 $4,337,000 $1,000 $0 $0 ------------------------------------------------------------------------------------------------------------------------ High Income Fund # $3,000 $60,000 $285,164 $3,000 $74,000 $0 ------------------------------------------------------------------------------------------------------------------------ International Equity Fund $6,533,000 $7,655,000 $7,210,000 $18,000 $308,000 $70,000 ------------------------------------------------------------------------------------------------------------------------ International Equity Index $1,359,000 $563,000 $543,000 $190,000 $70,000 $77,000 Fund ------------------------------------------------------------------------------------------------------------------------ Investment Grade Bond Fund $7,739,000 $6,499,000 $4,853,000 $798,000 $743,000 $794,000 ------------------------------------------------------------------------------------------------------------------------ Investment Grade Tax-Exempt $1,176,000 $1,381,000 $1,118,000 $109,000 $191,000 $208,000 Bond Fund ------------------------------------------------------------------------------------------------------------------------
B-39
----------------------------- --------------------------------------------- ---------------------------------------- Fees Paid Fees Waived or Reimbursed (Net After Waivers or Reimbursements) FUND ----------------------------- --------------------------------------------- ---------------------------------------- Limited-Term Federal $742,000 $955,000 $740,000 $162,000 $153,000 $159,000 Mortgage Securities Fund ------------------------------------------------------------------------------------------------------------------------ Maryland Municipal Bond Fund $186,000 $84,000 $50,000 $42,000 $49,000 $61,000 ------------------------------------------------------------------------------------------------------------------------ Mid-Cap Equity Fund $2,763,000 $3,717,000 $3,847,000 $191,000 $355,000 $422,000 ------------------------------------------------------------------------------------------------------------------------ Prime Quality Money Market $21,362,000 $17,530,000 $9,511,000 $6,310,000 $4,356,000 $2,700,000 Fund ------------------------------------------------------------------------------------------------------------------------ Short-Term Bond Fund $1,110,000 $90,000 $544,000 $185,000 $139,000 $165,000 ------------------------------------------------------------------------------------------------------------------------ Short-Term U.S. Treasury $347,000 $352,000 $151,000 $88,000 $62,000 $78,000 Securities Fund ------------------------------------------------------------------------------------------------------------------------ Small Cap Growth Stock Fund $3,384,000 $314,000 * $84,000 $79,000 * ------------------------------------------------------------------------------------------------------------------------ Small Cap Value Equity Fund $3,363,000 $3,701,000 $3,350,000 $76,000 $161,000 $329,000 ------------------------------------------------------------------------------------------------------------------------ Tax-Exempt Money Market Fund $3,098,000 $4,122,000 $2,219,000 $1,060,000 $1,057,000 $882,000 ------------------------------------------------------------------------------------------------------------------------ Tax Sensitive Growth Stock $6,855,000 $1,008,000 * $399,000 $124,000 * Fund ------------------------------------------------------------------------------------------------------------------------ U.S. Government Securities $670,000 $380,000 $187,000 $88,000 $58,000 $54,000 Fund ------------------------------------------------------------------------------------------------------------------------ U.S. Government Securities $2,564,000 $2,992,000 $1,984,000 $537,000 $607,000 $580,000 Money Market Fund ------------------------------------------------------------------------------------------------------------------------ U.S. Treasury Money Market $4,236,000 $1,486,000 $2,412,000 $855,000 $21,000 $0 Fund ------------------------------------------------------------------------------------------------------------------------ Value Income Stock Fund $13,106,000 $15,302,000 $15,826,000 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ Virginia Intermediate $1,551,000 $641,000 $1,248,000 $0 $0 $0 Municipal Bond Fund ------------------------------------------------------------------------------------------------------------------------ Virginia Municipal Bond Fund $280,000 $110,000 $167,000 $20,000 $20,000 $28,000 ------------------------------------------------------------------------------------------------------------------------ Virginia Tax-Free Money $1,184,000 $607,000 $963,000 $4,000 $3,000 $0 Market Fund ------------------------------------------------------------------------------------------------------------------------
* Not in operation during the period. + Prior to May 24, 1999, advisory fees were paid by the predecessor to this Fund pursuant to an agreement between the CrestFunds and Crestar Asset Management Company for the fiscal years ended November 30, 1999 and November 30, 1998, respectively. B-40 # Prior to March 28, 2000, advisory fees were paid by the predecessor to this Fund pursuant to an agreement between the ESC Strategic Funds and SunTrust Equitable Securities Corporation. The amounts listed for 1999 and 1998 represent the advisory fees paid to and/or waived by Equitable Securities Corporation for the fiscal years ending March 28, 2000 and March 31, 1999, respectively. For the fiscal years ended May 31, 2000, 1999, and 1998, the Life Vision Funds paid the following advisory fees:
FEES PAID FEES WAIVED OR REIMBURSED ----------------------------------------------- ---------------------------------------------- FUND 2000 1999 1998 2000 1999 1998 -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- Life Vision Aggressive Growth $ 11,000 $ 21,986 $ 39,508 $ 31,000 $13,352 $ 25,574 Fund+ -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- Life Vision Growth and Income $ 18,000 $ 25,358 $ 53,342 $ 40,000 $15,141 $ 32,109 Fund+ -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- Life Vision Moderate Growth $111,000 $114,314 $233,180 $102,000 $54,595 $119,987 Fund+ -------------------------------- -------------- --------------- ---------------- --------------- --------------- --------------
+Prior to May 24, 1999, advisory fees were paid by the predecessor to this Fund pursuant to an agreement between The CrestFunds and Crestar Asset Management Company for the fiscal years ended November 30, 1999 and November 30, 1998, respectively. The Adviser has agreed to waive a portion of its fees or reimburse expenses in order to limit Fund expenses. THE ADMINISTRATOR The Trust and SEI Investments Mutual Funds Services (the "Administrator") are parties an to administration agreement (the "Administration Agreement"). The Administration Agreement provides that the Administrator shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the matters to which the Administration Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Administrator in the performance of its duties or from reckless disregard by it of its duties and obligations thereunder. The Administration Agreement shall remain in effect for a period of five years after the date of the Agreement and shall continue in effect for successive periods of two years subject to review at least annually by the Trustees of the Trust unless terminated by either party on not less than 90 days' written notice to the other party. The Administrator, a Delaware business trust, has its principal business offices at Oaks, Pennsylvania 19456. SEI Investments Management Corporation ("SIMC"), a wholly owned subsidiary of SEI Investments Company ("SEI Investments"), is the owner of all beneficial interest in the Administrator. SEI Investments and its subsidiaries and affiliates, including the Administrator, are leading providers of funds evaluation services, trust accounting systems, and brokerage and information services to financial institutions, institutional investors, and money managers. The Administrator and its affiliates also serve as administrator or sub-administrator to the following other mutual funds including, but without limitation: The Achievement Funds Trust, The Advisors' Inner Circle Fund, Alpha Select Funds, Amerindo Funds Inc., The Arbor Fund, ARK Funds, Armada Funds, The Armada Advantage Fund, Bishop Street Funds, CNI Charter Funds, CUFUND, The Expedition Funds, First American Funds, Inc., First American Investment Funds, Inc., First American Strategy Funds, Inc., Friends Ivory Funds, HighMark Funds, Huntington Funds, Huntington VA Funds, The Nevis Fund, Inc., Oak Associates Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds, SEI Asset Allocation Trust, Pitcairn Funds, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI Insurance Products Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Variable Trust, TIP Funds, UAM Funds Trust, UAM Funds, Inc. and UAM Funds, Inc. II. B-41 Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Funds, STI Classic Variable Trust, TIP Funds, UAM Funds Trust, UAM Funds, Inc. and UAM Funds, Inc. II. For its administrative services, the Administrator is entitled to a fee, which is calculated daily and paid monthly, at an annual rate of: .12% of the first $1 billion of average aggregate net assets, .09% on the next $4 billion of average aggregate net assets, .07% of the next $3 billion of average aggregate net assets, .065% of the next $2 billion of average aggregate net assets, and .06% thereafter. For the fiscal years ended May 31, 2000, 1999, and 1998, the Funds paid the following administration fees:
------------------------------ --------------------------------------------- ------------------------------------ Fees Paid Fees Waived FUND ------------------------------ ---------------------------------------------- ------------------------------------- 2000 1999 1998 2000 1999 1998 ----------------------------- ---------------------------------------------- ------------------------------------- Balanced Fund $232,000 $208,000 $136,000 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ Capital Appreciation Fund $1,458,000 $1,575,000 $1,218,000 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ Core Equity Fund $59,000 * * $0 * * ------------------------------------------------------------------------------------------------------------------------ E-Commerce Opportunity Fund $35,000 * * $0 * * ------------------------------------------------------------------------------------------------------------------------ Florida Tax-Exempt Bond Fund $85,000 $96,000 $61,000 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ Georgia Tax-Exempt Bond Fund $69,000 $69,000 $44,000 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ Growth and Income Fund $572,000 $493,000 $950,000 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ High Income Fund $0 $9,000 $42,775 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ Investment Grade Bond Fund $817,000 $683,000 $550,000 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ Investment Grade Tax-Exempt $123,000 $146,000 $128,000 $0 $0 $0 Bond Fund ------------------------------------------------------------------------------------------------------------------------ International Equity Fund $371,000 $477,000 $416,000 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ International Equity Index $122,000 $49,000 $43,000 $0 $0 $0 Fund ------------------------------------------------------------------------------------------------------------------------ Life Vision Aggressive $18,000 $20,000 N/A $0 $19,000 N/A Growth Fund ------------------------------------------------------------------------------------------------------------------------ Life Vision Growth and $17,000 $20,000 N/A $0 $18,000 N/A Income Fund ------------------------------------------------------------------------------------------------------------------------ Life Vision Moderate Growth $56,000 $20,000 N/A $0 $13,000 N/A Fund ------------------------------------------------------------------------------------------------------------------------ Limited-Term Federal $98,000 $115,000 $99,000 $0 $0 $0 Mortgage Securities Fund ------------------------------------------------------------------------------------------------------------------------ Maryland Municipal Bond Fund $25,000 $33,000 $26,000 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ Mid-Cap Equity Fund $181,000 $253,000 $267,000 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ Prime Quality Money Market $3,012,000 $2,092,000 $785,000 $0 $250,000 $571,000 Fund ------------------------------------------------------------------------------------------------------------------------ Short-Term Bond Fund $141,000 $106,000 $80,000 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ Short-Term U.S. Treasury $47,000 $42,000 $26,000 $0 $0 $0 Securities Fund ------------------------------------------------------------------------------------------------------------------------ Small Cap Value Equity Fund $212,000 $251,000 $230,000 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------
B-42
------------------------------ --------------------------------------------- ------------------------------------ Fees Paid Fees Waived FUND ------------------------------ ---------------------------------------------- ------------------------------------- 2000 1999 1998 2000 1999 1998 ----------------------------- ---------------------------------------------- ------------------------------------- Small Cap Growth Stock Fund $218,000 $21,000 * $0 $0 * ------------------------------------------------------------------------------------------------------------------------ Tax-Exempt Money Market Fund $535,000 $583,000 $398,000 $0 $0 $10,000 ------------------------------------------------------------------------------------------------------------------------ Tax Sensitive Growth Stock $446,000 $67,000 * $0 $0 * Fund ------------------------------------------------------------------------------------------------------------------------ U.S. Government Securities $73,000 $40,000 $24,000 $0 $0 $0 Fund ------------------------------------------------------------------------------------------------------------------------ U.S. Government Securities $337,000 $359,000 $236,000 $0 $3,000 $47,000 Money Market Fund ------------------------------------------------------------------------------------------------------------------------ U.S. Treasury Money Market $579,000 $550,000 $927,000 $0 $0 $0 Fund ------------------------------------------------------------------------------------------------------------------------ Value Income Stock Fund $1,154,000 $1,498,000 $1,428,000 $0 $0 $0 ------------------------------------------------------------------------------------------------------------------------ Virginia Intermediate $170,000 $185,000 $375,000 $0 $0 $0 Municipal Bond ------------------------------------------------------------------------------------------------------------------------ Virginia Municipal Bond Fund $36,000 $27,000 $46,000 $0 $20,000 $36,000 ------------------------------------------------------------------------------------------------------------------------ Virginia Tax-Free Money $212,000 $222,000 $366,000 $0 $0 $0 Market Fund ------------------------------------------------------------------------------------------------------------------------
* Not in operation during the period. + Prior to May 24, 1999, administration fees were paid by the predecessor to this Fund pursuant to an agreement between the CrestFunds and the Administrator for the fiscal years ended November 30, 1999 and November 30, 1998, respectively. # Prior to March 28, 2000, administration fees were paid by the predecessor to this Fund pursuant to an agreement between the ESC Strategic Funds, Inc. and BISYS Fund Services. The amounts listed for 1999 and 1998 represent the administration fees paid to and/or waived by Equitable Securities Corporation for the fiscal years ending March 28, 2000 and March 31, 1999, respectively. THE DISTRIBUTOR SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary of SEI Investments, and the Trust have entered into a distribution agreement (the "Distribution Agreement") dated May 29, 1992. Under the Distribution Agreement, the Distributor must use all reasonable efforts, consistent with its other business, in connection with the continuous offering of Shares of the Trust. The Distributor will receive no compensation for distribution of Trust Shares. In addition, the Investor Shares of the Funds have a distribution plan (the "Investor Plan"), and the Flex Shares of the Funds have a distribution and service plan (the "Flex Plan"). The Distribution Agreement is renewable annually and may be terminated by the Distributor, the disinterested Trustees, or by a majority vote of the outstanding securities of the Trust upon not more than 60 days' written notice by either party. B-43 For the fiscal years ended May 31, 2000, 1999, and 1998, the aggregate sales charges payable to the Distributor with respect to the Investor Shares of the Funds were as follows:
AGGREGATE SALES CHARGE PAYABLE TO AMOUNT RETAINED BY DISTRIBUTOR DISTRIBUTOR ----------------------------------------------- ---------------------------------------------- FUND 2000 1999 1998 2000 1999 1998 -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- Balanced Fund $ 36,000 $ 32,000 $ 48,373 $ 17,000 $ 7,780 $ 0 -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- Capital Appreciation Fund $1,984,000 $1,916,000 $560,435 $298,000 $127,525 $ 312 -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- Florida Tax-Exempt Bond Fund $ 6,000 $ 7,000 $ 7,296 $ 6,000 $ 2,173 $ 0 -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- Georgia Tax-Exempt Bond Fund $ 6,000 $ 6,000 $ 7,871 $ 6,000 $ 6,260 $ 0 -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- Growth and Income Fund + $ 100,000 $ 26,000 $ 50,000 $ 50,000 $ 16,000 $ 50,000 -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- International Equity Fund $ 41,000 $ 51,756 $ 93,755 $ 13,000 $ 8,000 $ 16 -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- International Equity Index Fund $ 19,000 $ 22,000 $ 5,285 $ 12,000 $ 5,000 $ 16 -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- Investment Grade Bond Fund $ 129,000 $ 115,000 $ 54,658 $ 38,000 $ 36,642 $ 0 -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- Investment Grade Tax-Exempt $ 96,000 $ 6,000 $ 10,402 $ 22,000 $ 11,683 $ 36 Bond Fund -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- Limited-Term Federal Mortgage $ 4,000 $ 4,000 $ 485 $ 3,000 $ 1,486 $ 0 Securities Fund -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- Mid-Cap Equity Fund $ 72,000 $ 90,000 $ 93,073 $ 19,000 $ 6,975 $ 26 -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- Prime Quality Money Market $1,973,000 $1,157,000 $716,000 $320,000 $188,000 $251,000 Fund -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- Small Cap Growth Stock Fund $ 56,000 $ 97,000 $ 57,613 $ 24,000 $ 6,801 $ 0 -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- Short-Term Bond Fund $ 4,000 $ 5,000 $ 1,056 $ 4,000 $ 4,278 $ 10 -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- Short-Term U.S. Treasury $ 5,000 $ 4,000 $ 547 $ 5,000 $ 5,266 $ 4 Securities Fund -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- Tax-Exempt Money Market Fund $ 194,000 $ 214,000 $190,000 $ 49,000 $ 58,000 $ 4,000 -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- U.S. Government Securities Fund $ 8,000 $ 11,000 $ 23,873 $ 8,000 $ 1,771 $ 0 -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- U.S. Government Securities $ 108,000 $ 104,000 $ 97,000 $ 31,000 $ 49,000 $ 27,000 Money Market Fund -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- Value Income Stock Fund $ 504,000 $ 638,471 $576,856 $ 2,000 $ 0 $ 361 -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- Virginia Intermediate Municipal $ 11,000 $ 6,000 $ 13,000 $ 11,000 $ 5,894 $ 13,000 Bond Fund + -------------------------------- -------------- --------------- ---------------- --------------- --------------- -------------- Virginia Tax-Free Money Market $ 51,000 $ 14,000 $ 33,000 $ 25,000 $ 14,000 $ 33,000 Fund -------------------------------- -------------- --------------- ---------------- --------------- --------------- --------------
+ Prior to May 24, 1999, sales charges were paid by the predecessor to this Fund pursuant to an agreement between the CrestFunds and the Distributor for the fiscal years ended November 30, 1999 and November 30, 1998, respectively. B-44 The following table shows the amount of front-end sales charge that is paid to Investment Consultants (Dealers) as a percentage of the offering price of those Shares:
DEALERS' REALLOWANCE AS A PERCENTAGE OF OFFERING PRICE -------------------------------------------------------------------------- $100,000 $250,000 Less than but less than but less than $1,000,000 FUND(S) $100,000 $250,000 $1,000,000 and over ----------------------------------------------------- ----------------- ----------------- ------------------ ---------------- Balanced, Capital Appreciation, Core Equity, E- 3.75% 3.25% 2.5% 1.50% Commerce Opportunity, Florida Tax-Exempt Bond, Georgia Tax-Exempt Bond, Growth and Income Fund, International Equity, International Equity Index, Investment Grade Bond, Investment Grade Tax-Exempt Bond, Mid-Cap Equity, Small Cap Value Equity, Small Cap Growth Stock, U.S. Government Securities, Value Income Stock, and Virginia Intermediate Municipal Bond Funds ----------------------------------------------------- ----------------- ----------------- ------------------ ---------------- Limited-Term Federal Mortgage Securities Fund 2.5% 1.75% 1.25% 0% ----------------------------------------------------- ----------------- ----------------- ------------------ ---------------- Short-Term Bond Fund 2.00% 1.50% 1.00% 0% ----------------------------------------------------- ----------------- ----------------- ------------------ ---------------- Short-Term U.S. Treasury Securities Fund 1.00% 0.79% 0.5% 0% ----------------------------------------------------- ----------------- ----------------- ------------------ ---------------- For the fiscal years ended May 31, 2000, 1999 and 1998, the aggregate sales charges payable to the Distributor with respect to the Flex Shares of the Funds were as follows:
--------------------------------- -------------------------------------------------- -------------------------------------- AGGREGATE SALES CHARGE PAYABLE TO AMOUNT RETAINED BY DISTRIBUTOR FUND DISTRIBUTOR -------------------------------- -------------------------------------------------- -------------------------------------- 2000 1999 1998 2000 1999 1998 -------------------------------------------------------------------------------------------------------------------------------- Balanced Fund $ 765,000 $ 441,000 $ 11,758 $ 38,000 $ 14,028 $ 0 -------------------------------------------------------------------------------------------------------------------------------- Capital Appreciation Fund 1,528,000 1,276,420 60,500 45,000 0 0 -------------------------------------------------------------------------------------------------------------------------------- Core Equity Fund 11,000 * * 3,000 * * -------------------------------------------------------------------------------------------------------------------------------- E-Commerce Opportunity Fund 52,000 * * 1,000 * * -------------------------------------------------------------------------------------------------------------------------------- Florida Tax-Exempt Bond Fund 127,000 115,000 2,556 53,000 47,200 0 -------------------------------------------------------------------------------------------------------------------------------- Georgia Tax-Exempt Bond Fund 113,000 100,000 3,920 47,000 41,114 0 -------------------------------------------------------------------------------------------------------------------------------- Growth and Income Fund 497,000 136,000 203,000 126,000 21,000 51,000 -------------------------------------------------------------------------------------------------------------------------------- High Income Fund # 4,000 N/A N/A 2,000 N/A N/A -------------------------------------------------------------------------------------------------------------------------------- International Equity Fund 146,000 193,720 23,393 28,000 51,229 0 -------------------------------------------------------------------------------------------------------------------------------- International Equity Index Fund 32,000 12,000 12,866 12,000 4,000 4,378 -------------------------------------------------------------------------------------------------------------------------------- Investment Grade Bond Fund 249,000 183,000 10,040 65,000 47,023 0 -------------------------------------------------------------------------------------------------------------------------------- Investment Grade Tax-Exempt 163,000 107,000 2,900 38,000 29,696 0 Bond Fund -------------------------------------------------------------------------------------------------------------------------------- Limited-Term Federal Mortgage 22,000 18,000 2,805 22,000 17,676 0 Securities Fund -------------------------------------------------------------------------------------------------------------------------------- Maryland Municipal Bond Fund 75,000 24,464 0 18,000 0 1,000 -------------------------------------------------------------------------------------------------------------------------------- Mid-Cap Equity Fund 139,000 275,000 8,666 23,000 25,502 0 -------------------------------------------------------------------------------------------------------------------------------- * Not in operation during the period.
B-45
--------------------------------- -------------------------------------------------- -------------------------------------- AGGREGATE SALES CHARGE PAYABLE TO AMOUNT RETAINED BY DISTRIBUTOR FUND DISTRIBUTOR -------------------------------- -------------------------------------------------- -------------------------------------- 2000 1999 1998 2000 1999 1998 -------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------- Prime Quality MM Fund $ 14,000 N/A N/A 6,000 N/A N/A -------------------------------------------------------------------------------------------------------------------------------- Short-Term Bond Fund 21,000 $ 21,000 $ 1,395 $21,000 $20,743 $ 0 -------------------------------------------------------------------------------------------------------------------------------- Short-Term U.S. Treasury 56,000 27,000 2,377 47,000 26,536 0 Securities Fund -------------------------------------------------------------------------------------------------------------------------------- Small Cap Value Equity Fund 139,000 275,000 0 36,000 63,824 0 -------------------------------------------------------------------------------------------------------------------------------- Small Cap Growth Stock Fund 112,000 12,000 * 17,000 8,257 * -------------------------------------------------------------------------------------------------------------------------------- Tax Sensitive Growth Stock Fund 1,867,000 144,000 * 71,000 8,880 * -------------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities Fund 104,000 54,000 2,014 48,000 21,800 0 -------------------------------------------------------------------------------------------------------------------------------- Value Income Stock Fund 1,321,000 1,171,000 112,674 23,000 9,021 0 -------------------------------------------------------------------------------------------------------------------------------- Virginia Municipal Bond Fund 62,000 25,146 26,000 26,000 0 16,061 -------------------------------------------------------------------------------------------------------------------------------- * Not in operation during the period.
* Not in operation during the period. + Prior to May 24, 1999, sales charges fees were paid by the predecessor to this Fund pursuant to an agreement between the CrestFunds and the Distributor for the fiscal years ended November 30, 1999, November 30, 1998, and November 30, 1997, respectively. # Prior to March 28, 2000 sales charges were paid by the predecessor to this Fund pursuant to an agreement between the ESC Strategic Funds, Inc. and BISYS Fund Services. The amounts listed for 1999 and 1998 represent the sales charges paid to and/or retained by BISYS Fund Services for the fiscal years ending March 28, 2000 and March 31, 1999, respectively. INVESTOR SHARES AND FLEX SHARES DISTRIBUTION PLANS The Distribution Agreement and the Investor Plan adopted by the Trust provide that Investor Shares of the Fund will pay the Distributor fees of up to the following respective levels: .28% of the average daily net assets of the Balanced Fund; .68% of the average daily net assets of the Capital Appreciation Fund;.25% of the average daily net assets of the Growth and Income Fund, .33% of the average daily net assets of the International Equity Fund; .38% of the average daily net assets of the International Equity Index Fund; .43% of the average daily net assets of the Mid-Cap Equity Fund; .33% of the average daily net assets of the Value Income Stock Fund; .18% of the average daily net assets of the Florida Tax-Exempt Bond Fund; .18% of the average daily net assets of the Georgia Tax-Exempt Bond Fund; .43% of the average daily net assets of the Investment Grade Bond Fund; .43% of the average daily net assets of the Investment Grade Tax-Exempt Bond Fund; .23% of the average daily net assets of the Limited-Term Federal Mortgage Securities Fund; .23% of the average daily net assets of the Short-Term Bond Fund; .18% of the average daily net assets of the Short-Term U.S. Treasury Securities Fund; .38% of the average daily net assets of the U.S. Government Securities Fund; .15% of the Virginia Intermediate Municipal Bond Fund, .20% of the average daily net assets of the Prime Quality Money Market Fund; .15% of the average daily net assets of the Tax-Exempt Money Market Fund; .40% of the average daily net assets of the Virginia Tax-Free Money Market Fund and .17% of the average daily net assets of the U.S. Government Securities Money Market Fund. B-46 The Distribution Agreement and the Flex Plan adopted by the Trust provide that each Flex Shares Fund will pay the Distributor a fee of up to .75% of the average daily net assets of that Fund. The Distributor can use these fees to compensate broker-dealers and service providers, including SunTrust and its affiliates, which provide administrative and/or distribution services to Investor Shares or Flex Shares Shareholders or their customers who beneficially own Investor Shares or Flex Shares. In addition, Flex Shares are subject to a service fee of up to .25% of the average daily net assets of the Flex Shares of each Fund. This service fee will be used for services provided and expenses incurred in maintaining shareholder accounts, responding to shareholder inquiries and providing information on their investments. Services for which broker-dealers and service providers may be compensated include establishing and maintaining customer accounts and records; aggregating and processing purchase and redemption requests from customers; placing net purchase and redemption orders with the Distributor; automatically investing customer account cash balances; providing periodic statements to customers; arranging for wires; answering customer inquiries concerning their investments; assisting customers in changing dividend options, account designations, and addresses; performing sub-accounting functions; processing dividend payments from the Trust on behalf of customers; and forwarding Shareholder communications from the Trust (such as proxies, Shareholder reports, and dividend distribution and tax notices) to these customers with respect to investments in the Trust. Certain state securities laws may require those financial institutions providing such distribution services to register as dealers pursuant to state law. Although banking laws and regulations prohibit banks from distributing shares of open-end investment companies such as the Trust, according to an opinion issued to the staff of the SEC by the Office of the Comptroller of the Currency, financial institutions are not prohibited from acting in other capacities for investment companies, such as providing shareholder services. Should future legislative, judicial, or administrative action prohibit or restrict the activities of financial institutions in connection with providing shareholder services, the Trust may be required to alter materially or discontinue its arrangements with such financial institutions. The Trust has adopted the Investor Plan and the Flex Plan in each case in accordance with the provisions of Rule 12b-1 under the 1940 Act, which Rule regulates circumstances under which an investment company may directly or indirectly bear expenses relating to the distribution of its shares. Continuance of the Investor Plan and the Flex Plan must be approved annually by a majority of the Trustees of the Trust and by a majority of the disinterested Trustees. The Investor Plan and the Flex Plan require that quarterly written reports of amounts spent under the Investor Plan and the Flex Plan, respectively, and the purposes of such expenditures be furnished to and reviewed by the Trustees. The Investor Plan and the Flex Plan may not be amended to increase materially the amount which may be spent thereunder without approval by a majority of the outstanding shares of the affected class of shares of the Trust. All material amendments of the Plans will require approval by a majority of the Trustees of the Trust and of the disinterested Trustees. There is no sales charge on purchases of Flex Shares, but Flex Shares are subject to a contingent deferred sales charge if they are redeemed within one year of purchase. Pursuant to the Distribution Agreement and the Flex Plan, Flex Shares are subject to an ongoing distribution and service fee calculated on each of the Bond Funds', Tax-Exempt Bond Funds', Equity Funds' and Balanced Fund's aggregate average daily net assets attributable to its Flex Shares. For the fiscal years ended May 31, 2000, 1999, and 1998, the Funds paid the following amounts pursuant to the Investor Plan:
DISTRIBUTION FEES - AMOUNT PAID -------------------------------------------------------------- FUND 2000 1999 1998 ------------------------------- ----------------- ---------------- -------------- Balanced Fund $ 19,000 $ 25,000 $ 5,000 ------------------------------- ----------------- ---------------- -------------- Capital Appreciation Fund $1,686,000 $1,789,000 $1,442,000 ------------------------------- ----------------- ---------------- --------------
B-47
DISTRIBUTION FEES - AMOUNT PAID -------------------------------------------------------------- FUND 2000 1999 1998 --------------------------------------------------- ----------------- ---------------- -------------- Core Equity Fund $ 0 * * --------------------------------------------------- ----------------- ---------------- -------------- E-Commerce Opportunity Fund $ 0 * * --------------------------------------------------- ----------------- ---------------- -------------- Florida Tax-Exempt Bond Fund $ 0 $ 5,000 $ 0 --------------------------------------------------- ----------------- ---------------- -------------- Georgia Tax-Exempt Bond Fund $ 0 $ 0 $ 0 --------------------------------------------------- ----------------- ---------------- -------------- Growth and Income Fund $ 50,000 $ 10,000 $ 0 --------------------------------------------------- ----------------- ---------------- -------------- International Equity Fund $ 28,000 $ 44,000 $ 34,000 --------------------------------------------------- ----------------- ---------------- -------------- International Equity Index Fund $ 7,000 $ 17,000 $ 8,000 --------------------------------------------------- ----------------- ---------------- -------------- Investment Grade Bond Fund $ 91,000 $106,000 $ 97,000 --------------------------------------------------- ----------------- ---------------- -------------- Investment Grade Tax-Exempt Bond Fund $ 74,000 $103,000 $ 77,000 --------------------------------------------------- ----------------- ---------------- -------------- Limited-Term Federal Mortgage Securities Fund $ 1,000 $ 5,000 $ 1,000 --------------------------------------------------- ----------------- ---------------- -------------- Mid-Cap Equity Fund $ 53,000 $ 83,000 $ 71,000 --------------------------------------------------- ----------------- ---------------- -------------- Prime Quality Money Market Fund $1,653,000 $969,000 $465,000 --------------------------------------------------- ----------------- ---------------- -------------- Short-Term Bond Fund $ 0 $ 0 $ 0 --------------------------------------------------- ----------------- ---------------- -------------- Short-Term U.S. Treasury Securities Fund $ 0 $ 0 $ 0 --------------------------------------------------- ----------------- ---------------- -------------- Small Cap Growth Stock $ 32,000 * * --------------------------------------------------- ----------------- ---------------- -------------- Tax-Exempt Money Market Fund $ 145,000 $156,000 $126,000 --------------------------------------------------- ----------------- ---------------- -------------- U.S. Government Securities Fund $ 0 $ 9,000 $ 1,000 --------------------------------------------------- ----------------- ---------------- -------------- U.S. Government Securities Money Market Fund $ 77,000 $ 55,000 $ 70,000 --------------------------------------------------- ----------------- ---------------- -------------- Value Income Stock Fund $ 502,000 $638,000 $631,000 --------------------------------------------------- ----------------- ---------------- -------------- Virginia Intermediate Municipal Bond Fund $ 0 $ 0 $ 0 --------------------------------------------------- ----------------- ---------------- -------------- Virginia Tax-Free Money Market Fund $ 26,000 $ 14,000 $ 0 --------------------------------------------------- ----------------- ---------------- -------------- For the fiscal years ended May 31, 2000, 1999 and 1998, the Funds paid the following amounts pursuant to the Flex Plan:
DISTRIBUTION FEES - AMOUNT PAID -------------------------------------------------------------- FUND 2000 1999 1998 ------------------------------- ----------------- ---------------- -------------- Balanced Fund $ 727,000 $ 427,000 $126,000 ------------------------------- ----------------- ---------------- -------------- Capital Appreciation Fund $1,483,000 $1,276,000 $673,000 ------------------------------- ----------------- ---------------- -------------- Core Equity Fund $ 8,000 * * ------------------------------- ----------------- ---------------- --------------
B-48
DISTRIBUTION FEES - AMOUNT PAID -------------------------------------------------------------- FUND 2000 1999 1998 ---------------------------------------------- ----------------- ---------------- -------------- E-Commerce Opportunity Fund $ 51,000 * * ---------------------------------------------- ----------------- ---------------- -------------- Florida Tax-Exempt Bond Fund $ 74,000 $ 67,000 $ 30,000 ---------------------------------------------- ----------------- ---------------- -------------- Georgia Tax-Exempt Bond Fund $ 66,000 $ 58,000 $ 30,000 ---------------------------------------------- ----------------- ---------------- -------------- Growth and Income Fund $ 371,000 $ 115,000 $ 152,000 ---------------------------------------------- ----------------- ---------------- -------------- High Income Fund $ 2,000 N/A N/A ---------------------------------------------- ----------------- ---------------- -------------- International Equity Fund $ 118,000 $ 143,000 $ 149,000 ---------------------------------------------- ----------------- ---------------- -------------- International Equity Index Fund $ 20,000 $ 8,000 $ 2,000 ---------------------------------------------- ----------------- ---------------- -------------- Investment Grade Bond Fund $ 184,000 $ 136,000 $ 56,000 ---------------------------------------------- ----------------- ---------------- -------------- Investment Grade Tax-Exempt Bond Fund $ 125,000 $ 77,000 $ 39,000 ---------------------------------------------- ----------------- ---------------- -------------- Limited-Term Federal Mortgage Securities Fund $ 0 $ 0 $ 1,000 ---------------------------------------------- ----------------- ---------------- -------------- Maryland Municipal Bond Fund $ 57,000 $ 24,000 $ 17,000 ---------------------------------------------- ----------------- ---------------- -------------- Mid-Cap Equity Fund $ 127,000 $ 147,000 $ 124,000 ---------------------------------------------- ----------------- ---------------- -------------- Prime Quality Money Market Fund $ 8,000 * * ---------------------------------------------- ----------------- ---------------- -------------- Short-Term Bond Fund $ 0 $ 0 $ 0 ---------------------------------------------- ----------------- ---------------- -------------- Short-Term U.S. Treasury Securities Fund $ 9,000 $ 0 $ 0 ---------------------------------------------- ----------------- ---------------- -------------- Small Cap Growth Stock Fund $ 95,000 $ 4,000 * ---------------------------------------------- ----------------- ---------------- -------------- Small Cap Value Equity Fund $ 103,000 $ 211,000 $ 156,000 ---------------------------------------------- ----------------- ---------------- -------------- Tax Sensitive Growth Stock Fund $1,796,000 $ 135,000 * ---------------------------------------------- ----------------- ---------------- -------------- U.S. Government Securities Fund $ 56,000 $ 32,000 $ 17,000 ---------------------------------------------- ----------------- ---------------- -------------- Value Income Stock Fund $1,298,000 $1,662,000 $1,234,000 ---------------------------------------------- ----------------- ---------------- -------------- Virginia Intermediate Municipal Bond Fund $ 36,000 $ 25,000 $ 25,000 ---------------------------------------------- ----------------- ---------------- --------------
* Not in operation during the period. THE TRANSFER AGENT Federated Services Company, Federated Investors Tower, Pittsburgh, PA 15222-3779 serves as the Trust's transfer agent. THE CUSTODIAN SunTrust Bank, 303 Peachtree Street N.E., 14th Floor, Atlanta, GA 30308 serves as the custodian for all of the Funds except for the International Equity and International Equity Index Funds. The Bank of New York, B-49 One Wall Street, New York, NY 10286 serves as custodian for the International Equity and International Equity Index Funds. CODES OF ETHICS The Board of Trustees of the Trust has adopted a Code of Ethics pursuant to Rule 17j-1 under the Investment Company Act of 1940. In addition, the Adviser and Distributor have adopted Codes of Ethics pursuant to Rule 17j-1. These Codes of Ethics (each a "Code" and together the "Codes") apply to the personal investing activities of trustees, officers and certain employees ("access persons"). Rule 17j-1 and the Codes are designed to prevent unlawful practices in connection with the purchase or sale of securities by access persons. Under each Code, access persons are permitted to engage in personal securities transactions, but are required to report their personal securities transactions for monitoring purposes. In addition, certain access persons of the Trust and the Adviser are prohibited from acquiring beneficial ownership of securities offered in connection with initial public offerings. Certain access persons of the Adviser are further prohibited from acquiring beneficial ownership of securities offered in connection with a limited offering. The Distributor's Code requires certain access persons to obtain approval before investing in initial public offerings and limited offerings. Copies of these Code of Ethics are on file with the Securities and Exchange Commission, and are available to the public. INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen LLP serves as independent public accountants for the Trust. LEGAL COUNSEL Morgan, Lewis & Bockius LLP serves as legal counsel to the Trust. TRUSTEES AND OFFICERS OF THE TRUST The Trustees supervise the management and affairs of the Trust. The Trustees have approved contracts with certain companies that provide the Trust with essential management services. The Trustees and Executive Officers of the Trust, their respective dates of birth, and their principal occupations for the last five years are set forth below. Each may have held other positions with the named companies during that period. Unless otherwise noted, the business address of each Trustee and each Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain officers of the Trust also serve as officers to one or more mutual funds for which SEI Investments Company or its affiliates act as investment manager, administrator or distributor. The Trustees supervise the management and affairs of the Trust. The Trustees have approved contracts with certain companies that provide the Trust with essential management services. The Trustees and Executive Officers of the Trust, their respective dates of birth, and their principal occupations for the last five years are set forth below. Each may have held other positions with the named companies during that period. Unless otherwise noted, the business address of each Trustee and each Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain officers of the Trust also serve as officers to one or more mutual funds for which SEI Investments Company or its affiliates act as investment manager, administrator or distributor. THOMAS GALLAGHER (11/25/47) - Trustee* - President, Genuine Parts Company Wholesale Distribution, 1970 present; Director, National Service Industries; Director, Oxford Industries. DANIEL S. GOODRUM (7/11/26) - Trustee* - Chairman & CEO, SunBank/South Florida, N.A., 1985-1991; Chairman Audit Committee and Director, Holy Cross Hospital; Executive Committee Member and Director, Honda Classic Foundation; Director, Broward Community College Foundation. B-50 WILTON LOONEY (4/18/19) - Trustee* - President of Genuine Parts Company, 1961-1964; Chairman of the Board, 1964-1990; Honorary Chairman of the Board, 1990 to present. Director, Rollins, Inc.; Director, RPC Energy Services, Inc. CHAMPNEY A. MCNAIR (10/30/24) - Trustee* - Director and Chairman of Investment Committee and member of Executive Committee, Cotton States Life and Health Insurance Company; Director and Chairman of Investment Committee and member of Executive Committee, Cotton States Mutual Insurance Company; Chairman, Trust Company of Georgia Advisory Council. F. WENDELL GOOCH (12/3/32) - Trustee - Retired. President, Orange County Publishing Co., Inc., 1981-1997, publisher of the Paoli News and the Paoli Republican and Editor of the Paoli Republican, 1981-1997, President, H & W Distribution, Inc., 1984-1997. Current Trustee on the Board of Trustees for the SEI Family of Funds and The Capitol Mutual Funds. Executive Vice President, Trust Department, Harris Trust and Savings Bank and Chairman of the Board of Directors of The Harris Trust Company of Arizona before January 1981. T. GORDY GERMANY (11/28/25) -Trustee - Retired President, Chairman, and CEO of Crawford & Company; held these positions, 1973-1987. Member of the Board of Directors, 1970-1990, joined company in 1948; spent entire career at Crawford, currently serves on Boards of Norrell Corporation and Mercy Health Services, the latter being the holding company of St. Joseph's Hospitals. JAMES O. ROBBINS (7/4/42) - Trustee - President and Chief Executive Officer, Cox Communications, Inc., 1983 - present; Director, NCR; Director, Cox Communications. DR. BERNARD F. SLIGER (9/30/24) - Trustee - Director, Stavros Center for Economic Education, Florida State University, 1991-present. President of Florida State University, 1976-91; previous four years EVP and Chief Academic Officer. During educational career, taught at Florida State, Michigan State, Louisiana State and Southern University. Spent 19 years as faculty member and administrator at Louisiana State University and served as Head of Economics Department, member and Chairman of the Graduate Council, Dean of Academic Affairs and Vice Chancellor. Member of Board of Directors of Federal Reserve Bank of Atlanta, 1983-1988. JONATHAN T. WALTON (3/28/30) - Trustee - Retired. Executive Vice President, NBD Bank, N.A. and NBD Bancorp, October 1956 to March 1995. Trustee, W.K. Kellogg Trust. MARK NAGLE (10/20/59) - President - President of the Administrator and Senior Vice President of SEI Investments Mutual Funds Services Operations Group since 1998. Vice President of the Administrator and Vice President of Fund Accounting and Administration of SEI Investments Mutual Funds Services, 1996-1998. Vice President of the Distributor since December 1997. Senior Vice President, Fund Administration, BISYS Fund Services, September 1995-November 1996. Senior Vice President and Site Manager, Fidelity Investments 1981- September 1995. JENNIFER E. SPRATLEY, CPA (2/13/69) - Treasurer and Chief Financial Officer - Director, SEI Funds Accounting since November 1999. Audit Manager at Ernst & Young LLP, 1991-1999. JAMES R. FOGGO (02/14/66) - Vice President and Assistant Secretary - Vice President and Assistant Secretary of SEI Investments since 1998. Vice President and Assistant Secretary of the Administrator and the Distributor since May 1999. Associate, Paul Weiss, Rifkind, Wharton & Garrison (law firm), 1998. Associate, Baker & McKenzie (law firm), 1995-1998. Associate, Battle Fowler L.L.P. (law firm), 1993-1995. LYDIA A. GAVALIS (6/5/64) - Vice President and Assistant Secretary - Vice President and Assistant Secretary of the Administrator and the Distributor since 1998. Assistant General Counsel and Director of Arbitration, Philadelphia Stock Exchange, 1989-1998. B-51 TIMOTHY D. BARTO (3/28/68) - Vice President and Assistant Secretary - Employed by SEI Investments since October 1999. Vice President and Assistant Secretary of the Administrator and Distributor since December 1999. Associate at Dechert Price & Rhoads 1997-1999. Associate at Richter, Miller & Finn 1994-1997. TODD B. CIPPERMAN (2/14/66) - Vice President and Assistant Secretary - Senior Vice President and General Cousel of SEI Investments since 2000. Senior Vice President, General Counsel and Secretary of the Administrator and the Distributor since 2000. Vice President and Assistant Secretary of SEI Investments, the Administator and the Distributor, 1995-2000. Associate, Dewey Ballantine (law firm), 1994-1995. Associate, Winston & Strawn (law firm), 1991-1994. CHRISTINE M. MCCULLOUGH (12/2/60) - Vice President and Assistant Secretary - Employed by SEI Investments since November 1, 1999. Vice President and Assistant Secretary of the Administrator and the Distributor since December 1999. Associate at White and Williams LLP, 1991-1999. Associate at Montgomery, McCracken, Walker & Rhoads, 1990-1991. RICHARD W. GRANT (10/25/45) - Secretary - 1701 Market Street, Philadelphia, Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), counsel to the Trust, Administrator and Distributor, since 1989. JOHN H. GRADY, JR. (6/1/61) - Assistant Secretary -1701 Market Street, Philadelphia, Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), Associate at Morgan, Lewis & Bockius LLP (law firm) since 1993. Counsel to the Trust, Administrator and Distributor since 1995. ----------------------------- * Messrs. Gallagher, Goodrum, Looney and McNair may be deemed to be "interested persons" of the Trust as defined in the Investment Company Act of 1940. The Trustees and Officers of the Trust own, in the aggregate, less than 1% of the outstanding shares of the Trust. For the fiscal year ended May 31, 2000, the Trust paid the following amounts to Trustees and Officers of the Trust:
AGGREGATE PENSION OR ESTIMATED TOTAL COMPENSATION NAME OF PERSON, COMPENSATION RETIREMENT BENEFITS ANNUAL FROM FUND AND FUND POSITION FROM FUND ACCRUED AS PART OF BENEFITS UPON COMPLEX PAID TO FUND EXPENSES RETIREMENT TRUSTEES ============================ ====================== =========================== =================== ============================ Thomas Gallagher, $ 6,000 N/A N/A $6,500 for service on Trustee# two boards ---------------------------- ---------------------- --------------------------- ------------------- ---------------------------- Daniel S. Goodrum, $16,500 N/A N/A $18,000 for service on Trustee+ two boards ---------------------------- ---------------------- --------------------------- ------------------- ---------------------------- Wilton Looney, $26,000 N/A N/A $28,000 for service on Trustee two boards ---------------------------- ---------------------- --------------------------- ------------------- ---------------------------- Champney A. McNair, $24,000 N/A N/A $26,000 for service on Trustee+ two boards ---------------------------- ---------------------- --------------------------- ------------------- ---------------------------- F. Wendell Gooch, $25,500 N/A N/A $27,500 for service on Trustee two boards ---------------------------- ---------------------- --------------------------- ------------------- ---------------------------- T. Gordy Germany, $25,500 N/A N/A $27,500 for service on Trustee+ two boards ---------------------------- ---------------------- --------------------------- ------------------- ----------------------------
B-52
AGGREGATE PENSION OR ESTIMATED TOTAL COMPENSATION NAME OF PERSON, COMPENSATION RETIREMENT BENEFITS ANNUAL FROM FUND AND FUND POSITION FROM FUND ACCRUED AS PART OF BENEFITS UPON COMPLEX PAID TO FUND EXPENSES RETIREMENT TRUSTEES ============================ ====================== =========================== =================== ============================ James O. Robbins, $ 4,500 N/A N/A $4,500 for service on Trustee# two boards ---------------------------- ---------------------- --------------------------- ------------------- ---------------------------- Dr. Bernard F. Sliger, $25,500 N/A N/A $27,500 for service on Trustee+ two boards ---------------------------- ---------------------- --------------------------- ------------------- ---------------------------- Jonathan T. Walton, $25,500 N/A N/A $27,500 for service on Trustee two boards ---------------------------- ---------------------- --------------------------- ------------------- ---------------------------- William H. Cammack, $ 0 N/A N/A $0 for service on two Trustee* boards ---------------------------- ---------------------- --------------------------- ------------------- ----------------------------
* Mr. Cammack resigned as a Trustee of the Trust on May 16, 2000. # Messrs. Robbins and Gallagher did not serve as Trustees for a full year during the most recent fiscal year. + Pursuant to the Board's retirement policy, Messrs. Germany, Goodrum, McNair and Dr. Sliger will retire on November 18, 2000. Immediately thereafter, the five remaining Trustees will constitute the entire Board of Trustees. PERFORMANCE INFORMATION From time to time a Fund may advertise its performance. Performance figures are based on historical earnings and are not intended to indicate future performance. CLASSES OF SHARES AND PERFORMANCE The performance of the Trust's Investor Shares and Flex Shares will normally be lower than for Trust Shares because Investor Shares and Flex Shares are subject to distribution, service, and certain transfer agent fees not charged to Trust Shares. Because of their differing distribution expense arrangements, the performance of Flex Shares in comparison to Investor Shares will vary depending upon the investor's investment time horizon. PERFORMANCE COMPARISONS Each Fund may periodically compare its performance to other mutual funds tracked by mutual fund rating services, to broad groups of comparable mutual funds, or to unmanaged indices. These comparisons may assume reinvestment of dividends but generally do not reflect deductions for administrative and management costs. COMPUTATION OF YIELD SEVEN-DAY YIELD The current yield of the Money Market Funds will be calculated daily based upon the seven days ending on the date of calculation (the "base period"). The yield is computed by determining the net change (exclusive of capital changes) in the value of a hypothetical pre-existing shareholder account having a balance of one share at the beginning of the period, subtracting a hypothetical charge reflecting deductions from shareholder accounts, B-53 and dividing such net change by the value of the account at the beginning of the same period to obtain the base period return and multiplying the result by (365/7). Realized and unrealized gains and losses are not included in the calculation of the yield. The effective compound yield of the Funds is determined by computing the net change (exclusive of capital changes) in the value of a hypothetical pre-existing account having a balance of one share at the beginning of the period, subtracting a hypothetical charge reflecting deductions from shareholder accounts, and dividing the difference by the value of the account at the beginning of the base period to obtain the base period return, and then compounding the base period return by adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the result, according to the following formula: Effective Yield = [(Base Period Return + 1)365/7] - 1. The current and the effective yields reflect the reinvestment of net income earned daily on portfolio assets. The Tax-Exempt Money Market Fund's "tax equivalent yield" and "tax equivalent effective yield" are calculated by determining the rate of return that would have to be achieved on a fully taxable investment to produce the after-tax equivalent of the Fund's yield, assuming certain tax brackets for a Shareholder. Tax-exempt yield is calculated according to the same formula except that E equals the interest exempt from federal income tax earned during the period. This tax-exempt yield is then translated into tax-equivalent yield according to the following formula: E TAX EQUIVALENT YIELD = ------- + T 1-P E = the portion of the yield which is tax-exempt P = stated income tax rate T = the portion of the yield which is taxable For the seven-day period ended May 31, 2000, the Money Market Funds' current effective and tax equivalent yields were as follows:
7-DAY TAX 7-DAY TAX CLASS OF 7-DAY EQUIVALENT EQUIVALENT FUND SHARES 7-DAY YIELD EFFECTIVE YIELD YIELD EFFECTIVE YIELD ======================= ================ =========== =============== ========== =============== Prime Quality Money Trust 6.03% 6.22% 6.03% 6.03% Market Fund ---------------- ----------- --------------- ---------- --------------- Investor 5.87 6.04 5.87 5.87 ----------------------- ---------------- ----------- --------------- ---------- --------------- Tax-Exempt Money Trust 3.79 3.86 6.26 6.38 Market Fund ---------------- ----------- --------------- ---------- --------------- Investor 3.67 3.74 6.07 6.18 ----------------------- ---------------- ----------- --------------- ---------- --------------- U.S. Government Trust 5.65 5.81 5.65 5.81 Securities Money ---------------- ----------- --------------- ---------- --------------- Market Fund Investor 5.51 5.66 5.51 5.66 ----------------------- ---------------- ----------- --------------- ---------- --------------- U.S. Treasury Money Trust 5.60 5.75 5.60 5.75 Market Fund ----------------------- ---------------- ----------- --------------- ---------- --------------- Virginia Tax-Free Trust 3.70 3.77 6.12 6.23 Money Market Fund ---------------- ----------- --------------- ---------- --------------- Investor 3.53 3.60 5.83 5.95 ----------------------- ---------------- ----------- --------------- ---------- ---------------
The yields of these Funds fluctuate, and the annualization of a week's dividend is not a representation by the Trust as to what an investment in the Fund will actually yield in the future. Actual yields will depend on such variables B-54 as asset quality, average asset maturity, the type of instruments a Fund invests in, changes in interest rates on money market instruments, changes in the expenses of the Fund and other factors. Yields are one basis upon which investors may compare the Funds with other money market funds; however, yields of other money market funds and other investment vehicles may not be comparable because of the factors set forth above and differences in the methods used in valuing portfolio instruments. 30-DAY YIELD The Bond, Short-Term U.S. Treasury, Tax-Exempt Bond, Equity Funds and Life Vision Funds may advertise a 30- day yield. In particular, yield will be calculated according to the following formula: Yield = (2 (a-b/cd + 1)6 - 1) where a = dividends and interest earned during the period; b = expenses accrued for the period (net of reimbursement); c = the average daily number of shares outstanding during the period that were entitled to receive dividends; and d = the maximum offering price per share on the last day of the period. For the 30-day period ended May 31, 2000, yields on the Funds other than the money market funds were as follows: FUND CLASS OF SHARES YIELD ------------------------------------------------------------------- Balanced Fund Trust Shares 2.92% ------------------------------ Investor Shares 2.51% ------------------------------ Flex Shares 1.87% ------------------------------------------------------------------- Capital Appreciation Fund Trust Shares 0.12% ------------------------------ Investor Shares -- ------------------------------ Flex Shares -- ------------------------------------------------------------------- Core Equity Fund Flex Shares -- ------------------------------------------------------------------- E-Commerce Opportunity Fund Flex Shares -- ------------------------------------------------------------------- Florida Tax-Exempt Bond Fund Trust Shares 4.80% ------------------------------ Investor Shares 4.42% ------------------------------ Flex Shares 4.08% ------------------------------------------------------------------- Georgia Tax-Exempt Bond Fund Trust Shares 4.71% ------------------------------ Investor Shares 4.35% ------------------------------ Flex Shares 4.02% ------------------------------------------------------------------- Growth and Income Fund Trust Shares 0.58% ------------------------------ Investor Shares 0.40% ------------------------------ Flex Shares -- ------------------------------------------------------------------- High Income Fund Flex Shares 7.47% ------------------------------------------------------------------- B-55 FUND CLASS OF SHARES YIELD ------------------------------------------------------------------- International Equity Fund Trust Shares -- ------------------------------ Investor Shares -- ------------------------------ Flex Shares -- ------------------------------------------------------------------- International Equity Index Fund Trust Shares -- ------------------------------ Investor Shares -- ------------------------------ Flex Shares -- ------------------------------------------------------------------- Investment Grade Bond Fund Trust Shares 7.82% ------------------------------ Investor Shares 7.11% ------------------------------ Flex Shares 6.90% ------------------------------------------------------------------- Investment Grade Tax-Exempt Bond Trust Shares 4.61% Fund ------------------------------ Investor Shares 4.05% ------------------------------ Flex Shares 3.74% ------------------------------------------------------------------- Limited-Term Federal Mortgage Trust Shares 5.87% Securities Fund ------------------------------ Investor Shares 5.46% ------------------------------ Flex Shares 5.24% ------------------------------------------------------------------- Maryland Municipal Bond Fund Trust Shares 4.89% ------------------------------ Flex Shares 3.95% ------------------------------------------------------------------- Mid-Cap Equity Fund Trust Shares 0.26% ------------------------------ Investor Shares -- ------------------------------ Flex Shares -- ------------------------------------------------------------------- Short-Term Bond Fund Trust Shares 6.83% ------------------------------ Investor Shares 6.42% ------------------------------ Flex Shares 6.27% ------------------------------------------------------------------- Short-Term U.S. Treasury Securities Trust Shares 6.09% Fund ------------------------------ Investor Shares 5.84% ------------------------------ Flex Shares 5.68% ------------------------------------------------------------------- Small Cap Growth Stock Fund Trust Shares -- ------------------------------ Investor Shares -- ------------------------------ Flex Shares -- ------------------------------------------------------------------- B-56 FUND CLASS OF SHARES YIELD ------------------------------------------------------------------- Small Cap Value Equity Fund Trust Shares -- ------------------------------ Flex Shares -- ------------------------------------------------------------------- Tax Sensitive Growth Stock Fund Trust Shares -- ------------------------------ Flex Shares -- ------------------------------------------------------------------- U.S. Government Securities Fund Trust Shares 6.26% ------------------------------ Investor Shares 5.55% ------------------------------ Flex Shares 5.31% ------------------------------------------------------------------- Value Income Stock Fund Trust Shares 2.21% ------------------------------ Investor Shares 1.74% ------------------------------ Flex Shares 1.12% ------------------------------------------------------------------- Virginia Intermediate Municipal Trust Shares 4.66% Bond Fund ------------------------------ Investor Shares 4.45% ------------------------------------------------------------------- Virginia Municipal Bond Fund Trust Shares 4.95% ------------------------------ Flex Shares 4.04% ------------------------------------------------------------------- LIFE VISION FUND CLASS OF SHARES YIELD ------------------------------------------------------------------- Life Vision Aggressive Growth Fund Trust Shares -- ------------------------------------------------------------------- Life Vision Growth and Income Fund Trust Shares 1.49% ------------------------------------------------------------------- Life Vision Moderate Growth Fund Trust Shares 2.03% ------------------------------------------------------------------- The Tax-Exempt Bond Funds' "tax equivalent yield" and "tax equivalent effective yield" are calculated by determining the rate of return that would have to be achieved on a fully taxable investment to produce the after-tax equivalent of the Fund's yield, assuming certain tax brackets for a Shareholder. Tax-exempt yield is calculated according to the same formula except that E equals the interest exempt from federal income tax earned during the period. This tax-exempt yield is then translated into tax-equivalent yield according to the following formula: / \ | E | TAX EQUIVALENT YIELD = | --------- | + T | 1-P | \ / E = the portion of the yield which is tax-exempt P = stated income tax rate T = the portion of the yield which is taxable Tax equivalent yields assume the payment of federal income taxes at a rate of 39.6%, for the Georgia Tax-Exempt Bond Fund, Georgia income taxes at a rate of 6.0%, for the Maryland Municipal Bond Fund, Maryland taxes at a rate B-57 of 7.9%, and for the Virginia Intermediate Municipal and Virginia Municipal Bond Funds, Virginia taxes at a rate of 5.75%. For the 30-day period ended May 31, 2000, the tax-equivalent yields for the Trust Shares were as follows: for the Florida Tax-Exempt Bond Fund - 6.29%, Georgia Tax-Exempt Bond Fund - 6.88%, Investment Grade Tax-Exempt Bond Fund - 5.98%, Maryland Municipal Bond Fund - 6.61%, Virginia Intermediate Municipal Bond Fund - 7.01%, and Virginia Municipal Bond Fund - 7.63%. For the 30-day period ended May 31, 2000, the tax-equivalent yields for the Investor Shares of the Tax-Exempt Funds were as follows: for the Florida Tax-Exempt Bond Fund - 5.71%, Georgia Tax-Exempt Bond Fund - 6.25%, Investment Grade Tax-Exempt Bond Fund - 5.13%, and Virginia Intermediate Municipal Bond Fund - 6.90%. For the 30-day period ended May 31, 1999, the tax-equivalent yields for the Flex Shares of the Tax-Exempt Funds were as follows: for the, Florida Tax-Exempt Bond Fund - 5.20%, Georgia Tax-Exempt Bond Fund - 5.61%, Investment Grade Tax-Exempt Bond Fund - 4.57% Maryland Municipal Bond Fund - 4.94%, and Virginia Municipal Bond Fund - 5.98%. CALCULATION OF TOTAL RETURN From time to time, the Bond, Short-Term U.S. Treasury, Tax-Exempt Bond, Balanced and Equity Funds may advertise total return. In particular, total return will be calculated according to the following formula: P (1 + T)n = ERV, where P = a hypothetical initial payment of $1,000; T = average annual total return; n = number of years; and ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the designated time period as of the end of such period. Based on the foregoing, the average annual total returns for the Funds from inception through May 31, 2000 and for the one-year, five-year and ten-year periods ended May 31, 2000 were as follows:
------------------------------------------------------------- FUND AVERAGE ANNUAL TOTAL RETURN ----------------- ----------------------------------------- ------------------------------------------------------------- FIVE TEN SINCE CLASS OF SHARES ONE-YEAR YEARS YEARS INCEPTION ----------------- ----------------------------------------- ------------------------------------------------------------- Balanced Trust Shares 1 5.02% 14.26% -- 12.10% Fund Investor Shares--With Sales Load 47 0.73 13.03 -- 11.05 Investor Shares--Without Sales Load 47 4.66 13.89 -- 11.69 Flex Share--With Sales Load 2 1.88 N/A -- 12.98 Flex Shares--Without Sales Load 2 3.88 N/A -- 12.98 ----------------- ----------------------------------------- ------------------------------------------------------------- Capital Trust Shares 3 8.98 21.74 -- 16.91 Appreciation Investor Shares--With Sales Load 4 4.25 20.06 -- 16.01 Fund Investor Shares--Without Sales Load 4 8.29 20.97 -- 16.56 Flex Shares--With Sales Load 5 5.88 -- -- 20.42 Flex Shares--Without Sales Load 5 7.77 -- -- 20.42 ----------------- ----------------------------------------- ------------------------------------------------------------- Core Equity Trust Shares 53 -- -- -- 17.05 Fund* Flex Shares-- With Load 54 -- -- -- -- Flex Shares-- Without Load 54 -- -- -- 11.97 ----------------- ----------------------------------------- ------------------------------------------------------------- E-Commerce Trust Shares 53 -- -- -- 99.55 Opportunity Flex Shares-- With Load 54 -- -- -- -36.81 Fund* Flex Shares-- Without Load 54 -- -- -- -33.06 ----------------- ----------------------------------------- ------------------------------------------------------------- Florida Tax- Trust Shares 19 -0.48 4.57 -- 4.84 Exempt Bond Investor Shares--With Sales Load 20 -4.38 3.58 -- 4.01 Fund Investor Shares--Without Sales Load 20 -0.68 4.38 -- 4.64 Flex Shares--With Sales Load 5 -3.07 -- -- 3.91 Flex Shares--Without Sales Load 5 -1.17 -- -- 3.91 ----------------- ----------------------------------------- ------------------------------------------------------------- Georgia Tax- Trust Shares 20 -.90 4.25 -- 3.69 Exempt Bond Investor Shares--With Sales Load 21 -4.95 3.21 -- 2.85 Fund Investor Shares--Without Sales Load 21 1.26 4.01 -- 3.47 Flex Shares--With Sales Load 22 -3.49 -- -- 3.38 Flex Shares--Without Sales Load 22 -1.59 -- -- 3.38 ----------------- ----------------------------------------- -------------------------------------------------------------
B-58
------------------------------------------------------------- FUND AVERAGE ANNUAL TOTAL RETURN ----------------- ----------------------------------------- ------------------------------------------------------------- FIVE TEN SINCE CLASS OF SHARES ONE-YEAR YEARS YEARS INCEPTION ----------------- ----------------------------------------- ------------------------------------------------------------- Growth and Trust Shares 6 4.11% 18.28% -- 15.81% Income Fund Investor Shares-- With Load 7 0.03 17.33 -- 14.84 Investor Shares-- Without Load 7 3.92 18.23 -- 15.46 Flex Shares-- With Load 8 1.19 17.40 -- 17.84 Flex Shares-- Without Load 8 3.11 17.40 -- 17.84 ----------------- ----------------------------------------- ------------------------------------------------------------- High Income Flex Shares--With Sales Load 55 -11.86 1.72 -- 3.03 Fund Flex Shares--Without Sales Load 55 -10.21 1.72 -- 17.23 ----------------- ----------------------------------------- ------------------------------------------------------------- International Trust Shares 9 10.58 14.94 -- 17.23 Equity Investor Shares-- With Sales Load 49 6.04 13.67 -- 16.02 Fund** Investor Shares-- Without Sales Load 49 10.15 14.54 -- 16.85 Flex Shares-- With Sales Load 49 7.46 13.87 -- 16.21 Flex Shares-- Without Sales Load 49 9.38 13.87 -- 16.21 ----------------- ----------------------------------------- ------------------------------------------------------------- International Trust Shares 50 19.36 13.73 -- 11.83 Equity Index Investor Shares-- With Sales Load 50 14.36 12.39 -- 11.83 Fund Investor Shares-- Without Sales Load 50 18.86 13.26 -- 11.36 Flex Shares-- With Sales Load 11 16.04 N/A -- 12.60 Flex Shares-- Without Sales Load 11 18.04 N/A -- 12.60 ----------------- ----------------------------------------- ------------------------------------------------------------- Investment Trust Shares 23 -1.76 4.80 -- 5.52 Grade Bond Investor Shares--With Sales Load 24 -5.81 3.59 -- 4.70 Fund Investor Shares--Without Sales Load 24 -2.17 4.39 -- 5.21 Flex Shares--With Sales Load 25 -4.48 4.12 -- 3.80 Flex Shares--Without Sales Load 25 -2.63 4.12 -- 3.80 ----------------- ----------------------------------------- ------------------------------------------------------------- Investment Trust Shares 26 1.41 5.49 -- 5.29 Grade Tax- Investor Shares--With Sales Load 27 -2.86 4.25 -- 5.99 Exempt Bond Investor Shares--Without Sales Load 27 0.90 5.05 -- 6.50 Fund Flex Shares--With Sales Load 5 -1.40 -- -- 4.55 Flex Shares--Without Sales Load 5 0.57 -- -- 4.56 ----------------- ----------------------------------------- -------------------------------------------------------------
B-59
------------------------------------------------------------- FUND AVERAGE ANNUAL TOTAL RETURN ----------------- ----------------------------------------- ------------------------------------------------------------- FIVE TEN SINCE CLASS OF SHARES ONE-YEAR YEARS YEARS INCEPTION ----------------- ----------------------------------------- ------------------------------------------------------------- Limited- Trust Shares 48 2.33% 5.08% -- 5.49% Term Federal Investor Shares--With Sales Load 28 -0.57 4.28 -- 4.90 Mortgage Investor Shares--Without Sales Load 28 1.93 4.81 -- 5.36 Securities Flex Shares--With Sales Load 25 -0.22 N/A -- 4.44 Fund Flex Shares--Without Sales Load 25 1.71 N/A -- 4.44 ----------------- ----------------------------------------- ------------------------------------------------------------- Maryland Trust Shares 29 -1.78 -- -- 3.00 Municipal Flex Shares-- With Sales Load 30 -4.54 -- -- 3.29 Bond Fund Flex Shares--Without Sales Load 30 -2.66 -- -- 3.29 ----------------- ----------------------------------------- ------------------------------------------------------------- Mid-Cap Trust Shares 12 19.10 16.02 -- 14.33 Equity Fund Investor Shares--With Sales Load 44 14.08 14.61 -- 13.0810 Investor Shares--Without Sales Load 44 18.55 15.50 -- 13.77 ----------------- ----------------------------------------- ------------------------------------------------------------- Prime Trust Shares 45 5.20 5.10 -- 4.51 Quality Investor Shares 45 5.02 4.94 -- 4.34 Money Flex Shares 52 -- Market Fund ----------------- ----------------------------------------- ------------------------------------------------------------- Short-Term Trust Shares 31 2.87 4.98 -- 4.91 Bond Fund Investor Shares-- With Sales Load 32 0.65 4.36 -- 4.34 Investor Shares-- Without Sales Load 32 2.67 4.78 -- 4.64 Flex Shares-- With Sales Load 33 0.36 -- -- 4.41 Flex Shares-- Without Sales Load 33 2.31 -- -- 4.41 ----------------- ----------------------------------------- ------------------------------------------------------------- Short-Term Trust Shares 31 3.75 5.02 -- 4.69 U.S. Treasury Investor Shares--With Sales Load 34 2.55 4.64 -- 4.38 Securities Investor Shares--Without Sales Load 34 3.58 4.85 -- 4.53 Fund Flex Shares--With Sales Load 51 1.36 -- -- 4.50 Flex Shares--Without Sales Load 51 3.34 -- -- 4.51 ----------------- ----------------------------------------- -------------------------------------------------------------
B-60
------------------------------------------------------------- FUND AVERAGE ANNUAL TOTAL RETURN ----------------- ----------------------------------------- ------------------------------------------------------------- FIVE TEN SINCE CLASS OF SHARES ONE-YEAR YEARS YEARS INCEPTION ----------------- ----------------------------------------- ------------------------------------------------------------- Small Cap Trust Shares 43 -4.72% -- -- 1.82% Value Equity Flex Shares--With Sales Load 14 -7.53 -- -- -3.29 Fund Flex Shares--Without Sales Load 14 -5.65 -- -- -3.29 ----------------- ----------------------------------------- ------------------------------------------------------------- Small Cap Trust Shares 15 27.24 -- -- -- Growth Stock Flex Shares--With Sales Load 15 23.95 -- -- 44.11 Fund Flex Shares--Without Sales Load 15 25.95 -- -- -44.11 Investor Shares--With Sales Load 51 -- -- -- -- Investor Shares--Without Sales Load 51 -- -- -- -- ----------------- ----------------------------------------- ------------------------------------------------------------- Tax-Exempt Trust Shares 45 3.19 3.12% -- 2.86 Money Investor Shares 45 3.07 3.00 -- 2.74 Market Fund ----------------- ----------------------------------------- ------------------------------------------------------------- Tax Sensitive Trust Shares 16 10.48 -- -- 19.43 Growth Stock Flex Shares--With Sales Load 13 7.38 -- -- 18.42 Fund Flex Shares--Without Sales Load 13 9.38 -- -- 18.42 ----------------- ----------------------------------------- ------------------------------------------------------------- U.S. Trust Shares 45 4.86 4.89 -- 4.33 Government Investor Shares 45 4.71 4.74 -- 4.19 Securities Money Market Fund ----------------- ----------------------------------------- ------------------------------------------------------------- U.S. Trust Shares 35 1.63 5.26 -- 5.99 Government Investor Shares--With Sales Load 10 -2.60 4.08 -- 4.83 Securities Investor Shares--Without Sales Load 10 1.19 4.88 -- 5.50 Fund Flex Shares-With Sales Load 25 -1.22 N/A -- 4.24 Flex Shares--Without Sales Load 25 .70 N/A -- 4.25 ----------------- ----------------------------------------- ------------------------------------------------------------- U.S. Treasury Trust Shares 42 4.81 4.83 -- 5.30 Money Market Fund ----------------- ----------------------------------------- ------------------------------------------------------------- Value Trust Shares 41 -10.52 13.85 -- 13.83 Income Stock Investor Shares--With Sales Load 18 -14.18 12.57 -- 13.24 Fund** Investor Shares--Without Sales Load 18 -10.83 13.43 -- 13.84 Flex Shares--With Sales Load 5 -13.11 N/A -- 12.62 Flex Shares--Without Sales Load 5 -11.50 N/A -- 12.62 ----------------- ----------------------------------------- -------------------------------------------------------------
B-61
------------------------------------------------------------- FUND AVERAGE ANNUAL TOTAL RETURN ----------------- ----------------------------------------- ------------------------------------------------------------- FIVE TEN SINCE CLASS OF SHARES ONE-YEAR YEARS YEARS INCEPTION ----------------- ----------------------------------------- ------------------------------------------------------------- Virginia Trust Shares 36 -1.31% 3.79% -- 4.08% Intermediate Investor Shares--With Sales Load 37 -4.97 3.03 -- 3.17 Municipal Investor Shares--Without Sales Load 37 -1.24 3.82 -- 3.73 Bond Fund ----------------- ----------------------------------------- ------------------------------------------------------------- Virginia Trust Shares 38 -3.18 3.73 -- 4.17 Municipal Flex Shares-- With Sales Load 39 -5.98 2.84 -- 3.16 Bond Fund Flex Shares-- Without Sales Load 39 -4.13 2.84 -- 3.17 ----------------- ----------------------------------------- ------------------------------------------------------------- Virginia Tax- Trust Shares 40 3.23 3.06 -- 3.40 Free Money Investor Shares 37 3.07 3.02 -- 2.72 Market Fund ----------------- ----------------------------------------- -------------------------------------------------------------
-------------------------------------------------------- ------------------------------------------------------------- LIFE VISION FUND 1-YEAR 5 YEARS 10 YEARS -------------------------------------------------------- ------------------------------------------------------------- Life Vision Aggressive Growth Fund 46 7.25% -- -- Life Vision Growth and Income Fund 46 5.81 -- -- Life Vision Moderate Growth Fund 46 4.46 -- -- -------------------------------------------------------- -------------------------------------------------------------
B-62
1 Commenced operations 1/3/94 35 Commenced operations 7/31/94 2 Commenced operations 6/14/95 19 Commenced operations 1/25/94 36 Commenced operations 5/5/93 3 Commenced operations 7/1/92 20 Commenced operations 1/18/94 37 Commenced operations 5/5/93 4 Commenced operations 6/9/92 21 Commenced operations 1/19/94 38 Commenced operations 4/5/95 5 Commenced operations 6/1/95 22 Commenced operations 6/6/95 39 Commenced operations 4/17/95 6 Commenced operations 9/28/92 23 Commenced operations 7/16/92 40 Commenced operations 6/15/89 7 Commenced operations 5/7/93 24 Commenced operations 6/11/92 41 Commenced operations 2/12/93 8 Commenced operations 4/19/95 25 Commenced operations 6/7/95 42 Commenced operations 2/18/87 9 Commenced operations 12/1/95 26 Commenced operations 10/21/93 43 Commenced operations 1/31/97 10 Commenced operations 6/9/94 27 Commenced operations 6/9/92 44 Commenced operations 2/1/94 11 Commenced operations 6/8/95 28 Commenced operations 7/17/94 45 Commended operations 6/8/92 12 Commenced operations 2/2/94 29 Commenced operations 3/1/96 46 Commenced operations 6/30/97 13 Commenced operations 6/5/95 30 Commenced operations 4/25/96 47 Commenced operations 1/4/94 14 Commenced operations 6/5/97 31 Commenced operations 3/15/93 48 Commenced operations 6/7/94 15 Commenced operations 10/8/98 32 Commenced operations 3/22/93 49 Commenced operations 1/2/96 16 Commenced operations 12/11/98 33 Commenced operations 6/20/95 50 Commenced operations 6/6/94 17 Commenced operations 12/15/98 34 Commenced operations 3/18/93 51 Commenced operations 12/12/99 52 Commenced operations 10/4/99 53 Commenced operations 9/30/99 54 Commenced operations 1/24/00 55 Commenced operations 5/4/94
* Fund not in operation for entire period. ** The performance for the periods prior to December 1995 for the International Equity Fund and February 1993 for the Value Income Stock Fund represent the performance of a common trust fund managed by the Adviser. PURCHASING SHARES Purchases and redemptions of shares of the Funds may be made on any day the New York Stock Exchange ("NYSE") is open for business. Currently, the NYSE is closed on: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. REDEEMING SHARES A Shareholder will at all times be entitled to aggregate cash redemptions from all Funds of the Trust during any 90-day period of up to the lesser of $250,000 or 1% of the Trust's net assets. B-63 The Trust reserves the right to suspend the right of redemption and/or to postpone the date of payment upon redemption for any period on which trading on the NYSE is restricted, or during the existence of an emergency (as determined by the Securities and Exchange Commission by rule or regulation) as a result of disposal or valuation of a Fund's securities is not reasonably practicable, or for such other periods as the Securities and Exchange Commission has by order permitted. The Trust also reserves the right to suspend sales of shares of a Fund for any period during which the NYSE, an Adviser, the Administrator and/or, the Custodian are not open for business. A number of Fund shareholders are institutions with significant share holdings that may be redeemed at any time. If a substantial number or amount of redemptions should occur within a relatively short period of time, a Fund may have to sell portfolio securities it would otherwise hold and incur the additional transaction costs. The sale of portfolio securities may result in the recognition of capital gains, which will be distributed annually and generally will be taxable to shareholders as ordinary income or capital gains. Shareholders are notified annually regarding the federal tax status of distributions they receive (see "Taxes"). DETERMINATION OF NET ASSET VALUE The net asset value per share of the Money Market Funds is calculated daily by the Administrator by adding the value of securities and other assets, subtracting liabilities and dividing by the number of outstanding shares. Securities will be valued by the amortized cost method which involves valuing a security at its cost on the date of purchase and thereafter (absent unusual circumstances) assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuations in general market rates of interest on the value of the instrument. While this method provides certainty in valuation, it may result in periods during which a security's value, as determined by this method, is higher or lower than the price a Fund would receive if it sold the instrument. During periods of declining interest rates, the daily yield of a Fund may tend to be higher than a like computation made by a company with identical investments utilizing a method of valuation based upon market prices and estimates of market prices for all of its portfolio securities. Thus, if the use of amortized cost by a Fund resulted in a lower aggregate portfolio value on a particular day, a prospective investor in a Fund would be able to obtain a somewhat higher yield than would result from investment in a company utilizing solely market values, and existing investors in a Fund would experience a lower yield. The converse would apply in a period of rising interest rates. A Fund's use of amortized cost and the maintenance of a Fund's net asset value at $1.00 are permitted by regulations promulgated by Rule 2a-7 under the 1940 Act, provided that certain conditions are met. The regulations also require the Trustees to establish procedures which are reasonably designed to stabilize the net asset value per share at $1.00 for the Funds. Such procedures include the determination of the extent of deviation, if any, of the Funds current net asset value per share calculated using available market quotations from the Funds amortized cost price per share at such intervals as the Trustees deem appropriate and reasonable in light of market conditions and periodic reviews of the amount of the deviation and the methods used to calculate such deviation. In the event that such deviation exceeds one-half of 1%, the Trustees are required to consider promptly what action, if any, should be initiated, and, if the Trustees believe that the extent of any deviation may result in material dilution or other unfair results to Shareholders, the Trustees are required to take such corrective action as they deem appropriate to eliminate or reduce such dilution or unfair results to the extent reasonably practicable. Such actions may include the sale of portfolio instruments prior to maturity to realize capital gains or losses or to shorten average portfolio maturity; withholding dividends; redeeming shares in kind; or establishing a net asset value per share by using available market quotations. In addition, if the Funds incur a significant loss or liability, the Trustees have the authority to reduce pro rata the number of shares of the Funds in each Shareholder's account and to offset each Shareholder's pro rata portion of such loss or liability from the Shareholder's accrued but unpaid dividends or from future dividends while each other Fund must annually distribute at least 90% of its investment company taxable income. The securities of the Bond, Short-Term U.S. Treasury Securities and Equity Funds are valued by the Administrator pursuant to valuations provided by an independent pricing service. The pricing service relies primarily on prices of actual market transactions as well as trader quotations. However, the service may also use a matrix system to determine valuations of fixed income securities, which system considers such factors as security prices, yields, B-64 maturities, call features, ratings and developments relating to specific securities in arriving at valuations. The procedures of the pricing service and its valuations are reviewed by the officers of the Trust under the general supervision of the Trustees. Although the methodology and procedures are identical, the net asset value per share of Trust Shares, Flex Shares and Investor Shares of the Bond, Short-Term U.S. Treasury Securities and Equity Funds may differ because of variations in the distribution and service fees and transfer agent fees charged to Investor Shares. TAXES The following is a summary of certain federal income tax considerations generally affecting the Funds and their shareholders that are not described in the Funds' prospectuses. No attempt is made to present a detailed explanation of the federal tax treatment of the funds or their shareholders, and the discussion here and in the Funds' prospectuses is not intended as a substitute for careful tax planning. This discussion of federal income tax consequences is based on the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations issued thereunder, in effect on the date of this Statement of Additional Information. New legislation, as well as administrative changes or court decisions, may change the conclusions expressed herein, and may have a retroactive effect with respect to the transactions contemplated herein. FEDERAL INCOME TAX In order to qualify for treatment as a regulated investment company ("RIC") under the Code each Fund must distribute annually to its shareholders at least the sum of 90% of its net investment income excludable from gross income plus 90% of its investment company taxable income (generally, net investment income plus net short-term capital gain) ("Distribution Requirement") and also must meet several additional requirements. Among these requirements are the following: (i) at least 90% of a Fund's gross income each taxable year must be derived from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of stock or securities, or certain other income; (ii) at the close of each quarter of a Fund's taxable year, at least 50% of the value of its total assets must be represented by cash and cash items, U.S. government securities, securities of other RICs and other securities, with such other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of a Fund's total assets and that does not represent more than 10% of the outstanding voting securities of such issuer; and (iii) at the close of each quarter of a Fund's taxable year, not more than 25% of the value of its total assets may be invested in securities (other than U.S. government securities or the securities of other RICs) of any one issuer, or of two or more issuers engaged in same or similar businesses if the Fund owns at least 20% of the voting power of such issuers. In addition, each Fund will distribute by the end of any calendar year 98% of its ordinary income for that year and 98% of its capital gain net income for the one-year period ending on October 31 of that calendar year, plus certain other amounts. Each Fund intends to make sufficient distributions prior to the end of each calendar year to avoid liability for the federal excise tax applicable to RICs. If, at the close of each quarter of its taxable year, at least 50% of the value of a Fund's total assets consists of obligations the interest on which is excludable from gross income, such Fund may pay "exempt-interest dividends," as defined in Section 852(b)(5) of the Code, to its shareholders. As noted in their prospectuses, the Tax-Exempt Money Market Fund, the Virginia Tax-Free Money Market Fund, the Investment Grade Tax-Exempt Bond Fund, and the State Tax-Exempt Bond Funds intend to pay exempt-interest dividends. Exempt-interest dividends are excludable from a shareholder's gross income for regular federal income tax purposes, but may nevertheless be subject to the alternative minimum tax (the "Alternative Minimum Tax") imposed by Section 55 of the Code. The Alternative Minimum Tax is imposed at a maximum rate of 28% in the case of non-corporate taxpayers and at the rate of 20% in the case of corporate taxpayers, to the extent it exceeds the B-65 taxpayer's regular tax liability. The Alternative Minimum Tax may be imposed in two circumstances. First, exempt-interest dividends derived from certain "private activity bonds" issued after August 7, 1986, will generally be an item of tax preference and therefore potentially subject to the Alternative Minimum Tax for both corporate and non-corporate taxpayers. Second, in the case of exempt-interest dividends received by corporate shareholders, all exempt-interest dividends, regardless of when the bonds from which they are derived were issued or whether they are derived from private activity bonds, will be included in the corporation's "adjusted current earnings," as defined in Section 56(g) of the Code, in calculating the corporation's alternative minimum taxable income for purposes of determining the Alternative Minimum Tax. Distributions of exempt-interest dividends may result in additional federal income tax consequences to shareholders in tax-exempt funds. For example, interest on indebtedness incurred by shareholders to purchase or carry shares of a tax-exempt fund will not be deductible for federal income tax purposes to the extent that the Fund distributes exempt interest dividends during the taxable year. The deduction otherwise allowable to property and casualty insurance companies for "losses incurred" will be reduced by an amount equal to a portion of exempt-interest dividends received or accrued during any taxable year. Certain foreign corporations engaged in a trade or business in the U. S. will be subject to a "branch profits tax" on their "dividend equivalent amount" for the taxable year, which will include exempt-interest dividends. Certain Subchapter S corporations may also be subject to taxes on their "passive investment income," which could include exempt-interest dividends. Up to 85% of the Social Security benefits or railroad retirement benefits received by an individual during any taxable year will be included in the gross income of such individual if the individual's "modified adjusted gross income" (which includes exempt-interest dividends) plus one-half of the Social Security benefits or railroad retirement benefits received by such individual during that taxable year exceeds the base amount described in Section 86 of the Code. A tax-exempt fund may not be an appropriate investment for persons (including corporations and other business entities) who are "substantial users" (or persons related to such users) of facilities financed by industrial development or private activity bonds. A "substantial user" is defined generally to include certain persons who regularly use in a trade or business a facility financed from the proceeds of industrial development bonds or private activity bonds. Such entities or persons should consult their tax adviser before purchasing shares of a tax-exempt fund. Issuers of bonds purchased by a tax-exempt fund (or the beneficiary of such bonds) may have made certain representations or covenants in connection with the issuance of such bonds to satisfy certain requirements of the Code that must be satisfied subsequent to the issuance of such bonds. Investors should be aware that exempt-interest dividends derived from such bonds may become subject to federal income taxation retroactively to the date of issuance of the bonds to which such dividends are attributable thereof if such representations are determined to have been inaccurate or if the issuer of such bonds (or the beneficiary of such bonds) fails to comply with such covenants. Any gain or loss recognized on a sale or redemption of shares of a Fund by a shareholder who is not a dealer in securities will generally be treated as long-term capital gain or loss if the shares have been held for more than one year, and short-term if for a year or less. If shares held for six months or less are sold or redeemed for a loss, two special rules apply: First, if shares on which a net capital gain distribution has been received are subsequently sold or redeemed, and such shares have been held for six months or less, any loss recognized will be treated as long-term capital loss to the extent of the long-term capital gain distributions. Second, any loss recognized by a shareholder upon the sale or redemption of shares of a tax-exempt fund held for six months or less will be disallowed to the extent of any exempt-interest dividends received by the shareholder with respect to such shares. The Funds will make annual reports to shareholders of the federal income tax status of all distributions. FOREIGN TAXES Dividends and interests received by a Fund may be subject to income, withholding or other taxes imposed by foreign countries and U.S. possessions that would reduce the yield on the Fund's stock or securities. Tax conventions B-66 between certain countries and the United States may reduce or eliminate these taxes. Foreign countries generally do not impose taxes on capital gains with respect to investments by foreign investors. If the International Equity Index and International Equity Funds meet the Distribution Requirement, and if more than 50% of the value of each such Fund's total assets at the close of their respective taxable years consist of stocks or securities of foreign corporations, each Fund will be eligible to, and will, file an election with the Internal Revenue Service that will enable shareholders, in effect, to receive the benefit of the foreign tax credit with respect to any foreign and U.S. possessions income taxes paid by the Funds. Pursuant to the election, each Fund will treat those taxes as dividends paid to its shareholders. Each such shareholder will be required to include a proportionate share of those taxes in gross income as income received from a foreign source and must treat the amount so included as if the shareholder had paid the foreign tax directly. The shareholder may then either deduct the taxes deemed paid by him or her in computing his or her taxable income or, alternatively, use the foregoing information in calculating the foreign tax credit against the shareholders' federal income tax. In no event shall a shareholder be allowed a foreign tax credit with respect to shares in a Fund if such shares are held by the shareholder for 15 days or less during the 30-day period beginning on the date which is 15 days before the date on which such shares become ex-dividend with respect to such dividend. If either of the two above-mentioned Funds make the election, such Fund will report annually to its shareholders the respective amounts per share of the Fund's income from sources within, and taxes paid to, foreign countries and U.S. possessions. The International Equity Index and International Equity Funds' transactions in foreign currencies and forward foreign currency contracts will be subject to special provisions of the Code that, among other things, may affect the character of gains and losses realized the by Funds (I.E., may affect whether gains or losses are ordinary or capital), accelerate recognition of income to the Funds and defer losses. These rules could therefore affect the character, amount and timing of distributions to shareholders. These provisions also may require the Funds to mark-to-market certain types of the positions in their portfolios (I.E., treat them as if they were closed out) which may cause the Funds to recognize income without receiving cash with which to make distributions in amounts necessary to satisfy the 90% and 98% distribution requirements for avoiding income and excise taxes. Each Fund will monitor its transactions, will make the appropriate tax elections, and will make the appropriate entries in the books and records when it acquires any foreign currency or forward foreign currency contract in order to mitigate the effect of these rules and prevent disqualification of the Fund as a RIC and minimize the imposition of income and excise taxes. FUND TRANSACTIONS The Trust has no obligation to deal with any dealer or group of dealers in the execution of transactions in portfolio securities. Subject to policies established by the Trustees, an Adviser is responsible for placing the orders to execute transactions for a Fund. In placing orders, it is the policy of the Trust to seek to obtain the best net results taking into account such factors as price (including the applicable dealer spread), the size, type and difficulty of the transaction involved, the firm's general execution and operational facilities, and the firm's risk in positioning the securities involved. While the Adviser generally seeks reasonably competitive spreads or commissions, the Trust will not necessarily be paying the lowest spread or commission available. The money market securities in which the Funds invest are traded primarily in the over-the-counter market. Bonds and debentures are usually traded over-the-counter, but may be traded on an exchange. Where possible, the Adviser will deal directly with the dealers who make a market in the securities involved except in those circumstances where better prices and execution are available elsewhere. Such dealers usually are acting as principal for their own account. On occasion, securities may be purchased directly from the issuer. Money market securities are generally traded on a net basis and do not normally involve either brokerage commissions or transfer taxes. The cost of executing portfolio securities transactions of the Trust will primarily consist of dealer spreads and underwriting commissions. B-67 TRADING PRACTICES AND BROKERAGE The Trust selects brokers or dealers to execute transactions for the purchase or sale of portfolio securities on the basis of its judgment of their professional capability to provide the service. The primary consideration is to have brokers or dealers provide transactions at best price and execution for the Trust. Best price and execution includes many factors, including the price paid or received for a security, the commission charged, the promptness and reliability of execution, the confidentiality and placement accorded the order and other factors affecting the overall benefit obtained by the account on the transaction. The Trust's determination of what are reasonably competitive rates is based upon the professional knowledge of its trading department as to rates paid and charged for similar transactions throughout the securities industry. In some instances, the Trust pays a minimal share transaction cost when the transaction presents no difficulty. Some trades are made on a net basis where the Trust either buys securities directly from the dealer or sells them to the dealer. In these instances, there is no direct commission charged but there is a spread (the difference between the buy and sell price) which is the equivalent of a commission. The Trust may allocate out of all commission business generated by all of the funds and accounts under management by the Adviser, brokerage business to brokers or dealers who provide brokerage and research services. These research services include advice, either directly or through publications or writings, as to the value of securities, the advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities; furnishing of analyses and reports concerning issuers, securities or industries; providing information on economic factors and trends, assisting in determining portfolio strategy, providing computer software used in security analyses, and providing portfolio performance evaluation and technical market analyses. Such services are used by the Adviser in connection with its investment decision-making process with respect to one or more funds and accounts managed by it, and may not be used exclusively with respect to the Fund or account generating the brokerage. As provided in the Securities Exchange Act of 1934 (the "1934 Act") higher commissions may be paid to broker-dealers who provide brokerage and research services than to broker-dealers who do not provide such services if such higher commissions are deemed reasonable in relation to the value of the brokerage and research services provided. Although transactions are directed to broker-dealers who provide such brokerage and research services, the Trust believes that the commissions paid to such broker-dealers are not, in general, higher than commissions that would be paid to broker-dealers not providing such services and that such commissions are reasonable in relation to the value of the brokerage and research services provided. In addition, portfolio transactions which generate commissions or their equivalent are directed to broker-dealers who provide daily portfolio pricing services to the Trust. Subject to best price and execution, commissions used for pricing may or may not be generated by the funds receiving the pricing service. The Adviser may place a combined order for two or more accounts or funds engaged in the purchase or sale of the same security if, in its judgment, joint execution is in the best interest of each participant and will result in best price and execution. Transactions involving commingled orders are allocated in a manner deemed equitable to each account or fund. It is believed that the ability of the accounts to participate in volume transactions will generally be beneficial to the accounts and funds. Although it is recognized that, in some cases, the joint execution of orders could adversely affect the price or volume of the security that a particular account or Fund may obtain, it is the opinion of the Adviser and the Trust's Board of Trustees that the advantages of combined orders outweigh the possible disadvantages of separate transactions. Consistent with the Conduct Rules of the National Association of Securities Dealers, Inc., and subject to seeking best price and execution, the Funds, at the request of the Distributor, give consideration to sales of shares of the Trust as a factor in the selection of brokers and dealers to execute Trust portfolio transactions. It is expected that the Trust may execute brokerage or other agency transactions through the Distributor or an affiliate of the Adviser, both of which are registered broker-dealers, for a commission in conformity with the 1940 Act, the 1934 Act and rules promulgated by the SEC. Under these provisions, the Distributor or an affiliate of the Adviser B-68 is permitted to receive and retain compensation for effecting portfolio transactions for the Trust on an exchange if a written contract is in effect between the Distributor and the Trust expressly permitting the Distributor or an affiliate of the Adviser to receive and retain such compensation. These rules further require that commissions paid to the Distributor by the Trust for exchange transactions not exceed "usual and customary" brokerage commissions. The rules define "usual and customary" commissions to include amounts which are "reasonable and fair compared to the commission, fee or other remuneration received or to be received by other brokers in connection with comparable transactions involving similar securities being purchased or sold on a securities exchange during a comparable period of time." In addition, the Trust may direct commission business to one or more designated broker-dealers in connection with such broker/dealer's provision of services to the Trust or payment of certain Trust expenses (E.G., custody, pricing and professional fees). The Trustees, including those who are not "interested persons" of the Trust, have adopted procedures for evaluating the reasonableness of commissions paid to the Distributor, and will review these procedures periodically. For the fiscal year ended May 31, 2000, the Funds paid the following brokerage commissions with respect to portfolio transactions:
% of Total % of Total Total $ Amount Total $ Amount of Brokerage Brokered of Brokerage Brokerage Commissions Paid Transactions Commissions Commissions Paid to Affiliated Effected Through Paid in FYE to Affiliates in FYE Brokers in FYE Affiliated Brokers Fund 5/31/00 5/31/00 (1) 5/31/00 FYE 5/31/00 ------------------------------- ------------------ ---------------------- ------------------- ------------------ Balanced Fund $ 721,707 $10,348 1.4% 8.6% ------------------------------- ------------------ ---------------------- ------------------- ------------------ Capital Appreciation Fund $ 6,562,103 $48,837 0.7% 4.4% ------------------------------- ------------------ ---------------------- ------------------- ------------------ Core Equity Fund $ 187,840 $ 1,419 0.8% 26.6% ------------------------------- ------------------ ---------------------- ------------------- ------------------ E-Commerce Opportunity $ 191,269 $ 2,203 1.2% 3.4% Fund ------------------------------- ------------------ ---------------------- ------------------- ------------------ Florida Tax-Exempt Bond $ 1,800 $ 1,800 100% 100% Fund ------------------------------- ------------------ ---------------------- ------------------- ------------------ Georgia Tax-Exempt Bond $ 3 $ 3 100% 100% Fund ------------------------------- ------------------ ---------------------- ------------------- ------------------ Growth and Income Fund + $ 1,520,932 $ 623 0.4% 33.5% ------------------------------- ------------------ ---------------------- ------------------- ------------------ High Income Fund $ 5 $ 5 100% 100% ------------------------------- ------------------ ---------------------- ------------------- ------------------ International Equity Index $ 606,700 $ 0 0% 0% Fund ------------------------------- ------------------ ---------------------- ------------------- ------------------ International Equity Fund $ 5,076,703 $ 0 0% 0% ------------------------------- ------------------ ---------------------- ------------------- ------------------ Investment Grade Bond $ 19,989 $19,989 100% 100% Fund ------------------------------- ------------------ ---------------------- ------------------- ------------------ Investment Grade Tax- $ 6,409 $ 6,409 100% 100% Exempt Bond Fund ------------------------------- ------------------ ---------------------- ------------------- ------------------ Limited-Term Federal $ 3,623 $ 3,623 100% 100% Mortgage Securities Fund ---------------------------------------------------------------------------------------------------------------------------
B-69
% of Total % of Total Total $ Amount Total $ Amount of Brokerage Brokered of Brokerage Brokerage Commissions Paid Transactions Commissions Commissions Paid to Affiliated Effected Through Paid in FYE to Affiliates in FYE Brokers in FYE Affiliated Brokers Fund 5/31/00 5/31/001 5/31/00 FYE 5/31/00 ------------------------------- ------------------ ---------------------- ------------------- ------------------ Maryland Municipal Bond $ 0 $ 0 0% 0% Fund + ------------------------------- ------------------ ---------------------- ------------------- ------------------ Mid-Cap Equity Fund $ 826,022 $ 4,278 0.5% 28.6% ------------------------------- ------------------ ---------------------- ------------------- ------------------ Prime Quality Money $ 226,376 $226,376 100% 100% Market Fund ------------------------------- ------------------ ---------------------- ------------------- ------------------ Short-Term Bond Fund $ 0 $ 0 0% 0% ------------------------------- ------------------ ---------------------- ------------------- ------------------ Short-Term U.S. Treasury $ 0 $ 0 0% 0% Securities Fund ------------------------------- ------------------ ---------------------- ------------------- ------------------ Small Cap Value Equity $1,007,234 $ 4,817 0.5% 7.5% Fund ------------------------------- ------------------ ---------------------- ------------------- ------------------ Small Cap Growth Stock $ 879,037 $ 1,927 0.2% 12.1% Fund ------------------------------- ------------------ ---------------------- ------------------- ------------------ Tax-Exempt Money $ 0 $ 0 0% 0% Market Fund ------------------------------- ------------------ ---------------------- ------------------- ------------------ Tax Sensitive Growth $ 778,609 $ 17,943 2.3% 4.7% Stock Fund ------------------------------- ------------------ ---------------------- ------------------- ------------------ U.S. Government $ 0 $ 0 0% 0% Securities Fund ------------------------------- ------------------ ---------------------- ------------------- ------------------ U.S. Government $ 188,047 $188,047 100% 100% Securities Money Market Fund ------------------------------- ------------------ ---------------------- ------------------- ------------------ U.S. Treasury Money $ 331,610 $331,610 100% 100% Market Fund + ------------------------------- ------------------ ---------------------- ------------------- ------------------ Value Income Stock Fund $3,356,918 $ 60,581 1.8% 43.2% ------------------------------- ------------------ ---------------------- ------------------- ------------------ Virginia Intermediate $ 0 $ 0 0% 0% Municipal Bond Fund + ------------------------------- ------------------ ---------------------- ------------------- ------------------ Virginia Municipal Bond $ 0 $ 0 0% 0% Fund + ------------------------------- ------------------ ---------------------- ------------------- ------------------ Virginia Tax-Free Money $ 0 $ 0 0% 0% Market Fund + ---------------------------------------------------------------------------------------------------------------------------
1 These amounts refer to brokerage commissions paid to, or brokered transactions effected through, SEI Investments Distribution Co., the Trust's principal underwriter. + Prior to May 24, 1999, brokerage fees were paid by the predecessor to this Fund pursuant to an agreement between the CrestFunds and the Adviser for the fiscal years ended November 30, 1999 and November 30, 1998, respectively. B-70 For the fiscal years ended May 31, 1999 and 1998, the Funds paid the following brokerage commissions with respect to portfolio transactions:
TOTAL $ AMOUNT OF BROKERAGE TOTAL $ AMOUNT OF BROKERED COMMISSIONS PAID COMMISSIONS PAID TO AFFILIATES ----------------------------------------- ------------------------------------------- FUND 1999 1998 1999 1998 --------------------------------- ------------------- ------------------- -------------------- ------------------- Balanced Fund $ 489,522 $ 169,222 N/A $ 4,280 --------------------------------- ------------------- ------------------- -------------------- ------------------- Capital Appreciation Fund $5,657,513 $ 3,339,393 N/A $ 34,827 --------------------------------- ------------------- ------------------- -------------------- ------------------- Core Equity Fund $ 0 * N/A * --------------------------------- ------------------- ------------------- -------------------- ------------------- E-Commerce Opportunity Fund $ 0 * N/A * --------------------------------- ------------------- ------------------- -------------------- ------------------- Florida Tax-Exempt Bond Fund $ 0 $ 0 N/A $ 200 --------------------------------- ------------------- ------------------- -------------------- ------------------- Georgia Tax-Exempt Bond Fund $ 0 $ 0 N/A $ 135 --------------------------------- ------------------- ------------------- -------------------- ------------------- Growth and Income Fund + $1,026,236 $ 1,031,949 N/A $ 0 --------------------------------- ------------------- ------------------- -------------------- ------------------- High Income Fund $ 0 $ N/A N/A N/A --------------------------------- ------------------- ------------------- -------------------- ------------------- International Equity Index Fund $ 103,312 $ 21,288 $ 0 $ 71 --------------------------------- ------------------- ------------------- -------------------- ------------------- International Equity Fund $4,701,955 $ 3,098,063 $ 0 $ 0 --------------------------------- ------------------- ------------------- -------------------- ------------------- Investment Grade Bond Fund $ 0 $ 0 N/A $ 0 --------------------------------- ------------------- ------------------- -------------------- ------------------- Investment Grade Tax-Exempt $ 0 $ 0 N/A $ 0 Bond Fund --------------------------------- ------------------- ------------------- -------------------- ------------------- Limited-Term Federal Mortgage $ 0 $ 0 N/A $ 73 Securities Fund --------------------------------- ------------------- ------------------- -------------------- ------------------- Maryland Municipal Bond Fund $ 0 N/A N/A N/A --------------------------------- ------------------- ------------------- -------------------- ------------------- Mid-Cap Equity Fund $ 612,170 $ 191,298 N/A $ 18,224 --------------------------------- ------------------- ------------------- -------------------- ------------------- Prime Quality Money Market $ 0 $ 0 $ 0 $ 0 Fund --------------------------------- ------------------- ------------------- -------------------- ------------------- Short-Term Bond Fund $ 0 $ 0 $ 0 $ 0 --------------------------------- ------------------- ------------------- -------------------- ------------------- Short-Term U.S. Treasury $ 0 $ 0 $ 0 $ 0 Securities Fund --------------------------------- ------------------- ------------------- -------------------- ------------------- Small Cap Value Equity Fund $ 986,430 * N/A * --------------------------------- ------------------- ------------------- -------------------- ------------------- Small Cap Growth Stock Fund $ 141,859 * N/A * --------------------------------- ------------------- ------------------- -------------------- ------------------- Tax-Exempt Money Market $ 0 $ 0 $ 0 $ 0 Fund --------------------------------- ------------------- ------------------- -------------------- ------------------- Tax Sensitive Growth Stock $ 203,827 * N/A * Fund ---------------------------------------------------------------------------------------------------------------------------------
B-71
TOTAL $ AMOUNT OF BROKERAGE TOTAL $ AMOUNT OF BROKERED COMMISSIONS PAID COMMISSIONS PAID TO AFFILIATES ----------------------------------------- ------------------------------------------- FUND 1999 1998 1999 1998 --------------------------------- ------------------- ------------------- -------------------- ------------------- U.S. Government Securities $ 0 N/A $ 0 N/A Fund --------------------------------- ------------------- ------------------- -------------------- ------------------- U.S. Government Securities $ 0 N/A $ 0 N/A Money Market Fund --------------------------------- ------------------- ------------------- -------------------- ------------------- U.S. Treasury Money Market $ 0 N/A $ 0 N/A Fund + --------------------------------- ------------------- ------------------- -------------------- ------------------- Value Income Stock Fund $ 3,804,108 $ 4,325,977 N/A $ 37,379 --------------------------------- ------------------- ------------------- -------------------- ------------------- Virginia Intermediate Municipal $ 0 N/A $ 0 N/A Bond Fund + --------------------------------- ------------------- ------------------- -------------------- ------------------- Virginia Municipal Bond Fund + $ 0 N/A $ 0 N/A --------------------------------- ------------------- ------------------- -------------------- ------------------- Virginia Tax-Free Money $ 0 N/A $ 0 N/A Market Fund + ---------------------------------------------------------------------------------------------------------------------------------
*Not in operation during the period. +Prior to May 24, 1999, brokerage fees were paid by the predecessor to this Fund pursuant to an agreement between the CrestFunds and the Adviser for the fiscal years ended November 30, 1999 and November 30, 1998, respectively. For the fiscal years ended May 31, 2000, 1999, and 1998, the portfolio turnover rate for each of the non-money market funds was as follows:
TURNOVER RATE ---------------------------------------------- FUND 2000 1999 1998 ----------------------------------------------------------------------- ----------- ----------- ---------- Balanced Fund 182% 179% 154% ----------------------------------------------------------------------- ----------- ----------- ---------- Capital Appreciation Fund 129% 147% 194% ----------------------------------------------------------------------- ----------- ----------- ---------- Core Equity Fund 44% * * ----------------------------------------------------------------------- ----------- ----------- ---------- E-Commerce Opportunity Fund 250% * * ----------------------------------------------------------------------- ----------- ----------- ---------- Florida Tax-Exempt Bond Fund 88% 72% 69% ----------------------------------------------------------------------- ----------- ----------- ---------- Georgia Tax-Exempt Bond Fund 19% 12% 7% ----------------------------------------------------------------------- ----------- ----------- ---------- Growth and Income Fund 53% 71% 100% ----------------------------------------------------------------------- ----------- ----------- ---------- High Income Fund 0% N/A N/A ----------------------------------------------------------------------- ----------- ----------- ---------- International Equity Fund 179% 161% 108% ----------------------------------------------------------------------- ----------- ----------- ---------- International Equity Index Fund 9% 32% 1% ----------------------------------------------------------------------- ----------- ----------- ---------- Investment Grade Bond Fund 202% 221% 109% ----------------------------------------------------------------------------------------------------------------------------
B-72
TURNOVER RATE ---------------------------------------------- FUND 2000 1999 1998 ----------------------------------------------------------------------- ----------- ----------- ---------- Investment Grade Tax-Exempt Bond Fund 226% 224% 378% ----------------------------------------------------------------------- ----------- ----------- ---------- Limited-Term Federal Mortgage Securities Fund 384% 379% 163% ----------------------------------------------------------------------- ----------- ----------- ---------- Maryland Municipal Bond Fund 14% 19% 12% ----------------------------------------------------------------------- ----------- ----------- ---------- Mid-Cap Equity Fund 131% 76% 129% ----------------------------------------------------------------------- ----------- ----------- ---------- Short-Term Bond Fund 69% 108% 87% ----------------------------------------------------------------------- ----------- ----------- ---------- Short-Term U.S. Treasury Securities Fund 50% 57% 39% ----------------------------------------------------------------------- ----------- ----------- ---------- Small Cap Value Equity Fund 65% 63% 55% ----------------------------------------------------------------------- ----------- ----------- ---------- Small Cap Growth Stock Fund 110% * * ----------------------------------------------------------------------- ----------- ----------- ---------- Tax Sensitive Growth Stock Fund 30% * * ----------------------------------------------------------------------- ----------- ----------- ---------- U.S. Government Securities Fund 29% 19% 14% ----------------------------------------------------------------------- ----------- ----------- ---------- Value Income Stock Fund 62% 69% 99% ----------------------------------------------------------------------- ----------- ----------- ---------- Virginia Intermediate Municipal Bond Fund 18% 19% 30% ----------------------------------------------------------------------- ----------- ----------- ---------- Virginia Municipal Bond Fund 19% 28% 39% ----------------------------------------------------------------------------------------------------------------------------
* Not in operation during the period. DESCRIPTION OF SHARES The Declaration of Trust authorizes the issuance of an unlimited number of shares and classes of shares of the Funds each of which represents an equal proportionate interest in that Fund with each other share. Shares are entitled upon liquidation to a pro rata share in the net assets of the Funds. Shareholders have no preemptive rights. The Declaration of Trust provides that the Trustees of the Trust may create additional series of shares or classes of series. All consideration received by the Trust for shares of any additional series and all assets in which such consideration is invested would belong to that series and would be subject to the liabilities related thereto. Share certificates representing shares will not be issued. SHAREHOLDER LIABILITY The Trust is an entity of the type commonly known as a "Massachusetts business trust." Under Massachusetts law, shareholders of such a trust could, under certain circumstances, be held personally liable as partners for the obligations of the trust. Even if, however, the Trust were held to be a partnership, the possibility of the shareholders' incurring financial loss for that reason appears remote because the Trust's Declaration of Trust contains an express disclaimer of shareholder liability for obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by or on behalf of the Trust or the Trustees, and because the Declaration of Trust provides for indemnification out of the Trust property for any shareholder held personally liable for the obligations of the Trust. B-73 LIMITATION OF TRUSTEES' LIABILITY The Declaration of Trust provides that a Trustee shall be liable only for his own willful defaults and, if reasonable care has been exercised in the selection of officers, agents, employees or investment advisers, shall not be liable for any neglect or wrongdoing of any such person. The Declaration of Trust also provides that the Trust will indemnify its Trustees and officers against liabilities and expenses incurred in connection with actual or threatened litigation in which they may be involved because of their offices with the Trust unless it is determined in the manner provided in the Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the Trust. However, nothing in the Declaration of Trust shall protect or indemnify a Trustee against any liability for his willful misfeasance, bad faith, gross negligence or reckless disregard of his duties. 5% AND 25% SHAREHOLDERS As of August 23, 2000, the following persons were the only persons who were record owners (or to the knowledge of the Trust, beneficial owners) of 5% and 25% or more of the shares of the Funds. Persons who owned of record or beneficially more than 25% of a Fund's outstanding shares may be deemed to control the Fund within the meaning of the Act. The Trust believes that most of the shares of the Trust Class of the Funds were held for the record owner's fiduciary, agency or custodial customers. 5% SHAREHOLDERS
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== High Income Fund Homesure of America Inc. 74,180.4930 Flex 13.79% P.O. Box 551510 Ft. Lauderdale, FL 33355-1510 --------------------------------------------------------------------------------------------------------------------------- High Income Fund NFSC FEBO 37,827.4820 Flex 7.03% NFSC/FMTC IRA FBO Marius J. Herrin 151 Ashland Way Gray, GA 31032-6333 --------------------------------------------------------------------------------------------------------------------------- Core Equity Fund Trustman 7,214,837.4120 Trust 46.25% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Core Equity Fund Trustman 5,532,802.7740 Trust 35.47% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Core Equity Fund Trustman 1,698,244.2470 Trust 10.89% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 ---------------------------------------------------------------------------------------------------------------------------
B-74
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== Core Equity Fund HAMAC & CO 919,206.7450 Trust 5.89% Attn. Barbara Holloway P.O. Box 26665 HDQ 5706 Richmond, VA 23261-6665 --------------------------------------------------------------------------------------------------------------------------- Small Cap Growth Stock Vanguard Group 103,990.9640 Investor 5.66% Fund FBO Lockwood Greene 401K and Profit Sharing Plan 92477 P.O. Box 2600 VM 613 Valley Forge, PA 19482-2600 --------------------------------------------------------------------------------------------------------------------------- E-Commerce Opportunity Trustman 2,446,890.3920 Trust 35.49% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- E-Commerce Opportunity Trustman 2,759,590.0360 Trust 40.03% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- E-Commerce Opportunity Trustman 1,519,455.2740 Trust 22.04% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Prime Quality Money SunTrust Bank 3,319,523,002.5500 Trust 94.42% Market Fund Attn. Susan Grider Mail Center 3133 PO Box 105504 Atlanta, GA 30348-5504 --------------------------------------------------------------------------------------------------------------------------- Prime Quality Money National Financial Services Corp. 1,453,732,522.6000 Investor 95.73% Market Fund For Exclusive Benefit of our Cust. Attn. Mutual Funds Dept. One World Financial Center 200 Liberty Street, FL 5 New York, NY 10281-5500 --------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities SunTrust Bank 399,468,347.3200 Trust 76.43% Money Market Fund Attn. Susan Grider Mail Center 3133 PO Box 105504 Atlanta, GA 30348-5504 ---------------------------------------------------------------------------------------------------------------------------
B-75
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== U.S. Government Securities SunTrust Bank Central Florida 91,739,218.3800 Trust 17.55% Money Market Fund TTEE FBO Sawtek Inc. ESOP & Profit Sharing Plan c/o FASCORP 8515 E. Orchard Rd. #2T2 Englewood, CO 80111-5037 --------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities Akerman, Senterfitt & Eidson 5,511,239.000 Investor 6.41% Money Market Fund Attorney Account P.O. Box 231 Orlando, FL 32802-0231 --------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities National Financial Services Corp. 60,932,005.3900 Investor 70.82% Money Market Fund for Exclusive Bene. of our Cust. Attn: Mutual Funds Department One World Financial Center 200 Liberty St., FL 5 New York, NY 10281-5500 --------------------------------------------------------------------------------------------------------------------------- Tax-Exempt Money Market SunTrust Bank 900,357,587.7800 Trust 99.95% Fund Attn. Susan Grider Mail Center 3133 PO Box 105504 Atlanta, GA 30348-5504 --------------------------------------------------------------------------------------------------------------------------- Tax-Exempt Money Market National Financial Services Corp. 134,980,310.7000 Investor 91.29% Fund for Exclusive Benefit of our Cust. Attn. Mutual Funds Dept. One World Financial Center 200 Liberty Street, FL 5 New York, NY 10281-5500 --------------------------------------------------------------------------------------------------------------------------- Investment Grade Bond Trustman 27,992,689.0040 Trust 30.84% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Investment Grade Bond Trustman 16,653,086.4780 Trust 18.35% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Investment Grade Bond Trustman 31,187,371.0410 Trust 34.36% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 ---------------------------------------------------------------------------------------------------------------------------
B-76
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== Investment Grade Tax- Trustman 2,151,679.1060 Trust 20.84% Exempt Bond Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Investment Grade Tax- Trustman 2,654,481.6810 Trust 25.71% Exempt Bond Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Investment Grade Tax- Trustman 5,517,437.3330 Trust 53.44% Exempt Bond Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Investment Grade Tax- Marion G. Nelson 100,000.0000 Investor 5.64% Exempt Bond Fund P.O. Box 2531 Panama City, FL 32402-2531 --------------------------------------------------------------------------------------------------------------------------- Capital Appreciation Fund Trustman 17,185,918.7750 Trust 25.69% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Capital Appreciation Fund Trustman 4,632,216.6710 Trust 6.92% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Capital Appreciation Fund Trustman 12,017,275.8480 Trust 17.96% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Capital Appreciation Fund Trustman 10,853,503.2440 Trust 16.22% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 ---------------------------------------------------------------------------------------------------------------------------
B-77
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== Capital Appreciation Fund Trustman 5,186,305.2820 Trust 7.75% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Value Income Stock Fund Trustman 44,612,224.7340 Trust 58.00% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Value Income Stock Fund Trustman 6,518,875.4900 Trust 8.47% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Value Income Stock Fund Nissan Motor Corp-USA 401K 4,471,158.5010 Trust 5.81% Plan RH03 State Street Bank TTEE P.O. Box 1992 Attn: Cathie Noyes Boston, MA 02105-1992 --------------------------------------------------------------------------------------------------------------------------- Short-Term U.S. Treasury Trustman 1,755,888.4890 Trust 19.87% Securities Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Short-Term U.S. Treasury Trustman 2,603,683.2140 Trust 29.46% Securities Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Short-Term U.S. Treasury Trustman 2,301,864.1110 Trust 26.04% Securities Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Short-Term U.S. Treasury CENCO 1,819,658.6460 Trust 20.59% Securities Fund AMG 7th Floor P.O. Box 10566 Birmingham, AL 35296-0001 ---------------------------------------------------------------------------------------------------------------------------
B-78
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== Short-Term U.S. Treasury Clarence A. Rittenhouse 70,601.9160 Investor 34.48% Securities Fund Margaret S. Rittenhouse Jt Wros 12993 Lampadaire Drive Creve Coeur, MO 63141-7361 --------------------------------------------------------------------------------------------------------------------------- Short-Term U.S. Treasury NFSC FEBO 12,049.4280 Investor 5.89% Securities Fund NFSC/FMTC IRA FBO James H. Gordon P.O. Box 1858 Umatilla, FL 32784-1858 --------------------------------------------------------------------------------------------------------------------------- Short-Term U.S. Treasury NFSC FEBO 11,797.3110 Investor 5.76% Securities Fund Bill Lovett TTEE Hussey Gay Bell & DeYoung Inc. PS P.O. Box 14247 Savannah, GA 31416-1247 --------------------------------------------------------------------------------------------------------------------------- Short-Term U.S. Treasury NFSC FEBO 10,891.6780 Investor 5.32% Securities Fund Poucher Sexton Spitzer TTEE A Randys Electric 401K P.O. Box 42577 St. Petersburg, FL 33742-4577 --------------------------------------------------------------------------------------------------------------------------- Short-Term Bond Fund Trustman 5,511,633.9490 Trust 26.83% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Short-Term Bond Fund Trustman 7,604,921.5280 Trust 37.02% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Short-Term Bond Fund Trustman 4,983,888.3070 Trust 24.26% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Short-Term Bond Fund Trustman 1,106,663.5470 Trust 5.39% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 ---------------------------------------------------------------------------------------------------------------------------
B-79
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== Short-Term Bond Fund SunTrust Bank Atlanta 11,663.9630 Investor 8.10% Custodian for the Sep of Charles I. Schwartz Sep c/o Avanti Properties Group 431 E. Horatio Ave. #210 Maitland, FL 32751-4560 --------------------------------------------------------------------------------------------------------------------------- Short-Term Bond Fund Barton Memorial Hospital 14,227.9290 Investor 9.88% Foundation Inc. P.O. Box 877 Bartow, FL 33831-0877 --------------------------------------------------------------------------------------------------------------------------- Short-Term Bond Fund NFSC FEBO 14,743.4060 Investor 10.24% NFSC/FMTC IRA Rollover FBO Dewey L. Haggard 549 Hollydale Ct NW Atlanta, GA 30342-3633 --------------------------------------------------------------------------------------------------------------------------- Mid-Cap Equity Fund Trustman 6,794,705.5660 Trust 48.51% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Mid-Cap Equity Fund Trustman 1,284,465.2840 Trust 9.17% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Mid-Cap Equity Fund Trustman 4,565,476.0350 Trust 32.59% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Mid-Cap Equity Fund Anthony R. Gray 64,026.2820 Investor 6.35% 460 Virginia Dr. Winter Park, FL 32789-5805 --------------------------------------------------------------------------------------------------------------------------- Balanced Fund Trustman 2,346,996.2120 Trust 14.11% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 ---------------------------------------------------------------------------------------------------------------------------
B-80
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== Balanced Fund SunTrust Bank Atlanta Trustee 975,197.5620 Trust 5.86% FBO Genuine Partnership Plan c/o FASCORP 8515 E. Orchard Rd. # 2T2 Englewood, CO 80111-5037 --------------------------------------------------------------------------------------------------------------------------- Florida Tax-Exempt Bond Trustman 1,072,484.2110 Trust 11.75% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Florida Tax-Exempt Bond Trustman 2,326,846.3530 Trust 25.49% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Florida Tax-Exempt Bond Trustman 5,729,017.7820 Trust 62.76% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Florida Tax-Exempt Bond Albert B. Marshall Trustee 15,667.4240 Investor 5.87% Fund Albert B. Marshall Family Trust Dated 4/7/87 P.O. Box 25 Umatilla, FL 32784-0025 --------------------------------------------------------------------------------------------------------------------------- Florida Tax-Exempt Bond Mary C. Marshall Trustee of the 15,667.4240 Investor 5.87% Fund Mary C. Marshall Family Trust DTD 4/7/87 P.O. Box 25 Umatilla, FL 32784-0025 --------------------------------------------------------------------------------------------------------------------------- Florida Tax-Exempt Bond Mildred Meinhart Rast 34,302.1730 Investor 12.85% Fund 821 Lake Port Blvd. Apt. #A404 Leesburg, FL 34748-7698 --------------------------------------------------------------------------------------------------------------------------- Georgia Tax-Exempt Bond Trustman 2,211,631.0820 Trust 26.26% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 ---------------------------------------------------------------------------------------------------------------------------
B-81
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== Georgia Tax-Exempt Bond Trustman 5,331,918.9320 Trust 63.31% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Georgia Tax-Exempt Bond Trustman 878,787.2850 Trust 10.43% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Georgia Tax-Exempt Bond Patrick J. Doran & Norma R. 33,279.4590 Investor 12.70% Fund Doran Jtten 2024 Fisher Trail NE Atlanta, GA --------------------------------------------------------------------------------------------------------------------------- Georgia Tax-Exempt Bond John L. Conyers 14,524.8920 Investor 5.54% Fund 124 Etowah Drive Cartersville, GA 30120-3730 --------------------------------------------------------------------------------------------------------------------------- Georgia Tax-Exempt Bond NFSC FEBO 54,153.2930 Investor 20.66% Fund M C Tatro 5360 Deer Run Dr. Conyers, GA 30094-4706 --------------------------------------------------------------------------------------------------------------------------- International Equity Index Trustman 15,109,097.8320 Trust 60.97% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- International Equity Index Trustman 4,935,317.9160 Trust 19.92% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- International Equity Index Trustman 3,720,555.5950 Trust 15.01% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 ---------------------------------------------------------------------------------------------------------------------------
B-82
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== International Equity Index NFSC FEBO 26,126.7150 Investor 7.96% Fund David E. Couk TTEE Blue Ridge Orthopaedic Assn. U/A 9/15/78 328 Hospital Drive Warrenton, VA 20186-3006 --------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities Trustman 2,478,762.6230 Trust 22.53% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities Trustman 4,036,236.2030 Trust 36.68% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities Trustman 3,719,131.0610 Trust 33.80% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities SunTrust Bank Atlanta 10,679.1030 Investor 7.86% Fund Custodian for the IRA of Jim P. Demos 618 Palisade Drive Murfreesboro, TN 37129-1254 --------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities SunTrust Bank Atlanta 8,650.0750 Investor 6.37% Fund Custodian for the IRA of Doris S. Demos 618 Palisade Drive Murfreesboro, TN 37129-1254 --------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities NFSC FEBO 8,108.7240 Investor 5.97% Fund Lillian M. Schwartz 7108 Purdue Place McLean, VA 22101-5065 --------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities NFSC FEBO 21,878.0140 Investor 16.10% Fund NFSC/FMTC IRA FBO Dona M. Bray 22 Little John Lane Rockledge, FL 32955-2411 ---------------------------------------------------------------------------------------------------------------------------
B-83
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== U.S. Government Securities NFSC FEBO 7,326.4070 Investor 5.39% Fund Faye A. Waldo TTEE Faye A. Waldo Trust U/A 4/30/91 5759 Arvine Ct. Ft. Myers, FL 33919-2719 --------------------------------------------------------------------------------------------------------------------------- Limited-Term Federal Trustman 7,428,502.9700 Trust 56.83% Mortgage Securities Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Limited-Term Federal Trustman 1,522,384.0120 Trust 11.65% Mortgage Securities Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Limited-Term Federal Trustman 3,695,419.3350 Trust 28.27% Mortgage Securities Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Limited-Term Federal International Brotherhood of 5,727.2330 Investor 5.13% Mortgage Securities Fund Electrical Workers Local Union 756 General Fund 5901 Airport Rd. Daytona Beach, FL 32124-6703 --------------------------------------------------------------------------------------------------------------------------- Limited-Term Federal SunTrust Bank Central Florida NA 11,278.4150 Investor 10.11% Mortgage Securities Fund Collateral Account Greater Orlando Assoc. of Realtors P.O. Box 587 Orlando, FL 32802-0587 --------------------------------------------------------------------------------------------------------------------------- Limited-Term Federal NFSC FEBO 5,750.7660 Investor 5.15% Mortgage Securities Fund Robert P. Bohmeier TTEE Robert P. Bohmeier Rev Trust U/A 11/7/91 3050 Ringwood Meadow Sarasota, FL 34235-7122 ---------------------------------------------------------------------------------------------------------------------------
B-84
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== International Equity Fund Trustman 10,980,664.0760 Trust 50.79% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- International Equity Fund Trustman 2,028,990.7160 Trust 9.39% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- International Equity Fund Trustman 6,455,759.3300 Trust 29.86% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Small Cap Value Equity NFSC FEBO 81,217.7800 Flex 10.01% Fund Gordon L. Dickens, III 11545 Wills Road, Suite 102 Alpharetta, GA 30004-2073 --------------------------------------------------------------------------------------------------------------------------- Investment Grade Tax- NFSC FEBO 92,506.9210 Flex 7.25% Exempt Bond Fund BSC Tres Investment P.O. Box 6447 Knoxville, TN 37914-0447 --------------------------------------------------------------------------------------------------------------------------- Short-Term U.S. Treasury NFSC FEBO 32,077.9150 Flex 5.90% Securities. Fund Dennis Murphy TTEE Olympian Tape Sales Inc. DBA United Tape Co PSP 2545 Ivy Street East Cumming, GA 30041-6459 --------------------------------------------------------------------------------------------------------------------------- Short-Term Bond Fund NFSC FEBO 13,553.6330 Flex 6.42% James Hunnicutt Pamela Hunnicutt 3764 Prairie Dunes Drive Sarasota, FL 34238-2853 --------------------------------------------------------------------------------------------------------------------------- Short-Term Bond Fund NFSC FEBO 10,999.6550 Flex 5.21% BJ Cole, Jr. Brenda W. Cole TTEE Cole Electric Co. 401K/PSP 1669 Westview Dr. SW Atlanta, GA 30310-1264 ---------------------------------------------------------------------------------------------------------------------------
B-85
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== Short-Term Bond Fund NFSC FEBO 10,603.4090 Flex 5.02% Aslam Khatri TTEE Trimble House Corp PS 1605 Indian Brook Way #100 Norcross, GA 30093-2663 --------------------------------------------------------------------------------------------------------------------------- Florida Tax-Exempt Bond NFSC FEBO 54,348.8360 Flex 5.87% Fund Joseph Pellegrino TR Joseph Pellegrino U/A 7/8/94 506 Oleander Drive Hallandale, FL 33009-6530 --------------------------------------------------------------------------------------------------------------------------- Georgia Tax-Exempt Bond NFSC FEBO 67,673.4290 Flex 7.49% Fund Francis E. Cook 1210 Peachtree Rd. Augusta, GA 30909-3822 --------------------------------------------------------------------------------------------------------------------------- International Equity Index NFSC FEBO 28,077.8180 Flex 6.28% Fund Darrell F. Ellison SunTrust Bank Atlanta Collateral Acct. 308 Brim Drive Macon, GA 31220-5402 --------------------------------------------------------------------------------------------------------------------------- Limited-Term Federal NFSC FEBO 13,218.1470 Flex 8.89% Mortgage Securities Fund John E. Fitzharris Barbara H. Fitzharris 5236 Pounds Drive South Stone Mountain, GA 30087-3668 --------------------------------------------------------------------------------------------------------------------------- Small Cap Value Equity Trustman 15,725,433.2370 Trust 73.62% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Small Cap Value Equity Trustman 2,032,622.2540 Trust 9.52% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Small Cap Growth Stock Trustman 11,719,479.4060 Trust 49.08% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 ---------------------------------------------------------------------------------------------------------------------------
B-86
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== Small Cap Growth Stock Trustman 2,759,980.7850 Trust 11.56% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Small Cap Growth Stock Trustman 4,199,043.4160 Trust 17.58% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Small Cap Growth Stock Trustman 2,556,728.3150 Trust 10.71% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Tax Sensitive Growth Stock Trustman 6,161,669.9170 Trust 29.00% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Tax Sensitive Growth Stock Trustman 7,304,709.2930 Trust 34.38% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Tax Sensitive Growth Stock Trustman 6,767,990.8170 Trust 31.85% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Life Vision Moderate Trustman 4,711,753.0440 Trust 66.46% Growth Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 ---------------------------------------------------------------------------------------------------------------------------
B-87
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== Life Vision Moderate HAMIC & Co TTEE 386,327.5710 Trust 5.45% Growth Fund Various Expediter 401K Plans SunTrust Bank - Mail Center 3144 Mutual Fund Reconciliation Unit P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Life Vision Moderate SunTrust Bank Trustee FBO 457,399.8800 Trust 6.45% Growth Fund RBI Corporation Profit Sharing Plan c/o FASCORP 8515 E. Orchard Rd. # 2T2 Englewood, CO 80111-5037 --------------------------------------------------------------------------------------------------------------------------- Life Vision Growth and Trustman 2,049,491.3530 Trust 61.82% Income Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Life Vision Growth and SunTrust Bank Trustee FBO 269,179.3520 Trust 8.12% Income Fund Dodson Brothers Extermination Co Profit Sharing Plan c/o FASCORP 8515 E. Orchard Rd. # 2T2 Englewood, CO 80111-5037 --------------------------------------------------------------------------------------------------------------------------- Life Vision Growth and SunTrust Bank Trustee FBO 272,309.6040 Trust 8.21% Income Fund Dye Vanmol & Lawrence Inc. Profit Sharing Plan c/o FASCORP 8515 E. Orchard Rd. # 2T2 Englewood, CO 80111-5037 --------------------------------------------------------------------------------------------------------------------------- Life Vision Growth and SunTrust Bank Trustee FBO 281,690.5010 Trust 8.50% Income Fund Hartman & Associates Inc. 401(K) Plan c/o FASCORP 8515 E. Orchard Rd. # 2T2 Englewood, CO 80111-5037 --------------------------------------------------------------------------------------------------------------------------- Life Vision Aggressive Trustman 991,743.9030 Trust 61.01% Growth Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 ---------------------------------------------------------------------------------------------------------------------------
B-88
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== Life Vision Aggressive Hamic & Co TTEE 111,490.2110 Trust 6.86% Growth Fund Various Expediter 401K Plans SunTrust Bank - Mail Center 3144 Mutual Fund Reconciliation Unit P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- U.S. Treasury Securities SunTrust Bank 725,143,736.9700 Trust 99.90% Money Market Fund Attn. Susan Grider Mail Center 3133 P.O. Box 105504 Atlanta, GA 30348-5504 --------------------------------------------------------------------------------------------------------------------------- Virginia Tax-Free Money SunTrust Bank 174,691,035.6600 Trust 97.62% Market Fund Attn. Susan Grider Mail Center 3133 P.O. Box 105504 Atlanta, GA 30348-5504 --------------------------------------------------------------------------------------------------------------------------- Virginia Tax-Free Money National Financial Services Corp. 55,959,626.9600 Investor 100.00% Market Fund for Exclusive Bene of our Cust. Attn: Mutual Fund Department One World Financial Center 200 Liberty St., FL 5 New York, NY 10281-5500 --------------------------------------------------------------------------------------------------------------------------- Virginia Intermediate Trustman 5,528,606.0990 Trust 27.11% Municipal Bond Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Virginia Intermediate Trustman 14,304,446.0250 Trust 70.16% Municipal Bond Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Virginia Intermediate NFSC FEBO 49,101.0690 Investor 6.88% Municipal Bond Fund Wilburn LC Attn: Linda Kline 459 Eagle Lane Harrisonburg, VA 22802-8710 --------------------------------------------------------------------------------------------------------------------------- Maryland Municipal Bond Trustman 657,290.0300 Trust 23.06% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 ---------------------------------------------------------------------------------------------------------------------------
B-89
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== Maryland Municipal Bond Trustman 1,389,870.2260 Trust 48.76% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Maryland Municipal Bond Trustman 181,109.7690 Trust 6.35% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Maryland Municipal Bond HAMAC & Co. 622,118.8660 Trust 21.83% Fund Attn: Barbara Holloway P.O. Box 26665 HDQ 5706 Richmond, VA 23261-6665 --------------------------------------------------------------------------------------------------------------------------- Maryland Municipal Bond NFSC FEBO 32,371.7910 Flex 5.16% Fund Roberta R. Hunt TTEE Roberta R. Hunt Trust 5722 Tennyson St. Riverdale, MD 20737-1327 --------------------------------------------------------------------------------------------------------------------------- Virginia Municipal Bond Trustman 1,011,088.8750 Trust 19.76% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Virginia Municipal Bond Trustman 2,290,147.7440 Trust 44.75% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Virginia Municipal Bond Trustman 1,482,213.5750 Trust 28.96% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Virginia Municipal Bond HAMAC & Co. 334,458.2920 Trust 6.54% Fund Attn: Barbara Holloway P.O. Box 26665 HDQ 5706 Richmond, VA 23261-6665 ---------------------------------------------------------------------------------------------------------------------------
B-90
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== Virginia Municipal Bond NFSC FEBO [# H3E-050865] 48,771.7930 Flex 9.34% Fund Virginia E. White 311 Desota Drive Richmond, VA 23229-7112 --------------------------------------------------------------------------------------------------------------------------- Growth and Income Fund Trustman 12,940,042.1530 Trust 22.85% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Growth and Income Fund Trustman 10,253,165.7590 Trust 18.10% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Growth and Income Fund Trustman 22,396,006.5630 Trust 39.54% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Growth and Income Fund Trustman 6,130,305.7160 Trust 10.82% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Prime Quality Money NFSC FEBO 162,060.6300 Flex 5.78% Market Fund John Beiser Maureen Beiser PMB 504 1266 W. Paces Ferry Road Atlanta, GA 30327-2306 --------------------------------------------------------------------------------------------------------------------------- Prime Quality Money NFSC FEBO 169,783.4200 Flex 6.06% Market Fund Paula E. Kelly 10970 Woodland Falls Drive Great Falls, VA 22066-1536 ---------------------------------------------------------------------------------------------------------------------------
25% SHAREHOLDERS B-91
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== Core Equity Fund Trustman 7,214,837.4120 Trust 46.25% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Core Equity Fund Trustman 5,532,802.7740 Trust 35.47% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- E-Commerce Opportunity Trustman 2,446,890.3920 Trust 35.49% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- E-Commerce Opportunity Trustman 2,759,590.0360 Trust 40.03% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Prime Quality Money SunTrust Bank 3,319,523,002.5500 Trust 94.42% Market Fund Attn. Susan Grider Mail Center 3133 PO Box 105504 Atlanta, GA 30348-5504 --------------------------------------------------------------------------------------------------------------------------- Prime Quality Money National Financial Services Corp. 1,453,732,522.6000 Investor 95.73% Market Fund For Exclusive Benefit of our Cust. Attn. Mutual Funds Dept. One World Financial Center 200 Liberty Street, FL 5 New York, NY 10281-5500 --------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities SunTrust Bank 399,468,347.3200 Trust 76.43% Money Market Fund Attn. Susan Grider Mail Center 3133 PO Box 105504 Atlanta, GA 30348-5504 --------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities National Financial Services Corp. 60,932,005.3900 Investor 70.82% Money Market Fund For Exclusive Benefit of our Cust. Attn. Mutual Funds Dept. One World Financial Center 200 Liberty Street, FL 5 New York, NY 10281-5500 ---------------------------------------------------------------------------------------------------------------------------
B-92
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== Tax-Exempt Money Market SunTrust Bank 900,357,587.7800 Trust 99.95% Fund Attn. Susan Grider Mail Center 3133 PO Box 105504 Atlanta, GA 30348-5504 --------------------------------------------------------------------------------------------------------------------------- Tax-Exempt Money Market National Financial Services Corp. 134,980,310.7000 Investor 91.29% Fund For Exclusive Benefit of our Cust. Attn. Mutual Funds Dept. One World Financial Center 200 Liberty Street, FL 5 New York, NY 10281-5500 --------------------------------------------------------------------------------------------------------------------------- Investment Grade Bond Trustman 27,992,689.0040 Trust 30.84% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Investment Grade Bond Trustman 31,187,371.0410 Trust 34.36% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Investment Grade Tax- Trustman 2,654,481.6810 Trust 25.71% Exempt Bond Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Investment Grade Tax- Trustman 5,517,437.3330 Trust 53.44% Exempt Bond Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Capital Appreciation Fund Trustman 17,185,918.7750 Trust 25.69% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Value Income Stock Fund Trustman 44,612,224.7340 Trust 58.00% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 ---------------------------------------------------------------------------------------------------------------------------
B-93
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== Short-Term U.S. Treasury Trustman 2,603,683.2140 Trust 29.46% Securities Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Short-Term U.S. Treasury Trustman 2,301,864.1110 Trust 26.04% Securities Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Short-Term U.S. Treasury Clarence A. Rittenhouse 70,601.9160 Investor 34.48% Securities Fund Margaret S. Rittenhouse Jt Wros 12993 Lampadaire Drive Creve Coeur, MO 63141-7361 --------------------------------------------------------------------------------------------------------------------------- Short-Term Bond Fund Trustman 5,511,633.9490 Trust 26.83% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Short-Term Bond Fund Trustman 7,604,921.5280 Trust 37.02% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Mid-Cap Equity Fund Trustman 6,794,705.5660 Trust 48.51% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Mid-Cap Equity Fund Trustman 4,565,476.0350 Trust 32.59% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Florida Tax-Exempt Bond Trustman 2,326,846.3530 Trust 25.49% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 ---------------------------------------------------------------------------------------------------------------------------
B-94
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== Florida Tax-Exempt Bond Trustman 5,729,017.7820 Trust 62.76% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Georgia Tax-Exempt Bond Trustman 2,211,631.0820 Trust 26.26% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Georgia Tax-Exempt Bond Trustman 5,331,918.9320 Trust 63.31% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- International Equity Index Trustman 15,109,097.8320 Trust 60.97% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities Trustman 4,036,236.2030 Trust 36.68% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities Trustman 3,719,131.0610 Trust 33.80% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Limited-Term Federal Trustman 7,428,502.9700 Trust 56.83% Mortgage Securities Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Limited-Term Federal Trustman 3,695,419.3350 Trust 28.27% Mortgage Securities Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 ---------------------------------------------------------------------------------------------------------------------------
B-95
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== International Equity Fund Trustman 10,980,664.0760 Trust 50.79% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- International Equity Fund Trustman 6,455,759.3300 Trust 29.86% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Small Cap Value Equity Trustman 15,725,433.2370 Trust 73.62% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 PO Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Small Cap Growth Stock Trustman 11,719,479.4060 Trust 49.08% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Tax Sensitive Growth Stock Trustman 6,161,669.9170 Trust 29.00% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Tax Sensitive Growth Stock Trustman 7,304,709.2930 Trust 34.38% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Tax Sensitive Growth Stock Trustman 6,767,990.8170 Trust 31.85% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Life Vision Moderate Trustman 4,711,753.0440 Trust 66.46% Growth Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 ---------------------------------------------------------------------------------------------------------------------------
B-96
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== Life Vision Growth & Trustman 2,049,491.3530 Trust 61.82% Income Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Life Vision Aggressive Trustman 991,743.9030 Trust 61.01% Growth Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- U.S. Treasury Securities SunTrust Bank 725,143,736.9700 Trust 99.90% Money Market Attn. Susan Grider Mail Center 3133 P.O. Box 105504 Atlanta, GA 30348-5504 --------------------------------------------------------------------------------------------------------------------------- Virginia Tax-Free Money SunTrust Bank 174,691,035.6600 Trust 97.62% Market Attn. Susan Grider Mail Center 3133 P.O. Box 105504 Atlanta, GA 30348-5504 --------------------------------------------------------------------------------------------------------------------------- Virginia Tax-Free Money National Financial Services Corp. 55,959,626.9600 Investor 100.00% Market for Exclusive Bene of our Cust. Attn: Mutual Fund Department One World Financial Center 200 Liberty St., FL 5 New York, NY 10281-5500 --------------------------------------------------------------------------------------------------------------------------- Virginia Intermediate Trustman 5,528,606.0990 Trust 27.11% Municipal Bond Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Virginia Intermediate Trustman 14,304,446.0250 Trust 70.16% Municipal Bond Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Maryland Municipal Bond Trustman 1,389,870.2260 Trust 48.76% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 ---------------------------------------------------------------------------------------------------------------------------
B-97
% OF FUND NAME AND ADDRESS NUMBER OF SHARES CLASS CLASS =========================================================================================================================== Virginia Municipal Bond Trustman 2,290,147.7440 Trust 44.75% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Virginia Municipal Bond Trustman 1,482,213.5750 Trust 28.96% Fund SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 --------------------------------------------------------------------------------------------------------------------------- Growth and Income Fund Trustman 22,396,006.5630 Trust 39.54% SunTrust Banks Mutual Fund Reconciliation Unit Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 ---------------------------------------------------------------------------------------------------------------------------
B-98 APPENDIX DESCRIPTION OF RATINGS The following descriptions are summaries of published ratings. DESCRIPTION OF COMMERCIAL PAPER RATINGS A-1 This is the highest category by Standard and Poor's (S&P) and indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2 Capacity for timely payment on issues with this designation is satisfactory and the obligation is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. PRIME-1 Issues rated Prime-1 (or supporting institutions) by Moody's have a superiorability for repayment of senior short-term debt obligations. Prime-1 repaymentability will often be evidenced by many of the following characteristics: - Leading market positions in well-established industries. - High rates of return on funds employed. - Conservative capitalization structure with moderate reliance on debt and ample asset protection. - Broad margins in earnings coverage of fixed financial charges and high internal cash generation. - Well-established access to a range of financial markets and assured sources of alternate liquidity. The rating F1 (Highest Credit Quality) is the highest commercial rating assigned by Fitch. Paper rated F1 is regarded as having the strongest capacity for timely payment of financial commitments. The rating F2 (Good Credit Quality) is the second highest commercial paper rating assigned by Fitch which reflects a satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of the higher ratings. The rating TBW-1 by Thomson BankWatch (Thomson) indicates a very high likelihood that principal and interest will be paid on a timely basis. DESCRIPTION OF MUNICIPAL NOTE RATINGS Moody's highest rating for state and municipal and other short-term notes is MIG-1 and VMIG-l. Short-term municipal securities rated MIG-1 or VMIG-1 are of the best quality. They have strong protection from established cash flows, superior liquidity support, or demonstrated broad-based access to the market for refinancing or both. Short-tenn municipal securities rated MIG-2 or VMIG-2 are of high quality. Margins of protection are ample although not so large as in the MIG- 1/VMIG-2 group. An S&P note rating reflects the liquidity concerns and market access risks unique to notes. Notes due in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment: A-1 - Amortization Schedule - the larger the final maturity relative to other maturities, the more likely it will be treated as a note, and - Source of Payment - the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note. S&P note rating symbols are as follows: SP-1 Strong capacity to pay principal and interest. Those issues determined to possess a very strong capacity to pay a debt service is given a plus (+) designation. SP-2 Satisfactory capacity to pay principal and interest with some vulnerability to adverse financial and economic changes over the term of the votes. DESCRIPTION OF CORPORATE BOND RATINGS S&P Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a rating indicates an extremely strong capacity to pay principal and interest. Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay principal and interest is very strong, and in the majority of instances they differ from AAA issues only in small degree. Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. Debt rated BB and B is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. Debt rated BB has less near-term vulnerability to default than other speculative grade debt. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to inadequate capacity to meet timely interest and principal payments. The BB rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BBB- rating. Debt rate B has greater vulnerability to default but presently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions would likely impair capacity or willingness to pay interest and repay principal. The B rating category also is used for debt subordinated to senior debt that is assigned an actual or implied BB or BB- rating. MOODY'S Bonds which are rated Aaa by Moody's are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large, or an exceptionally stable, margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Bonds rated Aa by Moody's are judged by Moody's to be of high quality by all standards. Together with bonds rated Aaa, they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than the Aaa securities. Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and A-2 interest are considered adequate, but elements may be present which suggest a susceptibility to impainnent sometime in the future. Bonds which are rated Baa are considered as medium-grade obligations (I.E., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Moody's bond ratings, where specified, are applied to financial contracts, senior bank obligations and insurance company senior policyholder and claims obligations with an original maturity in excess of one-year. Obligations relying upon support mechanisms such as letters-of-credit and bonds of indemnity are excluded unless explicitly rated. Obligations of a branch of a bank are considered to be domiciled in the country in which the branch is located. Unless noted as an exception, Moody's rating on a bank's ability to repay senior obligations extends only to branches located in countries which carry a Moody's sovereign rating. Such branch obligations are rated at the lower of the bank's rating or Moody's sovereign rating for the bank deposits for the country in which the branch is located. When the currency in which an obligation is denominated is not the same as the currency of the country in which the obligation is domiciled, Moody's ratings do not incorporate an opinion as to whether payment of the obligation will be affected by the actions of the government controlling the currency of denomination. In addition, risk associated with bilateral conflicts between an investor's home country and either the issuer's home country or the country where an issuer branch is located are not incorporated into Moody's ratings. Moody's makes no representation that rated bank obligations or insurance company obligations are exempt from registration under the U.S. Securities Act of 1933 or issued in conformity with any other applicable law or regulation. Nor does Moody's represent that any specific bank or insurance company obligation is legally enforceable or is a valid senior obligation of a rated issuer. Moody's ratings are opinions, not recommendations to buy or sell, and their accuracy is not guaranteed. A rating should be weighed solely as one factor in an investment decision and you should make your own study and evaluation of any issuer whose securities or debt obligations you consider buying or selling. FITCH Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade, broadly marketable, suitable for investment by trustees and fiduciary institutions liable to but slight market fluctuation other than through changes in the money rate. The prime feature of an AAA bond is a showing of earnings several times or many times interest requirements, with such stability of applicable earnings that safety is beyond reasonable question whatever changes occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be of safety virtually beyond question and are readily salable, whose merits are not unlike those of the AAA class, but whose margin of safety is less strikingly broad. The issue may be the obligation of a small company, strongly secured but influenced as to rating by the lesser financial power of the enterprise and more local type market. Bonds rated A are considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings. Bonds rated BBB are considered to be investment A-3 grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings. Bonds rated BB are considered speculative. The obligor's ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified which could assist the obligor in satisfying its debt service requirements. Bonds rated B are considered highly speculative. While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and interest reflects the obligor's limited margin of safety and the need for reasonable business and economic activity throughout the life of the issue. THOMSON Bonds rated AAA by Thomson BankWatch indicate that the ability to repay principal and interest on a timely basis is extremely high. Bonds rated AA indicate a very strong ability to repay principal and interest on a timely basis, with limited incremental risk compared to issues rated in the highest category. Bonds rated A indicate the ability to repay principal and interest is strong. Issues rated A could be more vulnerable to adverse developments (both internal and external) than obligations with higher ratings. Bonds rated BBB (the lowest investment-grade category) indicate an acceptable capacity to repay principal and interest. Issues rated "BBB" are, however, more vulnerable to adverse developments (both internal and external) than obligations with higher ratings. While not investment grade, the BB rating suggests that the likelihood of default is considerably less than for lower- rated issues. However, there are significant uncertainties that could affect the ability to adequately service debt obligations. Issues rated B show a higher degree of uncertainty and therefore greater likelihood of default than higher-rated issues. Adverse developments could negatively affect the payment of interest and principal on a timely basis. A-4 FINANCIAL STATEMENTS Following are the audited financial statements for the fiscal year ended May 31, 2000 and the reports of Arthur Andersen LLP, independent public accountants, dated July 18, 2000, relating to the financial statements and financial highlights. F-1 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 BALANCED FUND -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- COMMON STOCKS (59.8%) BASIC MATERIALS (0.7%) Air Products & Chemicals 42,000 $ 1,454 Alcoa 9,500 555 -------- 2,009 -------- CAPITAL GOODS (8.1%) Danaher 3,900 188 Eastman Kodak 9,900 592 Energizer Holdings* 7,433 126 Fortune Brands 7,700 205 General Electric 138,600 7,294 Honeywell International 43,425 2,375 Illinois Tool Works 16,400 952 Minnesota Mining & Manufacturing 8,300 712 Republic Services* 38,400 634 Teradyne* 6,000 516 Textron 44,100 2,767 Tyco International 139,818 6,580 United Technologies 17,200 1,040 WW Grainger 6,000 240 -------- 24,221 -------- COMMUNICATION SERVICES (4.6%) ADC Telecommunications* 40,900 2,748 AT&T 11,300 392 AT&T Wireless Group* 2,000 57 CenturyTel 52,300 1,412 Charter Communications* 39,400 480 Comverse Technology* 8,900 813 Fox Entertainment Group* 600 16 Lucent Technologies 29,588 1,698 Motorola 12,401 1,163 Nortel Networks 20,600 1,119 Sprint (FON Group) 31,300 1,894 US West 19,300 1,390 Worldcom* 14,264 537 -------- 13,719 -------- CONSUMER CYCLICALS (12.7%) Bed Bath & Beyond* 3,800 140 Brinker International* 47,700 1,351 Carnival 32,400 879 Cendant* 174,741 2,315 Costco Wholesale* 43,100 1,377 CVS 86,700 3,771 Ecolab 26,900 1,029 Family Dollar Stores 33,300 658 Federated Department Stores* 4,500 173 Gannett 15,800 1,023 Gap 14,800 519 Interpublic Group 45,100 1,936 Knight Ridder 9,300 493 -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- CONSUMER CYCLICALS--CONTINUED Kroger* 171,400 $ 3,407 Linens 'N Things* 39,000 1,036 Lowe's 65,600 3,054 Masco 99,450 1,958 McGraw-Hill 19,000 977 MediaOne Group* 30,800 2,058 New York Times, Cl A 25,300 971 Office Depot* 16,350 115 RadioShack 83,200 3,531 Royal Caribbean Cruises 31,100 766 Saks* 32,300 373 SFX Entertainment* 22,600 986 SPX* 5,200 548 Time Warner 16,900 1,334 United Rentals* 31,200 507 Young & Rubicam 10,500 501 -------- 37,786 -------- CONSUMER STAPLES (3.4%) Avon Products 13,900 574 Bestfoods 22,100 1,425 Dial 9,300 133 Flowers Industries 32,000 578 McDonald's 8,600 308 Nabisco Group Holdings 64,900 1,416 Nabisco Holdings 10,000 462 Pepsico 38,800 1,579 Ralston-Ralston Purina Group 70,100 1,301 Viacom, Cl B* 39,372 2,441 -------- 10,217 -------- ENERGY (3.3%) Burlington Resources 29,200 1,336 Conoco 100,600 2,867 Halliburton 15,900 811 Kerr-McGee 29,900 1,785 Texaco 27,600 1,585 Unocal 43,300 1,664 -------- 10,048 -------- FINANCE (5.8%) ACE 44,200 1,185 American International Group 10,128 1,140 AmSouth Bancorporation 9,603 173 Associates First Capital 21,400 587 AXA Financial 14,000 545 Bank of America 33,531 1,863 Chase Manhattan 22,800 1,703 Cigna 21,000 1,865 Comerica 20,400 1,033 Conseco 34,100 213 Freddie Mac 11,300 503 32 -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- FINANCE--CONTINUED Mellon Financial 50,000 $ 1,928 Metlife* 37,300 765 PNC Financial Services Group 6,700 338 Radian Group 1,700 93 U.S. Bancorp 68,300 1,776 UnumProvident 11,700 265 Washington Mutual 40,676 1,169 -------- 17,144 -------- HEALTH CARE (7.9%) American Home Products 29,000 1,562 Baxter International 22,400 1,490 Bristol-Myers Squibb 40,100 2,208 Cardinal Health 33,465 2,171 Eli Lilly 7,050 537 HCA 4,400 119 Health Management Associates, Cl A* 66,800 789 Johnson & Johnson 20,300 1,817 Merck 43,900 3,276 Mylan Laboratories 1,800 48 Pharmacia 30,000 1,558 Schering-Plough 59,700 2,888 Tenet Healthcare* 56,900 1,458 Warner-Lambert 29,800 3,639 -------- 23,560 -------- TECHNOLOGY (12.7%) Analog Devices* 20,000 1,540 BMC Software* 27,100 1,192 Ceridian* 53,500 1,291 Cisco Systems* 98,400 5,603 Computer Associates International 9,100 469 Computer Sciences* 7,500 720 Dell Computer* 16,500 712 EMC* 15,800 1,838 Hewlett-Packard 21,500 2,583 Intel 35,400 4,414 International Business Machines 48,200 5,172 Microsoft* 88,500 5,537 Novellus Systems* 4,100 198 Sun Microsystems* 49,800 3,816 Texas Instruments 36,200 2,615 -------- 37,700 -------- TRANSPORTATION (0.6%) Sabre Holdings* 14,674 422 United Parcel Service 20,300 1,215 -------- 1,637 -------- Total Common Stocks (Cost $133,495) 178,041 -------- -------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- RIGHTS (0.0%) Cendant, Expires 02/14/01 8,000 $ 61 -------- Total Rights (Cost $0) 61 -------- PREFERRED STOCKS (0.3%) COMMUNICATION SERVICES (0.3%) Cox Communication, CV to 0.8621 Shares* 7,300 752 -------- FINANCE (0.0%) Conseco Financing Trust, Ser F, CV to 0.9363 Shares 10,000 92 -------- Total Preferred Stocks (Cost $1,146) 844 -------- CORPORATE OBLIGATIONS (17.5%) CONSUMER STAPLES (1.0%) Avon Products 7.150%, 11/15/09 $ 850 792 Cooper Tire & Rubber 7.750%, 12/15/09 2,350 2,225 -------- 3,017 -------- FINANCE (13.8%) AON 6.900%, 07/01/04 3,400 3,272 Aristar 7.250%, 06/15/06 2,600 2,483 Associates of North America 6.250%, 11/01/08 3,650 3,221 Conseco 8.750%, 02/09/04 4,250 2,911 6.800%, 06/15/05 2,500 1,650 Conseco (C) 6.400%, 06/15/11 950 712 Countrywide Home Loan 6.850%, 06/15/04 1,750 1,656 Countrywide Home Loan, MTN 6.510%, 02/11/05 2,300 2,110 Donaldson Lufkin Jenrette, MTN 6.150%, 05/04/04 1,250 1,169 Finova Capital 7.250%, 11/08/04 1,425 1,190 7.250%, 07/12/06 2,200 1,763 Finova Capital, MTN 7.300%, 09/22/03 3,000 2,591 Household Finance 7.200%, 07/15/06 2,250 2,126 Morgan Stanley Dean Witter, MTN 7.375%, 04/15/03 1,800 1,779 Paine Webber Group 6.020%, 04/22/02 3,000 2,884 33 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 BALANCED FUND--CONCLUDED -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- FINANCE--CONTINUED Provident 7.000%, 07/15/18 $2,550 $ 1,979 Reliastar Financial 8.000%, 10/30/06 1,540 1,525 6.500%, 11/15/08 2,000 1,822 Wachovia 5.625%, 12/15/08 1,300 1,102 Washington Mutual 8.600%, 02/01/02 1,750 1,761 7.500%, 08/15/06 1,425 1,368 -------- 41,074 -------- INDUSTRIAL (1.8%) Dillards 6.430%, 08/01/04 2,350 2,018 Marriott International 7.875%, 09/15/09 2,100 2,013 Philip Morris 7.500%, 04/01/04 500 480 Times Mirror 7.450%, 10/15/09 1,000 962 -------- 5,473 -------- UTILITIES (0.9%) Florida Power & Light 5.875%, 04/01/09 3,000 2,659 -------- Total Corporate Obligations (Cost $58,297) 52,223 -------- CONVERTIBLE BONDS (1.5%) Bell Atlantic Financial Services, CV to 178.0369 Shares, Callable 04/01/01 @ 102.3 5.750%, 04/01/03 650 635 Elan Finance, CV to 13.7500 Shares (A) 0.000%, 12/14/18 800 501 Network Associates, CV to 8.5380 Shares (A) 0.000%, 02/13/18 1,000 352 NTL, CV to 9.2435 Shares 5.750%, 12/15/09 300 234 Potomac Electric Power, CV to 29.5000 Shares 5.000%, 09/01/02 2,100 1,974 Solectron, CV to 12.3309 Shares (A) 0.000%, 05/05/20 1,400 786 -------- Total Convertible Bonds (Cost $4,650) 4,482 -------- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- U.S. AGENCY MORTGAGE- BACKED OBLIGATIONS (1.9%) FHLMC 7.375%, 05/15/03 $4,250 $ 4,251 FNMA 7.125%, 01/15/30 1,400 1,361 -------- Total U.S. Agency Mortgage- Backed Obligations (Cost $5,643) 5,612 -------- ASSET-BACKED OBLIGATIONS (1.4%) Commercial, Ser 1999-1, Cl A2 6.455%, 06/15/08 4,450 4,050 -------- Total Asset-Backed Obligations (Cost $4,117) 4,050 -------- U.S. TREASURY OBLIGATIONS (8.6%) U.S. Treasury Notes 6.500%, 08/31/01 4,950 4,934 6.500%, 02/15/10 2,600 2,637 7.500%, 11/15/16 6,550 7,244 8.750%, 08/15/20 8,500 10,718 -------- Total U.S. Treasury Obligations (Cost $25,180) 25,533 -------- REPURCHASE AGREEMENT (9.5%) Greenwich Capital 6.450%, dated 05/31/00, matures 06/01/00, repurchase price $28,246,331 (collateralized by various GNMA obligations: total market value $28,807,230) (D) 28,241 28,241 -------- Total Repurchase Agreement (Cost $28,241) 28,241 -------- Total Investments (100.5%) (Cost $260,769) 299,087 -------- OTHER ASSETS AND LIABILITIES, NET (-0.5%) (1,504) -------- 34 -------------------------------------------------------------------------------- VALUE (000) -------------------------------------------------------------------------------- NET ASSETS: Fund shares of the Trust Shares (unlimited authorization-- no par value) based on 16,728,349 outstanding shares of beneficial interest $183,902 Fund shares of the Investor Shares (unlimited authorization -- no par value) based on 716,879 outstanding shares of beneficial interest 7,976 Fund shares of the Flex Shares (unlimited authorization -- no par value) based on 4,848,311 outstanding shares of beneficial interest 62,104 Undistributed net investment income 1,359 Accumulated net realized gain on investments 3,924 Net unrealized appreciation on investments 38,318 -------- Total Net Assets (100.0%) $297,583 ======== Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $13.37 ======== Net Asset Value, Offering and Redemption Price Per Share -- Investor Shares $13.43 ======== Maximum Offering Price Per Share -- Investor Shares ($13.43 / 96.25%) $13.95 ======== Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $13.27 ======== (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 68. 35 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- COMMON STOCKS (90.8%) BASIC MATERIALS (0.9%) Air Products & Chemicals 357,100 $ 12,365 Alcoa 40,800 2,384 ---------- 14,749 ---------- CAPITAL GOODS (12.4%) Danaher 33,900 1,634 Eastman Kodak 84,000 5,019 Energizer Holdings* 63,033 1,072 Fortune Brands 31,500 839 General Electric 1,176,700 61,924 Honeywell International 370,262 20,249 Illinois Tool Works 139,200 8,082 Minnesota Mining & Manufacturing 71,100 6,097 Republic Services* 366,600 6,049 Teradyne* 50,800 4,369 Textron 377,900 23,713 Tyco International 1,225,004 57,652 United Technologies 146,200 8,836 WW Grainger 49,300 1,969 ---------- 207,504 ---------- COMMUNICATION SERVICES (7.6%) ADC Telecommunications* 347,200 23,327 AT&T 95,900 3,327 AT&T Wireless Group* 16,900 483 CenturyTel 451,050 12,178 Charter Communications* 381,700 4,652 Comverse Technology* 75,900 6,935 Lucent Technologies 287,351 16,487 Motorola 106,200 9,956 Nortel Networks 277,800 15,088 Sprint (FON Group) 265,900 16,087 US West 172,300 12,406 Worldcom* 162,453 6,112 ---------- 127,038 ---------- CONSUMER CYCLICALS (19.0%) Bed Bath & Beyond* 44,100 1,623 Brinker International* 405,200 11,472 Carnival 378,500 10,267 Cendant* 1,341,015 17,768 Costco Wholesale* 366,400 11,702 CVS 672,300 29,245 Ecolab 228,500 8,740 Family Dollar Stores 301,600 5,957 Federated Department Stores* 38,200 1,471 Gannett 114,600 7,420 Gap 68,200 2,391 Interpublic Group 384,000 16,488 Knight Ridder 79,100 4,192 Kroger* 1,454,200 28,902 -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- CONSUMER CYCLICALS--CONTINUED Linens 'N Things* 332,400 $ 8,829 Lowe's 715,100 33,297 Masco 891,100 17,544 McGraw-Hill 164,582 8,466 MediaOne Group* 263,500 17,605 New York Times, Cl A 146,700 5,630 Office Depot* 244,850 1,729 RadioShack 708,400 30,063 Royal Caribbean Cruises 275,300 6,779 Saks* 274,400 3,173 SFX Entertainment* 98,000 4,275 SPX* 44,500 4,686 Time Warner 158,000 12,472 United Rentals* 282,600 4,592 Young & Rubicam 44,200 2,111 ---------- 318,889 ---------- CONSUMER STAPLES (4.8%) Avon Products 117,800 4,867 Bestfoods 188,000 12,126 Dial 78,800 1,123 Flowers Industries 314,200 5,675 McDonald's 72,800 2,607 Nabisco Group Holdings 557,900 11,847 Nabisco Holdings 84,900 3,921 Pepsico 329,700 13,415 Ralston-Ralston Purina Group 255,600 4,745 Viacom, Cl B* 334,591 20,745 ---------- 81,071 ---------- ENERGY (4.4%) Burlington Resources 276,000 12,627 Conoco 708,100 20,181 Halliburton 140,000 7,140 Kerr-McGee 122,700 7,324 Texaco 208,800 11,993 Unocal 367,300 14,118 ---------- 73,383 ---------- FINANCE (8.9%) ACE 378,500 10,149 American International Group 89,895 10,119 AmSouth Bancorporation 105,001 1,897 Associates First Capital 183,800 5,043 AXA Financial 118,700 4,622 Bank of America 283,238 15,737 Chase Manhattan 194,700 14,542 Cigna 178,800 15,880 Comerica 173,700 8,794 Conseco 399,100 2,494 Freddie Mac 95,600 4,254 Mellon Financial 427,500 16,485 36 -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- FINANCE--CONTINUED Metlife* 316,300 $ 6,484 PNC Financial Services Group 76,100 3,834 Radian Group 14,600 803 U.S. Bancorp 581,400 15,116 UnumProvident 99,700 2,262 Washington Mutual 372,524 10,710 ---------- 149,225 ---------- HEALTH CARE (11.6%) American Home Products 246,800 13,296 Baxter International 190,800 12,688 Bristol-Myers Squibb 341,300 18,793 Cardinal Health 284,053 18,428 Eli Lilly 59,850 4,556 HCA 37,200 1,004 Health Management Associates, Cl A* 565,800 6,684 Johnson & Johnson 172,400 15,430 Merck 377,564 28,176 Mylan Laboratories 15,100 405 Pharmacia 255,500 13,270 Schering-Plough 506,900 24,521 Tenet Healthcare* 482,900 12,374 Warner-Lambert 207,900 25,390 ---------- 195,015 ---------- TECHNOLOGY (20.3%) Analog Devices* 169,500 13,051 BMC Software* 230,600 10,146 Ceridian* 468,900 11,312 Cisco Systems* 1,002,300 57,068 Computer Associates International 76,700 3,950 Computer Sciences* 63,600 6,102 Dell Computer* 141,100 6,085 EMC* 134,800 15,679 Hewlett-Packard 182,000 21,863 Intel 353,400 44,065 International Business Machines 409,500 43,944 Microsoft* 767,350 48,007 Novellus Systems* 35,300 1,701 Sun Microsystems* 453,000 34,711 Texas Instruments 308,600 22,296 ---------- 339,980 ---------- TRANSPORTATION (0.9%) Sabre Holdings* 128,309 3,689 United Parcel Service 190,100 11,382 ---------- 15,071 ---------- Total Common Stocks (Cost $1,053,202) 1,521,925 ---------- -------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- RIGHTS (0.1%) Cendant, Expires 02/14/01 188,000 $ 1,445 ---------- Total Rights (Cost $0) 1,445 ---------- PREFERRED STOCKS (0.4%) COMMUNICATION SERVICES (0.1%) Cox Communication, CV to 0.8621 Shares* 9,500 978 Global Crossing, CV to 4.6948 Shares 12,000 21 ---------- 999 ---------- FINANCE (0.0%) Conseco Financing Trust, Ser F, CV to 0.9363 Shares 5,500 51 ---------- HEALTH CARE (0.3%) Biovail, CV to 0.8241 Shares 125,000 5,820 ---------- Total Preferred Stocks (Cost $10,308) 6,870 ---------- CONVERTIBLE BONDS (2.9%) America Online, CV to 5.8338 Shares (A) 0.000%, 12/06/19 $ 7,000 3,482 At Home, CV to 17.6940 Shares 4.750%, 12/15/06 2,000 1,350 Bell Atlantic Financial Services, CV To 178.0369 Shares Callable 04/01/01 @ 102.3 5.750%, 04/01/03 6,150 6,012 Clear Channel Communications, CV to 9.4535 Shares 1.500%, 12/01/02 800 783 Devon Energy, CV to 9.3283 Shares 4.900%, 08/15/08 4,200 4,169 Echostar Communications, CV to 22.0070 Shares 4.875%, 01/01/07 2,500 2,663 Elan Finance, CV to 13.7500 Shares (A) 0.000%, 12/14/18 3,600 2,255 Molten Metal Technology, CV to 25.8065 Shares (B) 5.500%, 05/01/06 10,000 50 Network Associates, CV to 8.5380 Shares Callable 02/13/03 @ 49.452 (A) (B) 0.000%, 02/13/18 10,000 3,525 37 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 CAPITAL APPRECIATION FUND--CONCLUDED -------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- CONVERTIBLE BONDS--CONTINUED Network Associates, CV to 8.5380 Shares (A) 0.000%, 02/13/18 $ 2,000 $ 705 NTL, CV to 9.2435 Shares 5.750%, 12/15/09 5,500 4,290 Potomac Electric Power, CV to 29.5000 Shares 5.000%, 09/01/02 8,150 7,661 Solectron, CV to 12.3309 Shares (A) 0.000%, 05/05/20 11,700 6,567 Tower Automotive, CV to 38.6399 Shares 5.000%, 08/01/04 4,200 3,386 Waste Management, CV to 22.9590 Shares 4.000%, 02/01/02 3,000 2,696 ---------- Total Convertible Bonds (Cost $59,682) 49,594 ---------- REPURCHASE AGREEMENTS (4.7%) Deutsche Bank 6.450%, dated 05/31/00, matures 06/01/00, repurchase price $39,557,152 (collateralized by FNMA obligation: total market value $40,341,068) (D) 39,550 39,550 Greenwich Capital 6.450%, dated 05/31/00, matures 06/01/00, repurchase price $39,856,294 (collateralized by various GNMA obligations: total market value $40,647,043) (D) 39,849 39,849 ---------- Total Repurchase Agreements (Cost $79,399) 79,399 ---------- CASH EQUIVALENT (0.5%) AIM Liquid Assets Portfolio 7,941,822 7,942 ---------- Total Cash Equivalent (Cost $7,942) 7,942 ---------- Total Investments (99.4% ) (Cost $1,210,533) 1,667,175 ---------- OTHER ASSETS AND LIABILITIES, NET (0.6%) 9,332 ---------- -------------------------------------------------------------------------------- VALUE (000) -------------------------------------------------------------------------------- NET ASSETS: Fund shares of the Trust Shares (unlimited authorization -- no par value) based on 75,722,473 outstanding shares of beneficial interest $ 785,444 Fund shares of the Investor Shares (unlimited authorization -- no par value) based on 14,890,558 outstanding shares of beneficial interest 163,471 Fund shares of the Flex Shares (unlimited authorization -- no par value) based on 7,795,252 outstanding shares of beneficial interest 118,340 Accumulated net investment loss (1) Accumulated net realized gain on investments 152,611 Net unrealized appreciation on investments 456,642 ---------- Total Net Assets (100.0%) $1,676,507 ========== Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $17.12 ========== Net Asset Value, Offering and Redemption Price Per Share -- Investor Shares $16.91 ========== Maximum Offering Price Per Share -- Investor Shares ($16.91 / 96.25%) $17.57 ========== Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $16.45 ========== (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 68. 38 -------------------------------------------------------------------------------- CORE EQUITY FUND -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- COMMON STOCKS (98.5%) BASIC MATERIALS (1.0%) Avery Dennison 26,400 $ 1,617 -------- CAPITAL GOODS (8.5%) Dover 51,000 2,371 Honeywell International 51,500 2,816 Praxair 48,800 2,050 Sherwin-Williams 61,500 1,430 Tyco International 68,400 3,219 Weatherford International* 30,000 1,292 -------- 13,178 -------- COMMUNICATION SERVICES (4.4%) Bellsouth 46,000 2,148 Motorola 21,000 1,969 Worldcom* 72,200 2,717 -------- 6,834 -------- CONSUMER CYCLICALS (23.8%) Bed Bath & Beyond* 44,400 1,634 Brinker International* 68,800 1,948 CDW Computer Centers* 26,700 3,123 Circuit City 60,000 2,989 Costco Wholesale* 70,000 2,236 CVS 36,200 1,575 Ecolab 38,500 1,473 Family Dollar Stores 77,400 1,529 Gannett 30,700 1,988 Home Depot 51,450 2,511 Interpublic Group 54,000 2,319 Limited 140,400 3,387 LIZ Claiborne 66,500 2,614 Lowe's 46,500 2,165 McGraw-Hill 50,000 2,572 Omnicom Group 13,800 1,158 Walt Disney 45,600 1,924 -------- 37,145 -------- CONSUMER STAPLES (4.5%) Anheuser-Busch 28,800 2,232 Paychex 47,250 1,654 Sysco 75,100 3,149 -------- 7,035 -------- ENERGY (6.5%) Exxon Mobil 38,100 3,174 Halliburton 60,800 3,101 Schlumberger 32,000 2,354 Transocean Sedco Forex 31,200 1,535 -------- 10,164 -------- -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- FINANCE (18.3%) Aflac 56,000 $ 2,894 AMBAC Financial Group 35,000 1,763 American Express 28,800 1,550 Capital One Financial 34,700 1,640 Chase Manhattan 30,700 2,293 Citigroup 46,800 2,910 Freddie Mac 37,000 1,646 Golden West Financial 50,700 2,117 MBNA 75,200 2,096 Metlife* 180,800 3,706 MGIC Investment 38,800 1,923 Providian Financial 44,900 3,993 -------- 28,531 -------- HEALTH CARE (7.9%) Biomet 54,600 1,969 Eli Lilly 11,400 868 Health Management Associates, Cl A* 112,700 1,331 Schering-Plough 69,800 3,377 Warner-Lambert 39,200 4,787 -------- 12,332 -------- SERVICES (1.0%) Catalina Marketing* 15,500 1,497 -------- TECHNOLOGY (22.6%) BMC Software* 54,000 2,376 Cisco Systems* 49,200 2,801 Dell Computer* 39,000 1,682 Electronic Data Systems 50,400 3,241 Electronics for Imaging* 44,700 1,646 EMC* 19,000 2,210 Gateway* 63,500 3,143 Intel 37,600 4,688 Jabil Circuit* 87,800 3,205 Microchip Technology* 45,400 2,577 Microsoft* 24,600 1,539 Sun Microsystems* 20,500 1,571 Texas Instruments 47,400 3,425 Zebra Technologies* 21,300 1,022 -------- 35,126 -------- Total Common Stocks (Cost $141,847) 153,459 -------- 39 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 CORE EQUITY FUND--CONCLUDED -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- REPURCHASE AGREEMENT (1.4%) Morgan Stanley Dean Witter 6.450%, dated 05/31/00, matures 06/01/00, repurchase price $2,108,423, (collateralized by FNMA obligation: total market value $2,150,848) $2,108 $ 2,108 -------- Total Repurchase Agreement (Cost $2,108) 2,108 -------- Total Investments (99.9%) (Cost $143,955) 155,567 -------- OTHER ASSETS AND LIABILITIES, NET (0.1%) 201 -------- NET ASSETS: Fund shares of the Trust Shares (unlimited authorization -- no par value) based on 13,633,156 outstanding shares of beneficial interest 139,820 Fund shares of the Flex Shares (unlimited authorization -- no par value) based on 393,098 outstanding shares of beneficial interest 4,215 Accumulated net realized gain on investments 121 Net unrealized appreciation on investments 11,612 -------- Total Net Assets (100.0%) $155,768 ======== Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $11.11 ======== Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $11.06 ======== (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 68. 40 SCHEDULEOFINVESTMENTS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 E-COMMERCE OPPORTUNITY FUND -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- COMMON STOCKS (96.8%) CAPITAL GOODS (2.1%) Applied Materials* 20,000 $ 1,670 Spectrasite Holdings* 61,700 1,045 -------- 2,715 -------- COMMUNICATION SERVICES (12.4%) Akamai Technologies* 26,000 1,736 America Online* 84,200 4,463 American Power Conversion* 60,000 2,126 AT&T - Liberty Media Group* 26,200 1,161 EarthLink* 30,000 444 Gemstar International Group* 11,500 488 ITXC* 32,500 1,089 Net2Phone* 28,200 832 VeriSign* 9,200 1,245 Yahoo* 19,100 2,160 -------- 15,744 -------- COMPUTER SOFTWARE (21.5%) Amdocs* 84,200 5,215 Business Objects* 18,200 1,456 Check Point Software Technologies* 11,600 2,179 Harbinger* 137,900 2,060 ISS Group* 24,600 1,820 Micromuse* 16,000 1,593 Network Appliance* 19,600 1,265 Novell* 42,700 355 Oracle* 54,000 3,881 RealNetworks* 41,800 1,518 Siebel Systems* 17,300 2,024 Tibco Software* 38,600 2,147 Vignette* 48,610 1,340 Visual Networks* 8,000 397 -------- 27,250 -------- CONSUMER CYCLICALS (12.1%) Copart* 79,800 1,416 eBay* 22,000 1,376 First Data 25,000 1,402 Interpublic Group 99,700 4,281 Omnicom Group 17,400 1,461 Time Warner 12,500 987 TMP Worldwide* 61,600 3,403 Wal-Mart Stores 16,300 939 -------- 15,265 -------- ENERGY (7.0%) AES* 28,000 2,443 Dynegy, Cl A 35,000 2,699 Enron 50,300 3,666 -------- 8,808 -------- -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- FINANCE (2.2%) Knight Trading Group* 63,500 $ 1,845 Morgan Stanley Dean Witter 12,300 885 -------- 2,730 -------- SERVICES (6.1%) BroadVision* 23,000 824 Checkfree Holdings* 33,600 1,405 Devry* 58,600 1,637 Exodus Communications* 25,000 1,764 Infospace* 30,700 1,332 Viant* 30,000 750 -------- 7,712 -------- TECHNOLOGY (32.6%) Applied Micro Circuits* 19,600 1,945 AudioCodes* 37,500 2,740 Ciena* 13,300 1,592 Cisco Systems* 34,800 1,981 Clarent* 15,000 636 E-Tek Dynamics* 5,500 1,011 EMC* 27,600 3,210 Intel 24,700 3,080 Jabil Circuit* 41,000 1,497 JDS Uniphase* 8,800 774 LSI Logic* 55,300 2,914 Micron Technology* 57,600 4,028 National Semiconductor* 31,700 1,704 Oni Systems* 5,000 125 SDL* 4,100 929 Solectron* 101,700 3,362 STMicroelectronics ADR 10,000 599 Sonus Networks* 2,300 168 Sun Microsystems* 34,700 2,659 Texas Instruments 34,400 2,485 Xilinx* 50,900 3,875 -------- 41,314 -------- TRANSPORTATION (0.8%) United Parcel Service 16,700 1,000 -------- Total Common Stocks (Cost $125,976) 122,538 -------- Total Investments (96.8%) (Cost $125,976) $122,538 ======== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 68. 41 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 GROWTH AND INCOME FUND -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- COMMON STOCKS (98.6%) BASIC MATERIALS (3.0%) International Paper 650,000 $ 22,628 Nucor 175,000 6,803 -------- 29,431 -------- CAPITAL GOODS (8.1%) Boeing 500,000 19,531 Deere 450,000 18,703 General Electric 300,570 15,817 Illinois Tool Works 100,000 5,806 Ingersoll-Rand 450,000 20,503 SCI Systems* 960 43 -------- 80,403 -------- COMMUNICATION SERVICES (5.0%) ADC Telecommunications* 950 64 AT&T 400,000 13,875 AT&T - Liberty Media Group* 430 19 GTE 200,000 12,650 SBC Communications 225,000 9,830 Worldcom* 350,000 13,169 -------- 49,607 -------- CONSUMER CYCLICALS (7.9%) Albertson's 87,400 3,201 Gannett 75,000 4,856 Lowe's 80,000 3,725 Office Depot* 1,800,000 12,712 Sears Roebuck 250,000 9,234 Target 275,000 17,239 Time Warner 220 17 Wal-Mart Stores 440 25 Walt Disney 650,000 27,422 Viacom, Cl B* 477 30 -------- 78,461 -------- CONSUMER STAPLES (11.7%) Coca-Cola 350,000 18,681 Hershey Foods 325,000 16,859 Kellogg 450,000 13,669 Philip Morris 600,000 15,675 Procter & Gamble 330 22 Quaker Oats 400,000 29,425 Sara Lee 1,200,000 21,600 Sysco 700 29 -------- 115,960 -------- -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- ENERGY (10.2%) AES* 400 $ 35 Baker Hughes 1,100 40 Duke Energy 450,000 26,213 Exxon Mobil 325,000 27,077 Patterson Energy* 6,000 145 Royal Dutch Petroleum ADR 240,000 14,985 Schlumberger 200,000 14,712 Texaco 300,000 17,231 Williams 840 35 -------- 100,473 -------- FINANCE (17.5%) American International Group 180,317 20,297 Bank of America 290,130 16,120 Berkshire Hathaway* 12,000 22,632 Chubb 910 64 Citigroup 225,440 14,020 Fannie Mae 400,000 24,050 Fleet Boston Financial 500,000 18,906 KeyCorp 700,000 14,700 Morgan Stanley Dean Witter 125,000 8,992 PFF Bancorp 1,700 23 Safeco 1,790 44 St. Paul 1,960 73 Washington Mutual 400,000 11,500 Wells Fargo 475,470 21,515 -------- 172,936 -------- HEALTH CARE (10.8%) Allergan 470 32 Amgen* 265,000 16,861 HCA 500,000 13,500 Johnson & Johnson 225,000 20,137 Jones Pharma 1,500 55 Merck 265,000 19,776 Priority Healthcare* 1,000 51 Schering-Plough 300,000 14,512 Watson Pharmaceutical* 500,000 22,063 -------- 106,987 -------- TECHNOLOGY (24.0%) 3Com* 500,000 20,906 Adaptec* 1,000,000 19,688 America Online* 225,000 11,925 BMC Software* 400,000 17,600 Cisco Systems* 250,460 14,261 Compaq Computer 1,200,000 31,500 Computer Sciences* 275,000 26,383 Hewlett-Packard 125,000 15,016 Intel 200,000 24,938 International Business Machines 75,320 8,083 Lucent Technologies 175,000 10,041 Microsoft* 300,000 18,769 Southern 350,000 9,078 Sun Microsystems* 125,000 9,578 Titan* 3,800 136 -------- 237,902 -------- 42 -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- TRANSPORTATION (0.4%) UAL 75,000 $ 3,863 -------- Total Common Stocks (Cost $796,185) 976,023 -------- CASH EQUIVALENT (0.9%) SEI Daily Income Trust Prime Obligation Fund 9,499,988 9,500 -------- Total Cash Equivalent (Cost $9,500) 9,500 -------- Total Investments (99.5%) (Cost $805,685) 985,523 -------- OTHER ASSETS AND LIABILITIES, NET (0.5%) 4,714 -------- NET ASSETS: Fund shares of the Trust Shares (unlimited authorization -- no par value) based on 57,007,793 outstanding shares of beneficial interest 688,038 Fund shares of the Investor Shares (unlimited authorization -- no par value) based on 2,726,169 outstanding shares of beneficial interest 32,136 Fund shares of the Flex Shares (unlimited authorization -- no par value) based on 4,031,949 outstanding shares of beneficial interest 62,396 Undistributed net investment income 1,444 Accumulated net realized gain on investments 26,385 Net unrealized appreciation on investments 179,838 -------- Total Net Assets (100.0%) $990,237 ======== Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $15.53 ======== Net Asset Value, Offering and Redemption Price Per Share-- Investor Shares $15.65 ======== Maximum Offering Price Per Share-- Investor Shares ($15.65 / 96.25%) $16.26 ======== Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $15.49 ======== (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 68. 43 SCHEDULE OF INVESTMENTS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 INTERNATIONAL EQUITY FUND -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- FOREIGN COMMON STOCKS (93.7%) AUSTRALIA (2.1%) National Australia Bank 372,481 $ 5,570 Pasminco* 2,208,400 1,152 -------- 6,722 -------- BELGIUM (0.0%) Dexia VVPR Strips* 54,714 1 -------- DENMARK (1.1%) Danisco 97,200 3,528 -------- FRANCE (10.6%) Coflexip Stena Offshore 53,400 6,276 Elf Aquitaine 12 2 ISIS 33,000 2,097 Lafarge 80,700 6,278 Suez Lyonnaise des Eaux 12,000 2,025 Technip 61,610 6,456 Total Fina Elf 56,344 8,920 Vivendi 19,700 2,123 -------- 34,177 -------- GERMANY (4.3%) BASF 46,500 1,892 Bayer 51,000 1,977 Bayerische Vereinsbank 31,300 2,045 MG Technologies 381,700 5,671 Siemens 13,800 2,054 -------- 13,639 -------- HONG KONG (0.6%) Li & Fung 470,000 1,948 -------- IRELAND (0.0%) Bank of Ireland 17,306 102 -------- ISRAEL (0.8%) ECI Telecommunications ADR 98,380 2,669 -------- ITALY (5.6%) Banca Intesa* 689,385 2,733 ENI 1,203,500 6,520 Parmalat Finanziaria 2,640,500 3,302 Saipem 1,050,400 5,277 -------- 17,832 -------- JAPAN (23.5%) Canon 48,000 2,209 Daiwa House Industry 270,000 2,002 Daiwa Securities 170,000 2,067 Fuji Heavy Industry 1,256,000 9,324 Hirose Electric 12,600 1,764 Hitachi 194,000 2,402 -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- JAPAN--CONTINUED Japan Tobacco 456 $ 3,491 Kao 129,000 3,915 Kirin Brewery 237,400 2,864 Kyocera 13,400 2,223 Matsushita Electric 304,000 7,180 Minebea 158,000 1,866 Murata Manufacturing 12,000 2,071 Olympus Optical 200,000 3,434 Onward Kashiyama 172,000 2,298 Promise 24,200 2,032 Sharp 294,000 5,293 Sumitomo Heavy Industries 1,221,000 3,161 Tokio Marine & Fire Insurance 296,000 3,228 Toshiba 428,000 4,131 Yamada Denki 42,000 3,352 Yasuda Fire & Marine Insurance 543,000 2,797 Yokowo 83,000 2,326 -------- 75,430 -------- MEXICO (1.3%) Cemex ADR* 82,200 1,742 Fomento ADR 49,400 1,880 Kimberly, Ser A 223,800 692 -------- 4,314 -------- NETHERLANDS (5.9%) Fortis 170,000 4,493 IHC Caland 116,712 5,289 Randstad Holdings 58,000 2,365 Unique International 260,565 6,680 -------- 18,827 -------- NEW ZEALAND (1.0%) Fletcher Challenge Building 3,228,459 3,194 -------- NORWAY (7.2%) Kvaerner* 169,700 1,972 Petroleum Geo Services* 568,490 10,231 Petroleum Geo Services ADR* 564,400 10,759 -------- 22,962 -------- SOUTH AFRICA (1.3%) Gold Fields 442,000 1,602 Gold Fields ADR 221,000 870 Harmony Gold Mining 133,000 650 Harmony Gold Mining ADR 184,100 903 -------- 4,025 -------- SOUTH KOREA (1.1%) Hite Brewery 82,200 2,657 Pohang Iron & Steel ADR 45,000 922 -------- 3,579 -------- 44 -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- SPAIN (5.2%) Altadis 1,130,500 $ 16,657 -------- SWEDEN (1.9%) Sandvik 224,300 4,932 Swedish Match 358,200 1,118 -------- 6,050 -------- UNITED KINGDOM (20.2%) Allied Zurich 858,950 9,667 Diageo 1,713,405 14,705 Hanson 785,800 5,594 IMI 197,100 807 Imperial Tobacco Group 1,220,100 10,755 Prudential 167,000 2,534 Reckitt Benckiser 678,200 7,459 Rolls-Royce 1,554,369 5,737 Stagecoach Holdings 3,733,215 3,361 Unilever 619,100 4,099 -------- 64,718 -------- Total Foreign Common Stocks (Cost $294,340) 300,374 -------- FOREIGN COUPON (0.1%) NETHERLANDS (0.1%) Unique International 328,356 203 -------- Total Foreign Coupon (Cost $0) 203 -------- FOREIGN RIGHTS (0.0%) ITALY (0.0%) Banca Intesa* 20 -- -------- Total Foreign Rights (Cost $0) -- -------- FOREIGN WARRANT (0.0%) FRANCE (0.0%) Lafarge, Expires 03/20/01 18,732 67 -------- Total Foreign Warrant (Cost $0) 67 -------- Total Investments (93.8%) (Cost $294,340) $300,644 ======== At May 31, 2000, sector diversification of the Portfolio was as follows: % OF VALUE SECTOR DIVERSIFICATION NET ASSETS (000) ---------------------- ---------- ------- FOREIGN COMMON STOCK Food, Beverage and Tobacco 20.4% $65,200 Oil & Gas 15.7 50,083 Construction Material 7.9 25,236 Electronics 6.9 22,077 Insurance 5.7 18,224 Services 4.5 14,334 Consumer Products 4.1 13,102 Diversified Operations 3.9 12,536 Banking 3.3 10,451 Automotive 2.9 9,324 Financial Services 2.7 8,592 Machinery 2.5 8,093 Audio/Video 2.2 7,180 Metals 1.9 6,100 Aerospace 1.8 5,737 Cosmetics & Toiletries 1.2 3,915 Chemicals 1.2 3,868 Transportation 1.0 3,361 Retail 1.0 3,352 Telecommunications 0.8 2,669 Manufacturing 0.7 2,298 Real Estate 0.6 2,002 Distribution 0.6 1,948 Paper Products 0.2 692 ---- ------ TOTAL FOREIGN COMMON STOCK 93.7 300,374 FOREIGN COUPON 0.1 203 FOREIGN WARRANT -- 67 ----- -------- TOTAL INVESTMENTS 93.8% $300,644 ===== ======== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 68. 45 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 INTERNATIONAL EQUITY INDEX FUND -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- FOREIGN COMMON STOCKS (98.1%) AUSTRALIA (1.7%) Amcor 31,691 $ 92 AMP 36,999 323 Brambles Industries 9,286 255 Broken Hill Proprietary 58,570 598 Coles Myer 51,191 185 Colonial 33,865 183 CSR 63,354 147 Fosters Brewing Group 86,505 211 Lend Lease 23,858 272 National Australia Bank 57,815 865 News Corporation 58,659 666 Pacific Dunlop 78,743 75 PaperlinX* 24,530 43 Rio Tinto 16,506 237 Telstra 272,518 1,062 Westpac Banking 60,264 413 WMC 67,758 279 Woolworths 65,622 218 -------- 6,124 -------- AUSTRIA (1.1%) Austria Tabakwerke 7,130 244 Bank Austria 22,627 1,079 Flughafen Wien 6,206 209 Generali Holding Vienna 2,034 315 Mayr-Melnhof Karton 2,566 123 Oest Elektrizatswirts, Cl A 7,144 743 OMV 5,889 508 VA Technologie 3,630 200 Wienerberger Baustoffindustrie 16,020 365 -------- 3,786 -------- BELGIUM (1.0%) Bekaert 1,481 77 D'ieteren 498 127 Delhaize Freres 2,627 154 Electrabel 2,804 648 Fortis, Cl B 37,053 967 Groupe Bruxelles Lambert 1,253 303 KBC Bancassurance Holding 15,078 649 Solvay, Cl A 5,017 339 UCB 7,754 291 Union Miniere 1,483 53 -------- 3,608 -------- DENMARK (1.5%) D/S 1912, Cl B 77 846 D/S Svendborg, Cl B 47 741 Danisco 5,310 193 Den Danske Bank 3,600 420 Falck 800 122 -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- DENMARK--CONTINUED ISS* 3,200 $ 233 Navision Software* 2,600 97 Nordic Baltic Holding* 62,248 403 Novo-Nordisk, Cl B 5,070 844 Tele Danmark, Cl B 14,416 1,023 Vestas Wind Systems 7,000 258 William Demant Holdings 6,000 169 -------- 5,349 -------- FINLAND (1.7%) Merita* 12,800 69 Metso Oyj 1,600 21 Nokia Oyj 89,400 4,676 Outokumpu, Cl A 4,600 50 Sampo Insurance, Ser A 2,300 97 Sonera Group 12,700 646 Tietoenator Oyj, Cl B 1,800 71 UPM-Kymmene 6,200 158 -------- 5,788 -------- FRANCE (12.6%) Accor 8,004 326 Air Liquide 3,670 518 Alcatel Alsthom 41,000 2,279 Aventis 31,473 2,056 Axa 15,370 2,276 Banque National Paris, Cl A 21,864 1,983 BIC 3,540 158 Bouygues 1,369 852 Canal Plus 5,242 1,002 Cap Gemini 3,763 709 Carrefour 27,996 1,990 Casino Guichard-Perrachon 3,510 314 Cie de Saint Gobain 3,521 493 Dassault Systemes 5,636 431 Eridania Beghin-Say 1,250 115 Essilor International 623 184 France Telecom 41,035 6,019 Groupe Danone* 3,031 713 L'Oreal 2,747 1,901 Lafarge 4,501 350 Lagardere 5,922 416 Louis Vuitton-Moet Hennessy 3,889 1,594 Michelin, Cl B 5,743 191 Pechiney, Ser A 3,748 155 Pernod-Ricard 2,745 145 Peugeot 1,945 401 Pinault-Printemps-Redoute 4,874 1,054 Publicis 512 212 Sadexho Alliance 1,192 193 Sagem 500 590 Sanofi-Synthelabo 28,905 1,267 46 -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- FRANCE--CONTINUED Schneider 6,929 $ 464 Sidel 1,108 75 Societe Eurafrance 157 68 Societe Generale 15,162 879 STMicroelectronics 34,404 2,061 Suez Lyonnaise des Eaux 7,750 1,308 Thomson CSF* 6,237 243 Total Fina Elf 30,771 4,871 Total Fina Elf-Strip VVPR 1,314 -- Unibail 1,572 204 Usinor 15,197 184 Valeo 4,043 206 Vivendi 24,348 2,624 -------- 44,074 -------- GERMANY (14.1%) Adidas-Salomon 2,800 168 Allianz 14,380 5,216 BASF 36,800 1,497 Bayer 43,860 1,700 Bayerische Vereinsbank 24,922 1,628 Beiersdorf 5,290 412 Continental 9,150 171 DaimlerChrysler 59,916 3,263 Deutsche Bank 37,270 2,892 Deutsche Telekom 182,050 11,433 Douglas Holding 2,550 77 Dresdner Bank 31,500 1,290 EM.TV & Merchandising 7,000 472 Fresenius Medical 5,200 434 Gehe 4,800 161 Heidelberger Zement 4,074 239 Hochtief 5,110 163 Kamps 5,400 145 Karstadt Quelle 9,300 314 Linde 6,860 283 Lufthansa 22,980 566 Man Muenchen 6,310 221 Merck 10,600 342 Metro 16,301 535 Muenchener Rueckvers, Registered 10,560 3,118 Preussag 9,760 348 RWE 28,640 1,058 SGL Carbon* 1,150 80 SAP 3,650 1,522 Schering 4,060 612 Siemens 35,590 5,297 ThyssenKrupp 31,160 534 Veba 30,260 1,560 Viag 42,158 867 -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- GERMANY--CONTINUED Volkswagen 18,460 $ 753 WCM Beteiligungs 10,850 306 -------- 49,677 -------- HONG KONG (0.9%) Bank of East Asia 17,400 31 Cable & Wireless HKT 205,200 469 Cathay Pacific Airways 46,000 83 Cheung Kong Holdings 40,000 366 CLP Holdings 52,500 244 Hang Seng Bank 32,200 273 Hong Kong & China Gas 95,700 103 Hutchison Whampoa 69,080 798 Johnson Electric Holdings 16,000 119 New World Development 61,000 61 Sun Hung Kai Properties 36,600 223 Swire Pacific 36,500 210 Television Broadcasts 6,000 39 Wharf Holdings 42,000 75 -------- 3,094 -------- IRELAND (0.5%) Allied Irish Bank 43,700 405 CRH 16,100 281 Eircom 112,600 327 Independent News & Media (GB) 6,500 52 Independent News & Media 26,200 206 Jefferson Smurfit 125,100 246 Ryanair Holdings* 29,300 240 -------- 1,757 -------- ITALY (8.6%) Alitalia 112,439 220 Assicurazioni Generali 95,000 2,876 Autogrill 17,000 178 Banca di Roma* 377,500 410 Banca Intesa* 360,603 1,430 Banca Intesa RNC 51,000 107 Banca Popolare di Milano 18,500 121 Benetton Group 140,000 281 Bulgari 22,000 276 CartiereBurgo 10,500 100 Enel* 535,272 2,398 ENI 592,500 3,210 Fiat 26,400 674 Fiat RNC 6,700 92 Italcementi 23,400 213 Italgas 49,000 202 Magneti Marelli 25,000 128 Mediaset 87,000 1,354 Mediobanca 44,250 375 47 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 INTERNATIONAL EQUITY INDEX FUND--CONTINUED -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- ITALY--CONTINUED Mondadori Editore 8,734 $ 202 Olivetti 360,000 1,228 Parmalat Finanziaria 125,000 156 Pirelli 147,000 379 Reno de Medici 9,000 19 Rinascente 17,500 101 Riunione Adriatica di Sicurta 52,362 495 San Paolo-IMI 102,736 1,512 Sirti 38,000 70 Telecom Italia Mobile 488,000 5,109 Telecom Italia Mobile RNC 110,500 468 Telecom Italia 270,500 3,752 Telecom Italia RNC 65,000 405 UniCredito Italiano* 367,000 1,630 -------- 30,171 -------- JAPAN (33.3%) 77 Bank 16,000 146 Acom 7,000 514 Advantest 4,800 1,011 Ajinomoto 33,000 399 Amada 16,000 138 Aoyamma Trading 4,100 49 Asahi Bank 135,000 600 Asahi Breweries 24,000 298 Asahi Chemical Industry 73,000 454 Asahi Glass 59,000 547 Asatsu-DK 2,000 65 Autobacs Seven 1,600 46 Bank of Fukuoka 29,000 191 Bank of Tokyo Mitsubishi 223,000 2,794 Bank of Yokohama 50,000 213 Benesse 5,000 331 Bridgestone 42,000 959 Canon 42,000 1,933 Casio Computer 13,000 124 Central Japan Railway 108 601 Chiyoda* 18,000 18 Chugai Pharmaceutical 12,000 205 Chuo Mitsui Trust & Banking 45,000 181 Citizen Watch 17,000 146 Cosmo Oil 61,000 85 Credit Saison 7,800 157 CSK 2,800 86 Dai Nippon Printing 36,000 614 Daicel Chemical Industries 23,000 68 Daiei* 31,000 94 Daiichi Pharmaceutical 14,000 259 Daikin Industries 13,000 259 Daikyo* 4,000 9 Daimaru 18,000 51 Dainippon Ink & Chemicals 42,000 187 -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- JAPAN--CONTINUED Daito Trust Construction 6,400 $ 122 Daiwa Bank 87,000 220 Daiwa House Industry 26,000 193 Daiwa Kosho Lease 28,000 75 Daiwa Securities 64,000 778 Denso 44,000 998 East Japan Railway 191 1,088 Ebara 16,000 165 Eisai 14,000 301 Fanuc 11,500 1,002 Fuji Bank 163,000 1,260 Fuji Machine 2,000 97 Fuji Photo Film 24,000 837 Fujita* 17,000 7 Fujitsu 94,000 2,661 Furukawa Electric 29,000 414 Gunma Bank 26,000 142 Gunze 22,000 66 Hankyu Department Stores 11,000 54 Haseko* 89,000 34 Hirose Electric 1,900 266 Hitachi 160,000 1,981 Hokuriko Bank* 26,000 60 Honda Motor 46,000 1,515 Hoya 6,000 556 Industrial Bank of Japan 125,000 974 Isetan 11,000 108 Ito Yokado 20,000 1,186 Itochu* 65,000 262 Japan Airlines 89,000 268 Japan Energy* 97,000 90 Japan Steel Works* 34,000 32 Japan Tobacco 103 789 Joyo Bank 41,300 161 Jusco 16,000 274 Kadokawa Shoten Publishing 500 50 Kajima 59,000 147 Kaken Pharmaceutical 7,000 43 Kamigumi 23,000 110 Kanebo 34,000 72 Kaneka 17,000 175 Kansai Electric Power 50,700 873 Kao 30,000 910 Kawasaki Heavy Industries 75,000 98 Kawasaki Kisen Kaisha 27,000 42 Kawasaki Steel 169,000 256 Kinki Nippon Railway 82,000 327 Kirin Brewery 51,000 615 Komatsu 48,000 295 Konami 7,200 381 Koyo Seiko 8,000 56 Kubota 68,000 240 48 -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- JAPAN--CONTINUED Kumagai Gumi 57,000 $ 26 Kuraray 22,000 229 Kurita Water Industries 7,000 147 Kyocera 9,100 1,510 Kyowa Hakko Kogyo 21,000 191 Maeda Road Contruction 18,000 72 Marubeni 57,000 151 Marui 18,000 330 Matsushita Electric 98,000 2,314 Meiji Seika 23,000 149 Minebea 19,000 224 Mitsubishi 77,000 639 Mitsubishi Chemical 106,000 414 Mitsubishi Electric 103,000 1,011 Mitsubishi Estate 68,000 800 Mitsubishi Heavy Industries 172,000 597 Mitsubishi Materials 56,000 186 Mitsubishi Trust & Banking 60,000 484 Mitsui 75,000 527 Mitsui Fudosan 41,000 423 Mitsui Marine & Fire Insurance 37,000 196 Mitsui Mining & Smelting 26,000 172 Mitsui-Soko 15,000 31 Mitsukoshi 22,000 82 Murata Manufacturing 11,000 1,899 Mycal 16,000 48 Namco 2,300 58 NEC 77,000 1,951 NGK Insulators 19,000 197 NGK Spark Plug 13,000 152 Nidec 4,300 330 Nikon 18,000 496 Nintendo 6,700 995 Nippon Express 57,000 317 Nippon Mitsubishi Oil 71,000 291 Nippon Paper Industries 50,000 329 Nippon Sharyo 7,000 13 Nippon Sheet Glass 21,000 190 Nippon Shinpan 17,000 35 Nippon Steel 378,000 828 Nippon Suisan Kaisha 24,000 39 Nippon Telegraph & Telephone 607 7,210 Nippon Yusen 58,000 250 Nishimatsu Construction 25,000 90 Nissan Motor 191,000 1,001 Nissin Food Products 6,300 158 Nitto Denko 8,000 338 Nomura Securities 95,000 2,178 Noritake 18,000 82 NSK 27,000 208 NTN 29,000 95 -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- JAPAN--CONTINUED Obayashi 42,000 $ 160 Oji Paper 55,000 354 Okumura 21,000 63 Olympus Optical 13,000 223 Omron 13,000 335 Orient 24,000 109 Oriental Land 4,800 478 Orix 3,620 536 Osaka Gas 130,000 331 Oyo 1,700 19 Penta-Ocean Construction 12,000 14 Pioneer Electronics 9,000 275 Promise 5,800 487 Renown 8,000 9 Rohm 5,500 1,715 Sakura Bank 193,000 1,427 Sanden 12,000 71 Sankyo 23,000 530 Sanrio 4,000 107 Sanyo Electric 93,000 687 Secom 11,000 745 Sega Enterprises 5,200 78 Seino Transportation 15,000 68 Seiyu 16,000 65 Sekisui Chemical 35,000 120 Sekisui House 35,000 340 Sharp 53,000 954 Shimachu 3,400 57 Shimamura 2,700 282 Shimano 6,700 146 Shimizu 66,000 156 Shin-Etsu Chemical 21,000 1,029 Shionogi 16,000 254 Shiseido 19,000 261 Shizuoka Bank 36,000 340 Skylark 7,000 245 SMC 3,300 578 Snow Brand Milk Products 23,000 115 Softbank 5,800 888 Softbank - New* 10,000 1,499 Sony 42,600 3,854 Sumitomo 52,000 483 Sumitomo Bank 149,000 1,952 Sumitomo Chemical 83,000 401 Sumitomo Electric 44,000 641 Sumitomo Marine & Fire Insurance 35,000 219 Sumitomo Metal 174,000 119 Taisei 79,000 108 Taisho Pharmaceutical 17,000 519 Taiyo Yuden 6,000 455 Takara Shuzo 11,000 245 49 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 INTERNATIONAL EQUITY INDEX FUND--CONTINUED -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- JAPAN--CONTINUED Takashimaya 17,000 $ 153 Takeda Chemical 43,000 2,933 Takefuji 7,100 751 Teijin 53,000 221 Terumo 10,000 319 Toa 10,000 11 Tobu Railway 54,000 144 Toei 10,000 66 Toho 1,000 168 Tohoku Electric Power 32,600 408 Tokai Bank 109,000 531 Tokio Marine & Fire Insurance 87,000 949 Tokyo Broadcasting System 8,000 297 Tokyo Dome 16,000 70 Tokyo Electric Power 62,800 1,568 Tokyo Electron 8,000 1,091 Tokyo Gas 145,000 355 Tokyo Tatemono 7,000 13 Tokyotokeiba 30,000 37 Tokyu 56,000 246 Toppan Printing 35,000 371 Toray 87,000 331 Toshiba 155,000 1,496 Tosho 29,000 144 Tostem 11,000 181 Toto 24,700 166 Toyo Information Systems 2,000 108 Toyo Seikan Kaisha 11,300 200 Toyota Motor 180,000 8,168 Trans Cosmos 1,100 160 Ube Industries 43,000 97 Uni-Charm 3,500 205 UNY 11,000 136 World 3,150 125 Yamaha 12,000 109 Yamaichi Securities 15,000 -- Yamanouchi Pharmaceutical 17,000 775 Yamato Transport 21,000 490 Yokogawa Electric 13,000 109 -------- 117,089 -------- NETHERLANDS (2.7%) ABN Amro Holding 28,288 650 Aegon 24,860 901 Ahold 11,892 338 Akzo Nobel 5,815 223 ASM Lithography Holdings* 7,380 273 Buhrmann 1,884 58 Elsevier 11,463 108 Getronics 6,174 104 Hagemeyer 1,541 37 Heineken 5,659 292 ING Groep 18,120 1,089 -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- NETHERLANDS--CONTINUED Koninklijke KPN 8,825 $ 801 Philips Electronics 25,264 1,133 Royal Dutch Petroleum 39,837 2,466 TNT Post Group 8,445 205 Unilever 10,839 553 Wolters Kluwer 4,951 122 -------- 9,353 -------- NEW ZEALAND (0.2%) Carter Holt Harvey 189,600 153 Telecom of New Zealand 128,900 453 -------- 606 -------- NORWAY (0.8%) Bergesen, Cl A 8,750 183 Christiana Bank 48,300 251 Den Norske Bank 81,300 292 Kvaerner* 7,100 83 Merkantildata* 14,600 94 Norsk Hydro 27,225 1,052 Orkla, Cl A 21,500 357 Petroleum Geo Services* 8,800 158 Schibsted 7,200 141 Tomra Systems 8,200 174 Uni Storebrand 29,287 190 -------- 2,975 -------- PORTUGAL (0.7%) Banco Comercial Portugues 75,035 371 Banco Espirito Santo 7,861 185 BPI-SGPS 37,962 126 Brisa Auto Estradas 19,938 147 Cimpor Cimentos de Portugal 10,652 164 Electricidade de Portugal 35,629 623 Portugal Telecom 61,814 678 Sonae Investimentos 4,376 192 -------- 2,486 -------- SINGAPORE (0.5%) DBS Group Holdings 38,467 384 Overseas - Chinese Banking 36,350 205 Singapore Airlines 49,000 427 Singapore Press Holdings 11,000 166 Singapore Telecommunications 152,000 206 United Overseas Bank 49,000 266 -------- 1,654 -------- SPAIN (3.7%) Acerinox 3,658 125 ACS 4,343 119 Aguas de Barcelona 10,489 143 Altadis 18,619 274 Autopistas CESA 19,441 186 50 -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- SPAIN--CONTINUED Banco Bilbao Vizcaya 146,965 $ 2,066 Banco Santander Central Hispano 221,457 2,182 Endesa 56,206 1,171 Financiera Alba 4,655 117 Fomento de Construcciones y Contratas 7,248 163 Gas Natural 22,957 408 Grupo Dragados 15,311 114 Iberdrola 45,835 589 Repsol 63,594 1,363 Sol Melia 10,211 123 Telefonica 168,762 3,480 Telepizza* 10,883 63 Union Electrica Fenosa 15,032 315 Zardoya-Otis 14,347 129 -------- 13,130 -------- SWEDEN (2.3%) AstraZeneca 3,817 161 Atlas Copco, Ser A 4,200 94 Electrolux 9,100 155 Ericsson, Cl B 202,000 4,125 ForeningsSparbaken, Cl A 15,100 226 Hennes & Mauritz, Cl B 22,400 569 NetCom* 2,500 178 Nordic Baltic Holding 21,200 141 OM Gruppen 2,400 97 Sandvik 7,600 167 Securitas, Cl B 9,600 225 Skandia Forsakrings 26,700 687 Skandinaviska Enskilda Banken 19,200 211 Skanska, Cl B 4,100 153 Svenska Cellulosa, Cl B 11,900 240 Svenska Handlesbanken, Cl A 18,100 257 Swedish Match 26,700 83 Volvo, Cl B 8,150 195 WM-Data, Cl B 9,500 72 -------- 8,036 -------- SWITZERLAND (1.7%) ABB 3,483 434 Adecco 200 159 Credit Suisse Group 2,830 530 Holderbank Financiere Glarus 190 224 Nestle 472 904 Novartis, Registered 744 1,102 Roche Holdings, Bearer 17 199 Roche Holdings, Genusschein 74 784 Swiss Re 155 299 Swisscom 910 321 UBS, Registered 4,618 626 Zurich Allied 500 247 -------- 5,829 -------- -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- UNITED KINGDOM (8.5%) 3I Group 16,316 $ 310 Abbey National 15,265 204 Allied Zurich 20,122 226 Amvescap 12,522 165 Arm Holdings* 13,410 119 AstraZeneca Group 27,508 1,163 BAE Systems 72,176 454 Barclays Bank 24,277 633 Bass 23,059 253 BG Group 58,682 353 BOG Group 14,814 209 Boots 17,492 146 BP Amoco 382,338 3,491 British American Tobacco 37,531 220 British Sky Broadcasting 32,629 600 British Telecommunications 101,301 1,473 Cadbury Schweppes 44,428 297 Centrica 77,479 281 CGU 22,979 350 Compass Group 9,507 107 Diageo 62,732 538 Dixons Group* 28,205 134 EMI Group 25,845 221 GKN 25,291 350 GKN, Cl B* 25,291 4 Glaxo Wellcome 57,540 1,632 Granada Group 40,310 359 Great Universal Stores 22,837 142 Halifax 36,788 363 Hanson 26,996 192 Hays 27,333 154 HSBC Holdings 141,774 1,570 Imperial Chemical 21,428 172 Invensys 118,700 410 J Sainsbury 37,069 170 Jefferson Smurfit Group 45,700 91 Kingfisher 30,179 280 Legal & General Group 79,697 201 Lloyds TSB Group 90,236 980 Logica 6,763 182 Marconi 45,098 545 Marks & Spencer 73,299 274 Misys 11,686 101 National Grid Holdings 14,929 115 National Power 35,430 195 Ocean Group 8,806 161 Pearson 10,281 311 Prudential 24,728 375 Psion 3,830 31 Reed International 19,002 126 Rentokil Group 51,181 115 Reuters Group 23,047 344 51 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 INTERNATIONAL EQUITY INDEX FUND--CONCLUDED -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- UNITED KINGDOM--CONTINUED Rio Tinto 26,555 $ 393 Royal Bank of Scotland Group 43,452 717 Sage Group 21,355 208 Scottish Power 27,661 220 SEMA Group 6,173 86 Smithkline Beecham 90,671 1,162 Tesco 109,977 333 Unilever 54,746 362 Vodafone AirTouch Group 977,249 4,472 WPP Group 13,385 163 -------- 30,008 -------- Total Foreign Common Stocks (Cost $329,906) 344,594 -------- FOREIGN PREFERRED STOCKS (0.7%) AUSTRALIA (0.2%) News Corporation* 62,656 604 -------- GERMANY (0.5%) RWE* 5,480 163 SAP* 2,580 1,374 Volkswagen* 6,470 168 -------- 1,705 -------- ITALY (0.0%) Fiat* 7,200 117 -------- Total Foreign Preferred Stocks (Cost $2,692) 2,426 -------- FOREIGN RIGHTS (0.0%) ITALY (0.0%) Banca Intesa* 380,603 7 -------- SWEDEN (0.0%) Volvo* 815 5 -------- Total Foreign Rights (Cost $0) 12 -------- CASH EQUIVALENT (0.0%) HighMark Diversified Money Market Fund 1,836 2 -------- Total Cash Equivalent (Cost $2) 2 -------- Total Investments (98.8%) (Cost $332,600) 347,034 -------- OTHER ASSETS AND LIABILITIES, NET (1.2%) 4,235 -------- -------------------------------------------------------------------------------- VALUE (000) -------------------------------------------------------------------------------- NET ASSETS: Fund shares of the Trust Shares (unlimited authorization -- no par value) based on 24,406,806 outstanding shares of beneficial interest $326,418 Fund shares of the Investor Shares (unlimited authorization -- no par value) based on 330,602 outstanding shares of beneficial interest 2,649 Fund shares of the Flex Shares (unlimited authorization -- no par value) based on 425,991 outstanding shares of beneficial interest 5,655 Undistributed net investment income 171 Accumulated net realized gain on investments 1,919 Net unrealized appreciation on investments 14,434 Net unrealized appreciation on foreign currency and translation of other assets and liabilities in foreign currency investments 23 -------- Total Net Assets (100.0%) $351,269 ======== Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $13.97 ======== Net Asset Value, Offering Price and Redemption Price Per Share-- Investor Shares $13.80 ======== Maximum Offering Price Per Share-- Investor Shares ($13.80 / 96.25%) $14.34 ======== Net Asset Value, Offering Price and Redemption Price Per Share-- Flex Shares (1) $13.74 ======== (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. 52 -------------------------------------------------------------------------------- At May 31, 2000, sector diversification of the Portfolio was as follows: % OF VALUE SECTOR DIVERSIFICATION NET ASSETS (000) ---------------------- ---------- -------- FOREIGN COMMON STOCK Banking 12.6% $44,566 Electronics 9.6 33,932 Telecommunications 9.3 33,138 Telephone 8.8 30,903 Automotive 6.2 21,846 Insurance 5.5 19,206 Oil & Gas 5.3 18,565 Pharmaceuticals 5.1 17,931 Food, Beverage, & Tobacco 4.5 15,672 Diversified Operations 4.2 14,775 Financial Services 2.6 9,069 Chemicals 2.3 8,219 Computers 2.3 8,076 Retail 2.1 7,514 Construction Materials 2.0 7,086 Transportation 1.7 6,029 Consumer Products 1.2 4,245 Leisure 1.2 4,169 Services 1.2 4,118 Audio/Video 1.1 3,854 Cosmetics & Toiletries 1.0 3,556 Computer Software 1.0 2,164 Metals 1.0 3,463 Real Estate 0.7 2,532 News Media 0.7 2,300 Manufacturing 0.7 2,291 Paper Products 0.6 2,152 Distribution 0.6 2,120 Machinery 0.5 1,900 Communications 0.5 1,865 Airlines 0.5 1,805 Publishing 0.5 1,778 Television 0.4 1,299 Medical Products 0.3 1,106 Textiles 0.2 781 Aerospace 0.1 454 Agriculture 0.0 115 -------- -------- TOTAL FOREIGN COMMON STOCK 98.1 344,594 TOTAL FOREIGN PREFERREED STOCK 0.7 2,426 TOTAL FOREIGN RIGHTS -- 12 CASH EQUIVALENT -- 2 -------- -------- TOTAL INVESTMENTS 98.8 347,034 OTHER ASSETS AND LIABILITIES, NET 1.2 4,235 -------- -------- NET ASSETS 100.0% $351,269 ======== ======== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 68. 53 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 LIFE VISION AGGRESSIVE GROWTH FUND -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- EQUITY FUNDS (95.0%) STI Classic Capital Appreciation Fund, Trust Shares* 322,878 $ 5,528 STI Classic Growth & Income Fund, Trust Shares 472,865 7,343 STI Classic Small Cap Growth Stock Fund, Trust Shares* 131,408 2,405 STI Classic Small Cap Value Equity Fund, Trust Shares 243,424 2,222 ------- Total Equity Funds (Cost $15,194) 17,498 ------- MONEY MARKET FUND (5.3%) STI Classic Prime Quality Money Market Fund, Trust Shares 973,766 974 ------- Total Money Market Fund (Cost $974) 974 ------- Total Investments (100.3%) (Cost $16,168) 18,472 ------- OTHER ASSETS AND LIABILITIES, NET (-0.3%) (60) ------- NET ASSETS: Fund shares of the Trust Shares (unlimited authorization -- no par value) based on 1,586,214 outstanding shares of beneficial interest 15,911 Undistributed net investment income 4 Accumulated net realized gain on investments 193 Net unrealized appreciation on investments 2,304 ------- Total Net Assets (100.0%) $18,412 ======= Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $11.61 ======= THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 68. 54 -------------------------------------------------------------------------------- LIFE VISION GROWTH AND INCOME FUND -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- EQUITY FUNDS (69.8%) STI Classic Capital Appreciation Fund, Trust Shares* 355,369 $ 6,084 STI Classic Growth & Income Fund, Trust Shares 683,092 10,609 STI Classic Small Cap Growth Stock Fund, Trust Shares* 133,505 2,443 STI Classic Small Cap Value Equity Fund, Trust Shares 234,428 2,140 ------- Total Equity Funds (Cost $19,247) 21,276 ------- FIXED INCOME FUNDS (27.3%) STI Classic Investment Grade Bond Fund, Trust Shares 483,313 4,630 STI Classic Short-Term Bond Fund, Trust Shares 158,979 1,534 STI Classic U.S. Government Securities Fund, Trust Shares 218,356 2,153 ------- Total Fixed Income Funds (Cost $8,593) 8,317 ------- MONEY MARKET FUND (3.0%) STI Classic Prime Quality Money Market Fund, Trust Shares 908,970 909 ------- Total Money Market Fund (Cost $909) 909 ------- Total Investments (100.1%) (Cost $28,749) 30,502 ------- OTHER ASSETS AND LIABILITIES, NET (-0.1%) (29) ------- NET ASSETS: Fund shares of the Trust Shares (unlimited authorization -- no par value) based on 2,902,964 outstanding shares of beneficial interest 28,888 Undistributed net investment income 88 Accumulated net realized loss on investments (256) Net unrealized appreciation on investments 1,753 ------- Total Net Assets (100.0%) $30,473 ======= Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $10.50 ======= THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 68. 55 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 LIFE VISION MODERATE GROWTH FUND -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- EQUITY FUNDS (60.8%) STI Classic Capital Appreciation Fund, Trust Shares* 810,665 $13,879 STI Classic Growth & Income Fund, Trust Shares 1,291,131 20,051 STI Classic Small Cap Growth Stock Fund, Trust Shares* 266,480 4,877 STI Classic Small Cap Value Equity Fund, Trust Shares 381,983 3,487 ------- Total Equity Funds (Cost $35,909) 42,294 ------- FIXED INCOME FUNDS (36.3%) STI Classic Investment Grade Bond Fund, Trust Shares 1,470,375 14,086 STI Classic Short-Term Bond Fund, Trust Shares 435,287 4,200 STI Classic U.S. Government Securities Fund, Trust Shares 711,754 7,018 ------- Total Fixed Income Funds (Cost $26,381) 25,304 ------- MONEY MARKET FUND (3.0%) STI Classic Prime Quality Money Market Fund, Trust Shares 2,074,655 2,075 ------- Total Money Market Fund (Cost $2,075) 2,075 ------- Total Investments (100.1%) (Cost $64,365) 69,673 ------- OTHER ASSETS AND LIABILITIES, NET (-0.1%) (51) ------- NET ASSETS: Fund shares of the Trust Shares (unlimited authorization -- no par value) based on 6,562,141 outstanding shares of beneficial interest 63,958 Undistributed net investment income 339 Accumulated net realized gain on investments 17 Net unrealized appreciation on investments 5,308 ------- Total Net Assets (100.0%) $69,622 ======= Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $10.61 ======= THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 68. 56 -------------------------------------------------------------------------------- MID-CAP EQUITY FUND -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- COMMON STOCKS (82.9%) BASIC MATERIALS (4.8%) Georgia-Pacific Group 62,700 $ 2,053 Potash of Saskatchewan 73,100 4,231 Stillwater Mining* 176,500 4,953 -------- 11,237 -------- CAPITAL GOODS (5.4%) ACT Manufacturing* 91,300 2,876 Antec* 94,100 4,729 Optimal Robotics* 33,650 1,131 Seachange International* 107,700 2,760 Weatherford International* 30,600 1,318 -------- 12,814 -------- COMMUNICATION SERVICES (4.6%) Commscope* 29,500 1,139 Harris 50,700 1,550 Western Wireless* 169,700 8,114 WinStar Communications* 669 19 -------- 10,822 -------- CONSUMER CYCLICALS (8.8%) BJ's Wholesale Club* 66,700 2,068 Men's Wearhouse* 492,450 9,818 Outback Steakhouse* 104,700 3,174 Polaroid 236,000 4,528 SPX* 12,200 1,285 -------- 20,873 -------- CONSUMER STAPLES (6.7%) Bowater 62,000 3,205 Imax* 410,100 8,920 Nordstrom 90,600 2,276 Universal Foods 79,300 1,368 -------- 15,769 -------- ENERGY (17.2%) Apache 86,300 5,254 Barrett Resources* 118,100 4,672 BJ Services* 17,900 1,282 Bouygues Offshore 81,400 1,913 Burlington Resources 58,500 2,676 Coflexip Stena Offshore 10,300 600 Cooper Cameron* 21,400 1,493 Ensco International 50,900 1,778 Equitable Resources 63,100 3,139 Global Marine* 64,000 1,812 Grant Prideco* 30,600 711 Nabors Industries* 38,600 1,660 -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- ENERGY--CONTINUED Noble Drilling* 20,300 $ 881 Precision Drilling* 215,400 8,293 Smith International* 15,900 1,257 Stone Energy* 49,900 3,072 -------- 40,493 -------- FINANCE (7.4%) Bank United 74,000 2,655 Colonial Bancgroup 97,900 936 Hibernia 233,200 3,002 North Fork Bancorporation 177,500 2,940 Nova* 144,030 4,231 SouthTrust 131,700 3,564 -------- 17,328 -------- HEALTH CARE (10.5%) Forest Laboratories, Cl A* 31,400 2,779 Health Management Associates, Cl A* 371,800 4,392 Jones Pharma 196,300 7,153 Mylan Laboratories 192,200 5,153 Renal Care Group* 219,100 5,231 -------- 24,708 -------- TECHNOLOGY (14.5%) Concurrent Computer* 338,900 2,881 Cypress Semiconductor* 57,200 2,406 Flextronics International* 114,400 6,228 Integrated Device Technology* 46,700 2,215 Jabil Circuit* 30,800 1,124 Sawtek* 109,300 7,029 Scientific-Atlanta 38,900 2,193 Symbol Technologies 76,950 3,391 Vitesse Semiconductor* 18,500 937 Zoran* 147,500 5,789 -------- 34,193 -------- TRANSPORTATION (3.0%) CNF Transportation 267,800 7,046 -------- Total Common Stocks (Cost $163,937) 195,283 -------- PREFERRED STOCK (0.7%) WinStar Communications, CV to 24.2072 Shares 18,000 1,597 -------- Total Preferred Stock (Cost $1,751) 1,597 -------- 57 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 MID-CAP EQUITY FUND--CONCLUDED -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- CONVERTIBLE BONDS (7.6%) Affymetrix, CV to 3.1153 Shares, Callable 02/20/2003 @ 100 4.750%, 02/15/07 $ 1,790 $ 1,222 American Tower, CV to 19.4175 Shares, Callable 02/15/2003 @ 102.5 5.000%, 02/15/10 900 836 Chiron, CV to 34.5900 Shares, Callable 08/04/2000 @ 97.48 (B) 1.900%, 11/17/00 815 1,123 Human Genome Sciences, CV to 8.8888 Shares, Callable 02/06/2003 @ 100.5 5.000%, 02/01/07 1,415 1,364 Human Genome Sciences, CV to 4.5662 Shares, Callable 03/21/2003 @ 101.88 3.750%, 03/15/07 2,220 1,404 Millennium Pharmaceuticals, CV to 11.8848 Shares, Callable 01/15/2003 @ 103.14 5.500%, 01/15/07 1,240 1,435 Sanmina, CV to 22.5561 Shares, Callable 05/06/2002 @ 101.7 4.250%, 05/01/04 1,750 2,723 Sanmina, CV to 22.5561 Shares, Callable 05/06/2002 @ 101.8 (B) 4.250%, 05/01/04 1,825 2,840 Sepracor, CV to 21.1110 Shares, Callable 02/18/2001 @ 103.57 6.250%, 02/15/05 395 1,622 Sepracor, CV to 10.8249 Shares 5.000%, 02/15/07 2,675 3,237 -------- Total Convertible Bonds (Cost $15,833) 17,806 -------- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- REPURCHASE AGREEMENT (11.5%) Deutsche Bank 6.440%, dated 05/31/00, matures 06/01/00, repurchase price $27,218,299 (collateralized by U.S. Treasury Note: total market value $27,758,590) (D) $27,213 $ 27,213 -------- Total Repurchase Agreement (Cost $27,213) 27,213 -------- Total Investments (102.7%) (Cost $208,734) 241,899 -------- OTHER ASSETS AND LIABILITIES, NET (-2.7%) (6,253) -------- NET ASSETS: Fund shares of the Trust Shares (unlimited authorization -- no par value) based on 14,651,852 outstanding shares of beneficial interest 144,841 Fund shares of the Investor Shares (unlimited authorization -- no par value) based on 1,050,102 outstanding shares of beneficial interest 10,632 Fund shares of the Flex Shares (unlimited authorization -- no par value) based on 1,093,101 outstanding shares of beneficial interest 14,014 Accumulated net realized gain on investments 32,994 Net unrealized appreciation on investments 33,165 -------- Total Net Assets (100.0%) $235,646 ======== Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $14.10 ======== Net Asset Value, Offering and Redemption Price Per Share -- Investor Shares $13.82 ======== Maximum Offering Price Per Share-- Investor Shares ($13.82 / 96.25%) $14.36 ======== Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $13.35 ======== (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 68. 58 -------------------------------------------------------------------------------- SMALL CAP GROWTH STOCK FUND -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- COMMON STOCKS (98.6%) BASIC MATERIALS (3.7%) Bel Fuse, Cl A* 55,000 $ 983 Bel Fuse, Cl B 40,000 718 Centex Construction Products 29,845 895 Fairfield Communities* 120,000 1,013 Florida Rock Industries 28,000 1,108 Granite Construction 60,000 1,564 Kaufman & Broad Home 100,000 1,731 Maverick Tube* 130,000 4,574 NVR* 20,000 1,100 Simpson Manufacturing* 60,000 2,857 Stillwater Mining* 65,000 1,824 -------- 18,367 -------- CAPITAL GOODS (12.7%) Ade* 13,200 201 A.O. Smith 20,000 420 Astec Industries* 164,360 4,253 Asyst Technologies* 50,000 2,019 Ball 40,000 1,188 Black Box* 19,000 1,491 Copart* 150,000 2,662 Craftmade International 25,000 125 CTS 33,000 1,821 Dycom Industries* 92,000 4,456 Elcor 40,000 762 Electroglas* 50,000 1,325 Gasonics International* 80,000 2,190 Kent Electronics* 100,000 2,775 Kulicke & Soffa Industries* 45,000 2,264 Manitowoc 100,000 3,269 Measurement Specialties* 55,000 1,402 Mercury Computer Systems* 107,500 3,373 Mobile Mini* 90,000 1,901 Mueller Industries* 110,000 3,231 Nanometrics* 39,300 943 National-Oilwell* 120,000 3,120 Orbotech* 30,000 2,535 Photon Dynamics* 45,000 2,714 Stericycle* 95,000 1,924 Telcom Semiconductor* 153,000 3,787 Trimble Navigation* 12,800 566 UNIFAB International* 282,533 2,013 United Stationers* 125,000 4,000 -------- 62,730 -------- COMMUNICATION SERVICES (6.9%) Anaren Microwave* 25,000 2,537 Commscope* 100,000 3,863 Comtech Telecommunications* 45,000 568 Corsair Communications* 105,000 2,376 Ditech Communications* 45,000 3,690 -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- COMMUNICATION SERVICES--CONTINUED Gentner Communications* 170,000 $ 2,125 Gilat Communications* 75,900 1,442 InterVoice-Brite* 90,000 1,282 L-3 Communications* 50,000 2,800 Lightbridge* 120,000 2,602 Mastec* 28,000 1,914 Polycom* 46,500 3,909 Tollgrade Communications* 50,000 3,316 Xeta Technologies* 53,000 1,626 -------- 34,050 -------- CONSUMER CYCLICALS (19.9%) American Management Systems* 50,000 1,872 Barnes & Noble* 140,000 2,651 BJ's Wholesale Club* 92,000 2,852 Brauns Fashions* 155,000 3,468 Brinker International* 50,000 1,416 CEC Entertainment* 101,000 2,323 Chico's FAS* 205,000 3,703 Claire's Stores 90,000 1,822 Concord Camera* 180,000 3,049 Cost Plus* 107,000 3,123 Cutter & Buck* 84,252 853 EMCOR Group* 95,000 2,096 Fossil* 162,000 3,260 Gildan Activewear* 75,000 2,475 HOT Topic* 130,400 3,325 Insituform Technologies* 110,000 3,802 Jack in the Box* 135,630 3,365 Jakks Pacific* 130,000 1,885 K-Swiss 64,740 850 La-Z-Boy 78,200 1,256 Linens 'N Things* 95,000 2,523 Men's Wearhouse* 95,000 1,894 Monaco Coach* 74,293 1,068 Neiman Marcus Group, Cl A* 116,000 3,045 O'Charleys* 112,000 1,561 Pacific Sunwear of California* 70,000 1,124 Petco Animal Supplies* 150,000 2,841 Pulte 50,000 1,109 Quanta Services* 105,000 5,145 Rare Hospitality International* 146,000 3,997 Salton* 135,000 4,278 Sonic* 88,000 2,436 Station Casinos* 170,000 4,611 Steven Madden* 215,100 3,468 Superior Industries International 90,000 2,514 Toll Brothers* 70,000 1,356 Ultimate Electronics* 65,000 1,609 Wabash National 57,200 733 Zale* 95,000 3,610 -------- 98,368 -------- 59 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 SMALL CAP GROWTH STOCK FUND--CONCLUDED -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- CONSUMER STAPLES (0.7%) Canandaigua Brands* 55,000 $ 2,881 Pope & Talbot 24,400 453 -------- 3,334 -------- ENERGY (9.5%) Cal Dive International* 60,000 2,764 Carbo Ceramics 57,000 1,781 Core Laboratories* 147,000 3,822 Eagle Geophysical* 1,285 -- Global Industries* 420,000 7,403 Marine Drilling* 15,000 431 Newfield Exploration* 93,000 3,894 Newport 5,000 853 Newpark Resources* 43,400 363 Patterson Energy* 150,000 3,619 Quicksilver Resources* 40,000 255 Rowan* 116,000 3,603 Shaw Group 145,000 6,326 Stone Energy* 35,000 2,155 Triton Energy* 80,000 2,670 Veritas DGC* 95,000 2,624 Vintage Petroleum 185,000 4,394 -------- 46,957 -------- FINANCE (9.9%) CCB Financial 45,388 2,088 City National 85,000 3,315 Cullen/Frost Bankers 70,237 1,861 Dime Community Bancshares 20,000 326 Doral Financial 250,000 2,781 Gainsco 130,000 683 GBC Bancorp 93,500 2,671 Greater Bay Bancorp 68,000 3,107 In Focus Systems* 150,000 4,191 Kemet* 53,000 3,561 Metris 105,000 3,885 Nova* 90,000 2,644 OceanFirst Financial 87,000 1,474 Radian Group 84,999 4,675 Rainbow Technologies* 80,000 2,550 Rogers* 96,000 2,970 Southwest Securities Group 75,500 2,190 Texas Regional Bancshares 35,000 943 Triad Guaranty* 96,338 1,782 Trustmark 52,760 1,039 -------- 48,736 -------- HEALTH CARE (13.2%) Andrx* 68,000 4,055 Arthrocare* 41,000 3,495 Barr Laboratories* 77,000 4,168 Candela* 142,500 1,442 Cryolife* 210,000 3,609 -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- HEALTH CARE--CONTINUED Cytyc* 80,000 $ 4,015 Datascope 40,000 1,505 Elan* 73,150 2,912 Ivax* 140,000 5,268 Jones Pharma 90,000 3,279 Meade Instruments* 55,000 2,740 MedQuist* 105,000 4,344 Mid Atlantic Medical Services* 63,800 789 North American Scientific* 152,500 2,573 Noven Pharmaceuticals* 210,200 3,915 Oxford Health Plans* 120,000 2,550 Pharmacopeia* 99,700 2,168 PolyMedica* 136,600 3,637 Priority Healthcare* 80,000 4,080 Resmed* 85,000 2,040 Twinlab* 37,000 264 Zoll Medical* 50,000 2,500 -------- 65,348 -------- SERVICES (3.4%) F5 Networks* 50,000 1,613 Filenet* 150,000 3,150 Harbinger* 61,417 917 Herley Industries* 65,000 1,044 Informix* 80,000 580 Opus360* 850 4 Orthodontic Centers of America* 49,849 1,143 Pfsweb* 40,000 235 Prepaid Legal Services* 100,000 3,019 Profit Recovery Group International* 191,000 3,462 Quest Education* 125,000 1,188 SCB Computer Technology* 640,000 680 -------- 17,035 -------- TECHNOLOGY (16.2%) Actel* 87,000 2,534 Advanced Digital Information* 230,000 2,933 Alliance Semiconductor* 185,000 4,590 Alpha Industries* 50,000 2,303 Anixter International* 100,000 2,825 Barra* 72,500 3,195 C-COR.net* 120,400 2,649 Cybex Computer Products* 148,500 4,975 Dallas Semiconductor 60,000 2,400 Insight Enterprises* 91,000 4,129 International Rectifier* 50,000 2,063 Lattice Semiconductor* 35,000 2,076 Micros Systems* 37,730 1,193 Performance Technologies* 141,000 1,428 Pericom Semiconductor* 40,000 1,625 60 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- TECHNOLOGY--CONTINUED Plexus* 20,000 $ 1,670 Power-One* 20,000 1,753 Progress Software* 200,800 3,037 Semtech* 40,000 2,230 Sensormatic Electronics* 180,000 2,824 Silicon Valley Bancshares* 80,000 2,625 SonicWall* 37,000 2,229 Sunquest Information Systems* 74,000 539 Sybase* 218,000 4,156 Technitrol 60,000 4,140 Tecnomatix Technologies* 45,000 1,215 Three-Five Systems* 60,000 3,765 Unify* 175,000 2,352 Xircom* 62,000 2,558 Zebra Technologies* 40,000 1,920 Zomax* 136,000 2,423 -------- 80,354 -------- TRANSPORTATION (2.5%) American Freightways* 205,000 3,049 Atlas Air* 67,500 2,185 Forward Air* 120,000 3,825 Frontier Airlines* 90,000 1,187 Skywest 53,000 2,021 -------- 12,267 -------- Total Common Stocks (Cost $394,911) 487,546 -------- RIGHTS (0.0%) Elan* 190,000 95 -------- Total Rights (Cost $0) 95 -------- WARRANTS (0.0%) Per-Se Technologies*, Expires 07/08/03 3,664 -- -------- Total Warrants (Cost $0) -- -------- REPURCHASE AGREEMENT (0.2%) Morgan Stanley Dean Witter 6.450%, dated 05/31/00, matures 06/01/00, repurchase price $1,059,291 (collateralized by FHLMC obligation: total market value $1,181,109) (D) $1,059 1,059 -------- Total Repurchase Agreement (Cost $1,059) 1,059 -------- Total Investments (98.8%) (Cost $395,970) 488,700 -------- OTHER ASSETS AND LIABILITIES, NET (1.2%) 5,871 -------- -------------------------------------------------------------------------------- VALUE (000) -------------------------------------------------------------------------------- NET ASSETS: Fund shares of the Trust Shares (unlimited authorization -- no par value) based on 23,597,985 outstanding shares of beneficial interest $336,399 Fund shares of the Investor Shares (unlimited authorization -- no par value) based on 2,172,221 outstanding shares of beneficial interest 33,089 Fund shares of the Flex Shares (unlimited authorization -- no par value) based on 1,286,349 outstanding shares of beneficial interest 21,473 Accumulated net realized gain on investments 10,880 Net unrealized appreciation on investments 92,730 -------- Total Net Assets (100.0%) $494,571 ======== Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $18.30 ======== Net Asset Value, Offering and Redemption Price Per Share-- Investor Shares $18.27 ======== Maximum Offering Price Per Share-- Investor Shares ($18.27 / 96.25%) $18.98 ======== Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $18.00 ======== (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 68. 61 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 SMALL CAP VALUE EQUITY FUND -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- COMMON STOCKS (99.6%) BASIC MATERIALS (16.0%) Carpenter Technology 239,200 $ 4,949 Lilly Industries, Cl A 741,000 10,698 Pennzoil-Quaker State 598,600 6,585 Quixote 295,600 4,212 Texas Industries 251,700 7,221 Wausau-Mosinee Paper 171,500 1,586 -------- 35,251 -------- CAPITAL GOODS (19.0%) ABM Industries 126,300 2,929 American Woodmark 123,400 2,329 A.O. Smith 150,500 3,161 BHA Group Holdings 174,200 1,742 Fedders, Cl A 233,000 1,311 Fedders, Cl B 62,100 377 Gerber Scientific 227,600 2,731 Interface 2,085,400 8,993 Kaman 238,300 2,383 Lennox International 262,789 3,088 Lindberg 247,800 1,921 LSI Industries 229,000 3,893 Milacron 79,200 1,252 Pep Boys 429,800 3,062 Precision Castparts 25,300 1,233 York Group* 370,600 1,297 -------- 41,702 -------- CONSUMER CYCLICALS (22.6%) Bowne 185,600 1,868 Bush Industries 248,400 4,238 CBRL Group 290,300 4,209 Chemed 98,000 2,971 Federal Signal 162,800 3,144 Grey Advertising 7,300 3,435 Harman International Industries 214,200 12,397 Midas 92,200 2,392 Phillips-Van Heusen 405,100 3,519 Polaroid 560,700 10,758 Stride Rite 145,200 953 -------- 49,884 -------- CONSUMER STAPLES (16.2%) Ingles Markets 249,700 2,450 J.M. Smucker 227,800 3,830 Pittston Brink's Group 819,100 12,440 Standard Register 135,600 1,839 Universal Foods 650,100 11,214 Wolverine World Wide 348,800 3,924 -------- 35,697 -------- -------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- ENERGY (1.8%) Fletcher Challenge Energy ADR 152,900 $ 4,052 -------- FINANCE (9.7%) Annuity and Life Re 76,900 1,855 Downey Financial 56,200 1,672 Klamath First Bancorp 203,600 2,265 PXRE Group Limited 161,100 2,396 Scottish Annuity & Life Holdings 286,500 2,256 Seacoast Banking of Florida 86,500 2,249 Student Loan 56,900 2,173 Washington Federal 109,300 2,234 West Coast Bancorp 174,730 1,900 Westerfed Financial 164,200 2,319 -------- 21,319 -------- HEALTH CARE (5.2%) Interim Services* 301,120 6,060 Mentor 167,100 4,010 Vital Signs 69,600 1,470 -------- 11,540 -------- TECHNOLOGY (0.4%) Pioneer Standard Electronics 74,400 893 -------- TRANSPORTATION (4.7%) Knightsbridge Tankers 94,000 1,774 Sea Containers 393,700 8,637 -------- 10,411 -------- UTILITIES (4.0%) Midcoast Energy Resources 151,500 2,424 NUI 153,500 4,298 UGI 99,800 2,208 -------- 8,930 -------- Total Common Stocks (Cost $256,011) 219,679 -------- REPURCHASE AGREEMENT (0.4%) Morgan Stanley Dean Witter 6.450%, dated 05/31/00, matures 06/01/00, repurchase price $989,921 (collateralized by a FHLMC obligation: market value $1,009,682) $ 990 990 -------- Total Repurchase Agreement (Cost $990) 990 -------- Total Investments (100.0%) (Cost $257,001) 220,669 -------- OTHER ASSETS AND LIABILITIES, NET (0.0%) 1 -------- 62 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- VALUE (000) -------------------------------------------------------------------------------- NET ASSETS: Fund shares of the Trust Shares (unlimited authorization -- no par value) based on 23,220,959 outstanding shares of beneficial interest $289,178 Fund shares of the Flex Shares (unlimited authorization -- no par value) based on 945,026 outstanding shares of beneficial interest 19,159 Undistributed net investment income 832 Accumulated net realized loss on investments (52,167) Net unrealized depreciation on investments (36,332) -------- Total Net Assets (100.0%) $220,670 ======== Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $9.13 ======== Net Asset Value, Offering and Redemption Price Per Share--Flex Shares (1) $9.10 ======== (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 68. 63 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 TAX SENSITIVE GROWTH STOCK FUND -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- COMMON STOCKS (97.1%) BASIC MATERIALS (2.1%) Alcoa 188,955 $ 11,042 E.I. Du Pont de Nemours 211,782 10,377 ---------- 21,419 ---------- CAPITAL GOODS (11.3%) Agilent Technologies* 50,000 3,681 Applied Materials* 118,855 9,924 Caterpillar 290,970 11,130 General Electric 604,344 31,804 Honeywell International 233,038 12,744 JDS Uniphase* 150,263 13,223 Minnesota Mining & Manufacturing 137,566 11,796 Tyco International 125,102 5,888 United Technologies 208,080 12,576 ---------- 112,766 ---------- COMMUNICATION SERVICES (11.5%) America Online* 190,167 10,079 AT&T 338,896 11,755 AT&T Wireless Group* 19,000 543 Bell Atlantic 83,305 4,405 Bellsouth 102,443 4,783 GTE 150,716 9,533 Lucent Technologies 148,785 8,537 Network Appliance* 214,059 13,820 Nortel Networks 348,410 18,923 Qualcomm* 134,177 8,906 SBC Communications 127,743 5,581 Sprint (FON Group) 143,789 8,699 Yahoo* 84,069 9,505 ---------- 115,069 ---------- CONSUMER CYCLICALS (7.2%) Dollar General 561,977 9,835 Ford Motor 114,688 5,569 Gap 352,802 12,370 General Motors 71,458 5,047 Home Depot 282,813 13,805 Wal-Mart Stores 355,881 20,508 Walt Disney 115,936 4,891 ---------- 72,025 ---------- CONSUMER STAPLES (6.5%) Coca-Cola 238,246 12,716 Gillette 163,579 5,459 McDonald's 139,670 5,002 Paychex 416,427 14,575 Pepsico 228,539 9,299 Philip Morris 364,774 9,530 Walgreen 311,339 8,834 ---------- 65,415 ---------- -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- ENERGY (6.3%) Chevron 95,632 $ 8,840 Exxon Mobil 311,809 25,978 Halliburton 229,120 11,685 Royal Dutch Petroleum ADR 109,975 6,867 Schlumberger 125,814 9,255 ---------- 62,625 ---------- FINANCE (15.5%) American Express 351,180 18,898 American International Group 171,518 19,306 Bank of America 112,371 6,244 Charles Schwab 665,770 19,141 Chase Manhattan 167,034 12,475 Citigroup 278,210 17,301 Fannie Mae 247,521 14,882 Household International 349,495 16,426 JP Morgan 128,441 16,537 Wells Fargo 308,269 13,949 ---------- 155,159 ---------- HEALTH CARE (12.0%) Abbott Laboratories 127,294 5,179 American Home Products 127,640 6,877 Bristol-Myers Squibb 92,495 5,093 Eli Lilly 85,028 6,473 Johnson & Johnson 125,866 11,265 Medtronic 221,963 11,459 Merck 274,572 20,490 Pfizer 621,610 27,700 Schering-Plough 121,383 5,872 Warner-Lambert 159,703 19,504 ---------- 119,912 ---------- TECHNOLOGY (24.7%) Brocade Communications System* 61,826 7,292 Cisco Systems* 486,910 27,723 Computer Associates International 222,214 11,444 Dell Computer* 428,983 18,500 EMC* 187,360 21,792 Hewlett-Packard 96,174 11,553 Intel 287,967 35,906 International Business Machines 164,885 17,694 Linear Technology 306,527 18,104 Microsoft* 363,773 22,759 Oracle* 234,509 16,855 Sun Microsystems* 278,596 21,347 Texas Instruments 229,618 16,590 ---------- 247,559 ---------- Total Common Stocks (Cost $853,573) 971,949 ---------- 64 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- REPURCHASE AGREEMENT (2.7%) JP Morgan 6.405%, dated 05/31/00, matures 06/01/00, repurchase price $26,536,754 (collateralized by various FNMA and FHLMC obligations: total market value $27,103,742) (D) $26,532 $ 26,532 ---------- Total Repurchase Agreement (Cost $26,532) 26,532 ---------- Total Investments (99.8%) (Cost $880,105) 998,481 ---------- OTHER ASSETS AND LIABILITIES, NET (0.2%) 2,293 ---------- NET ASSETS: Fund shares of the Trust Shares (unlimited authorization -- no par value) based on 21,456,690 outstanding shares of beneficial interest 620,079 Fund shares of the Flex Shares (unlimited authorization -- no par value) based on 8,900,491 outstanding shares of beneficial interest 281,995 Accumulated net investment loss (876) Accumulated net realized loss on investments (18,800) Net unrealized appreciation on investments 118,376 ---------- Total Net Assets (100.0%) $1,000,774 ========== Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $33.10 ========== Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $32.65 ========== (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 68. 65 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 VALUE INCOME STOCK FUND -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- COMMON STOCKS (89.7%) BASIC MATERIALS (4.3%) Allegheny Technologies 264,750 $ 5,973 Boise Cascade 413,600 12,046 Fort James 422,300 9,555 Northrop Grumman 65,300 5,004 Rohm & Haas 441,500 15,066 ---------- 47,644 ---------- CAPITAL GOODS (22.7%) Cooper Industries 591,100 19,802 Emerson Electric 758,300 44,740 Fortune Brands 572,600 15,245 General Dynamics 361,000 21,322 Honeywell International 814,800 44,559 Hubbell, Cl B 601,000 15,851 Ingersoll-Rand 254,900 11,614 International Flavors & Fragrances 419,400 14,260 Minnesota Mining & Manufacturing 199,300 17,090 National Service Industries 471,400 10,253 Pall 271,400 5,699 Sonoco Products 609,830 13,454 Stanley Works 283,400 7,616 Thomas & Betts 89,800 2,548 W.W. Grainger 190,300 7,600 ---------- 251,653 ---------- COMMUNICATION SERVICES (10.1%) Alltel 178,700 11,694 AT&T 297,300 10,313 CenturyTel 212,300 5,732 GTE 480,300 30,379 Harris 286,800 8,765 SBC Communications 729,600 31,874 Sprint (FON Group) 215,500 13,038 ---------- 111,795 ---------- CONSUMER CYCLICALS (8.7%) Albertson's 631,700 23,136 Dana 259,400 6,696 Ford Motor 217,925 10,583 Genuine Parts 328,700 7,848 H & R Block 287,300 8,870 Masco 1,212,400 23,869 J.C. Penney 252,100 4,569 Rockwell International 271,900 11,148 ---------- 96,719 ---------- -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- CONSUMER STAPLES (9.1%) Bestfoods 361,500 $ 23,317 Conagra 637,300 14,698 Flowers Industries 356,900 6,446 H.J. Heinz 280,800 11,004 Kimberly-Clark 459,500 27,800 Pitney Bowes 288,600 12,554 Ryder System 307,100 5,892 ---------- 101,711 ---------- ENERGY (9.8%) Coastal 267,900 16,442 Conoco 1,412,484 40,256 Exxon Mobil 218,600 18,212 Texaco 391,800 22,504 Unocal 285,000 10,955 ---------- 108,369 ---------- FINANCE (17.5%) Allstate 753,300 19,962 American Financial Group 139,900 3,908 American General 214,000 13,709 AmSouth Bancorporation 950,468 17,168 Bank of America 323,900 17,997 Chase Manhattan 115,550 8,630 Chubb 195,000 13,650 Fleet Boston Financial 624,147 23,601 KeyCorp 367,700 7,722 Paine Webber Group 180,200 8,098 PNC Financial Services Group 496,200 24,996 Reliastar Financial 162,900 8,389 Summit Bancorp 601,500 17,256 Torchmark 347,200 9,439 ---------- 194,525 ---------- HEALTH CARE (4.2%) Baxter International 532,700 35,425 Pharmacia 212,594 11,042 ---------- 46,467 ---------- TECHNOLOGY (1.8%) International Business Machines 104,700 11,236 Scana 352,617 9,124 ---------- 20,360 ---------- UTILITIES (1.5%) GPU 282,400 7,978 Questar 447,000 9,080 ---------- 17,058 ---------- Total Common Stocks (Cost $1,006,261) 996,301 ---------- 66 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- REPURCHASE AGREEMENTS (10.1%) Deutsche Bank 6.440%, dated 05/31/00, matures 06/01/00, repurchase price $56,987,201 (collateralized by FHLMC obligation: total market value $58,116,549) (D) $56,977 $ 56,977 Greenwich Capital 5.670%, dated 05/31/00, matures 06/01/00, repurchase price $55,504,760 (collateralized by various GNMA obligations: total market value $56,606,827) (D) 55,495 55,495 ---------- Total Repurchase Agreements (Cost $112,472) 112,472 ---------- Total Investments (99.8%) (Cost $1,118,733) 1,108,773 ---------- OTHER ASSETS AND LIABILITIES, NET (0.2%) 1,765 ---------- NET ASSETS: Fund shares of the Trust Shares (unlimited authorization -- no par value) based on 88,766,289 outstanding shares of beneficial interest 1,036,615 Fund shares of the Investor Shares (unlimited authorization -- no par value) based on 10,066,266 outstanding shares of beneficial interest 121,924 Fund shares of the Flex Shares (unlimited authorization -- no par value) based on 8,255,429 outstanding shares of beneficial interest 127,712 Undistributed net investment income 4,316 Accumulated net realized loss on investments (170,069) Net unrealized depreciation on investments (9,960) ---------- Total Net Assets (100.0%) $1,110,538 ========== Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $10.38 ========== Net Asset Value, Offering and Redemption Price Per Share-- Investor Shares $10.35 ========== Maximum Offering Price Per Share-- Investor Shares ($10.35 / 96.25%) $10.75 ========== Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $10.24 ========== (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 68. 67 -------------------------------------------------------------------------------- KEY TO ABBREVIATIONS USED IN THE STATEMENT OF NET ASSETS AND SCHEDULE OF INVESTMENTS ADR American Depository Receipt Cl Class CV Convertible Security FHLMC Federal Home Loan Mortgage Corporation FNMA Federal National Mortgage Association GNMA Government National Mortgage Association MTN Medium Term Note RNC Risparmio Non-Convertible Ser Series * Non-income producing security (A) Zero Coupon Bond (B) Private Placement Security (C) Adjustable rate security. The rate reported on the Statement of Net Assets is the rate in effect on May 31, 2000. (D) Tri-Party Repurchase Agreement (GB) Great British Pound Amounts designated as "--" are either $0 or have been rounded to $0. 68
STATEMENTS OF ASSETS AND LIABILITIES (000) ------------------------------------------------------------------------------------------------------------------------------------ STI CLASSIC EQUITY FUNDS FOR THE PERIOD ENDED MAY 31, 2000 ------------ ------------- E-COMMERCE INTERNATIONAL OPPORTUNITY EQUITY FUND FUND ----------- ------------- Assets: Investments at Market Value (Cost $125,976 and $294,340, respectively) ................ $122,538 $300,644 Cash .................................................................................. -- 17,640 Foreign Currency (Cost $--and $14,861, respectively) .................................. -- 15,507 Accrued Income ........................................................................ 49 2,354 Receivable for Investment Securities Sold ............................................. 16,334 12,667 Receivable for Foreign Currency Contracts ............................................ -- 2,688 Receivable for Portfolio Shares Purchased ............................................. 364 44 Other Assets .......................................................................... 3 18 -------- -------- Total Assets .......................................................................... 139,288 351,562 -------- -------- Liabilities: Payable for Investment Securities Purchased ........................................... 12,187 27,447 Payable for Foreign Currency Contracts ................................................ -- 2,688 Payable for Portfolio Shares Redeemed ................................................. 188 87 Unrealized Foreign Exchange Loss ...................................................... -- 223 Accrued Expenses ...................................................................... 186 641 Other Liabilities ..................................................................... 101 23 -------- -------- Total Liabilities ..................................................................... 12,662 31,109 -------- -------- Total Net Assets ...................................................................... $126,626 $320,453 ======== ======== Net Assets: Fund shares of the Trust Shares (unlimited authorization -- no par value) based on 6,706,451 and 23,811,370, respectively, outstanding shares of beneficial interest ....................................................... $114,096 $278,001 Fund shares of the Investor Shares (unlimited authorization-- no par value) based on 838,701 outstanding shares of beneficial interest .......................... -- 9,925 Fund shares of the Flex Shares (unlimited authorization -- no par value) based on 1,277,762 and 903,013, respectively, outstanding shares of beneficial interest ... 24,769 13,186 Distributions in excess of net investment income ...................................... -- (3,841) Accumulated net realized gain (loss) on investments ................................... (8,801) 16,424 Net unrealized appreciation (depreciation) on investments ............................. (3,438) 6,304 Net unrealized appreciation on foreign currency and translation of other assets and liabilities in foreign currency investments ..................................... -- 454 -------- -------- Total Net Assets ...................................................................... $126,626 $320,453 ======== ======== Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares ................. $15.87 $12.56 ======== ======== Net Asset Value, Offering and Redemption Price Per Share -- Investor Shares .............. -- $12.47 ======== ======== Maximum Offering Price Per Share -- Investor Shares ($12.47 / 96.25%) .................... -- $12.96 ======== ======== Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) .............. $15.81 $12.06 ======== ======== (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. Amounts designated as "--" are either $0 or round to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 69
STATEMENTS OF OPERATIONS (000) ------------------------------------------------------------------------------------------------------------------------------------ STI CLASSIC EQUITY FUNDS FOR THE PERIOD ENDED MAY 31, 2000 CAPITAL CORE E-COMMERCE BALANCED APPRECIATION EQUITY OPPORTUNITY FUND FUND FUND FUND ---------- ------------ ---------- ----------- 06/01/99- 06/01/99- 09/30/99*- 09/30/99*- 05/31/00 05/31/00 05/31/00 05/31/00 ---------- ------------ ---------- ----------- Income: Interest Income .................................................... $ 9,029 $ 6,998 $ 154 $ 248 Dividend Income .................................................... 1,992 19,043 597 72 Less: Foreign Taxes Withheld ....................................... -- -- -- -- ------- -------- ------- -------- Total Income ....................................................... 11,021 26,041 751 320 ------- -------- ------- -------- Expenses: Investment Advisory Fees ........................................... 3,114 23,701 920 538 Less: Investment Advisory Fees Waived .............................. (335) (1,750) (63) (69) Administrator Fees ................................................. 232 1,458 59 35 Transfer Agent Fees -- Trust Shares ................................ 19 18 11 11 Transfer Agent Fees -- Investor Shares ............................. 21 93 -- -- Transfer Agent Fees -- Flex Shares ................................. 90 203 5 8 Transfer Agent Out of Pocket Expenses .............................. 23 142 6 3 Printing Fees ...................................................... 21 104 7 4 Custody Fees ....................................................... 19 102 3 2 Professional Fees .................................................. 24 132 6 4 Trustee Fees ....................................................... 3 16 1 1 Registration Fees .................................................. 46 135 18 17 Distribution Fees -- Investor Shares ............................... 36 1,984 -- -- Less: Distribution Fees Waived -- Investor Shares .................. (17) (298) -- -- Distribution Fees -- Flex Shares ................................... 765 1,528 11 52 Less: Distribution Fees Waived -- Flex Shares ...................... (38) (45) (3) (1) Insurance and Other Fees ........................................... 17 78 35 38 ------- -------- ------- -------- Total Expenses ..................................................... 4,040 27,601 1,016 643 ------- -------- ------- -------- Net Investment Income (Loss) ....................................... 6,981 (1,560) (265) (323) ------- -------- ------- -------- Net Realized and Unrealized Gain (Loss) on Investments: Capital Gain Received from Investments ............................. -- -- -- -- Net Realized Gain (Loss) on Securities Sold ........................ 5,831 240,075 386 (8,801) Net Realized Loss on Foreign Currency Transactions ................. -- -- -- -- Net Change in Unrealized Appreciation on Foreign Currency and ...... Translation of Other Assets and Liabilities in Foreign Currency .. -- -- -- -- Net Change in Unrealized Appreciation (Depreciation) on Investments 755 (89,037) 11,612 (3,438) ------- -------- ------- -------- Total Net Realized and Unrealized Gain (Loss) on Investments ....... 6,586 151,038 11,998 (12,239) ------- -------- ------- -------- Net Increase (Decrease) in Net Assets from Operations .............. $13,567 $149,478 $11,733 $(12,562) ======= ======== ======= ========
GROWTH AND INTERNATIONAL INTERNATIONAL LIFE VISION INCOME EQUITY EQUITY AGGRESSIVE GROWTH FUND FUND INDEX FUND FUND --------- ------------- ------------- ----------------- 06/01/99- 06/01/99- 06/01/99- 06/01/99- 05/31/00 05/31/00 05/31/00 05/31/00 --------- ------------- ------------- ----------------- Income: Interest Income .................................................... $ 1,155 $ 943 $ 396 $ -- Dividend Income .................................................... 13,185 10,625 3,141 133 Less: Foreign Taxes Withheld ....................................... -- (692) (289) -- ------- ------- ------ ------ Total Income ....................................................... 14,340 10,876 3,248 133 ------- ------- ------ ------ Expenses: Investment Advisory Fees ........................................... 7,270 6,551 1,549 42 Less: Investment Advisory Fees Waived .............................. (1) (18) (190) (31) Administrator Fees ................................................. 572 371 122 13 Transfer Agent Fees -- Trust Shares ................................ 10 18 15 16 Transfer Agent Fees -- Investor Shares ............................. 40 20 14 -- Transfer Agent Fees -- Flex Shares ................................. 68 40 14 -- Transfer Agent Out of Pocket Expenses .............................. 53 47 7 1 Printing Fees ...................................................... 43 6 10 1 Custody Fees ....................................................... 33 659 245 1 Professional Fees .................................................. 75 39 15 2 Trustee Fees ....................................................... 2 5 1 -- Registration Fees .................................................. 26 29 51 1 Distribution Fees -- Investor Shares ............................... 100 41 19 -- Less: Distribution Fees Waived -- Investor Shares .................. (50) (13) (12) -- Distribution Fees -- Flex Shares ................................... 497 146 32 -- Less: Distribution Fees Waived -- Flex Shares ...................... (126) (28) (12) -- Insurance and Other Fees ........................................... 81 27 22 -- ------- ------- ------ ------ Total Expenses ..................................................... 8,693 7,940 1,902 46 ------- ------- ------ ------ Net Investment Income (Loss) ....................................... 5,647 2,936 1,346 87 ------- ------- ------ ------ Net Realized and Unrealized Gain (Loss) on Investments: Capital Gain Received from Investments ............................. -- -- -- 780 Net Realized Gain (Loss) on Securities Sold ........................ 28,329 76,552 2,725 158 Net Realized Loss on Foreign Currency Transactions ................. -- (5,581) (534) -- Net Change in Unrealized Appreciation on Foreign Currency and ...... Translation of Other Assets and Liabilities in Foreign Currency .. -- 565 116 -- Net Change in Unrealized Appreciation (Depreciation) on Investments 1,238 (31,341) 37 461 ------- ------- ------ ------ Total Net Realized and Unrealized Gain (Loss) on Investments ....... 29,567 40,195 2,344 1,399 ------- ------- ------ ------ Net Increase (Decrease) in Net Assets from Operations .............. $35,214 $43,131 $3,690 $1,486 ======= ======= ====== ======
*Commencement of operations. Amounts designated as "--" are either $0 or round to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 70 & 71
STATEMENTS OF OPERATIONS (000) ------------------------------------------------------------------------------------------------------------------------------------ STI CLASSIC EQUITY FUNDS FOR THE PERIOD ENDED MAY 31, 2000 LIFE VISION LIFE VISION MID-CAP SMALL CAP GROWTH AND INCOME MODERATE EQUITY GROWTH STOCK FUND GROWTH FUND FUND FUND ----------------- ------------ ---------- ------------ 06/01/99- 06/01/99- 06/01/99- 06/01/99- 05/31/00 05/31/00 05/31/00 05/31/00 ----------------- ------------ ---------- ------------ Income: Interest Income .................................................... $ -- $-- $ 816 $ 846 Dividend Income .................................................... 472 2,048 2,182 211 ------ ------ ------- ------- Total Income ....................................................... 472 2,048 2,998 1,057 ------ ------ ------- ------- Investment Advisory Fees ........................................... 58 213 2,954 3,468 Less: Investment Advisory Fees Waived .............................. (40) (102) (191) (84) Administrator Fees ................................................. 17 56 181 218 Transfer Agent Fees -- Trust Shares ................................ 17 18 17 26 Transfer Agent Fees -- Investor Shares ............................. -- -- 19 13 Transfer Agent Fees -- Flex Shares ................................. -- -- 31 28 Transfer Agent Out of Pocket Expenses .............................. 1 5 3 10 Printing Fees ...................................................... 1 4 11 15 Custody Fees ....................................................... 1 4 6 10 Professional Fees .................................................. 1 7 6 10 Trustee Fees ....................................................... -- -- -- 2 Registration Fees .................................................. 1 2 17 27 Distribution Fees -- Investor Shares ............................... -- -- 72 56 Less: Distribution Fees Waived -- Investor Shares ................... -- -- (19) (24) Distribution Fees -- Flex Shares ................................... -- -- 150 112 Less: Distribution Fees Waived -- Flex Shares ....................... -- -- (23) (17) Insurance and Other Fees ........................................... 1 4 3 -- Amortization of Deferred Organization Costs ........................ -- -- -- -- ------ ------ ------- ------- Total Expenses ..................................................... 58 211 3,237 3,870 ------ ------ ------- ------- Net Investment Income (Loss) ....................................... 414 1,837 (239) (2,813) ------ ------ ------- ------- Net Realized and Unrealized Gain (Loss) on Investments: Capital Gain Received from Investments ............................. 832 2,705 -- -- Net Realized Gain (Loss) on Securities Sold ........................ (524) (979) 39,061 22,517 Net Change in Unrealized Appreciation (Depreciation) on Investments 408 264 4,067 40,570 ------ ------ ------- ------- Total Net Realized and Unrealized Gain (Loss) on Investments ....... 716 1,990 43,128 63,087 ------ ------ ------- ------- Net Increase (Decrease) in Net Assets from Operations .............. $1,130 $3,827 $42,889 $60,274 ====== ====== ======= =======
SMALL CAP TAX SENSITIVE VALUE VALUE EQUITY GROWTH STOCK INCOME STOCK FUND FUND FUND ------------ ------------- ------------ 06/01/99- 06/01/99- 06/01/99- 05/31/00 05/31/00 05/31/00 ------------ ------------- ------------ Income: Interest Income .................................................... $ 483 $ 1,956 $ 6,430 Dividend Income .................................................... 7,070 6,456 41,252 -------- ------- --------- Total Income ....................................................... 7,553 8,412 47,682 -------- ------- --------- Investment Advisory Fees ........................................... 3,439 7,254 13,106 Less: Investment Advisory Fees Waived .............................. (76) (399) -- Administrator Fees ................................................. 212 446 1,154 Transfer Agent Fees -- Trust Shares ................................ 18 16 20 Transfer Agent Fees -- Investor Shares ............................. -- -- 92 Transfer Agent Fees -- Flex Shares ................................. 44 160 177 Transfer Agent Out of Pocket Expenses .............................. 6 43 66 Printing Fees ...................................................... 2 44 3 Custody Fees ....................................................... 4 29 58 Professional Fees .................................................. 10 41 55 Trustee Fees ....................................................... 1 6 -- Registration Fees .................................................. 11 86 149 Distribution Fees -- Investor Shares ............................... -- -- 504 Less: Distribution Fees Waived -- Investor Shares .................. -- -- (2) Distribution Fees -- Flex Shares ................................... 139 1,867 1,321 Less: Distribution Fees Waived -- Flex Shares ...................... (36) (71) (23) Insurance and Other Fees ........................................... 11 16 6 Amortization of Deferred Organization Costs ........................ 12 -- -- -------- ------- --------- Total Expenses ..................................................... 3,797 9,538 16,686 -------- ------- --------- Net Investment Income (Loss) ....................................... 3,756 (1,126) 30,996 -------- ------- --------- Net Realized and Unrealized Gain (Loss) on Investments: Capital Gain Received from Investments ............................. -- -- -- Net Realized Gain (Loss) on Securities Sold ........................ (3,553) (23,743) (147,760) Net Change in Unrealized Appreciation (Depreciation) on Investments (20,563) 58,045 (137,601) -------- ------- --------- Total Net Realized and Unrealized Gain (Loss) on Investments ....... (24,116) 34,302 (285,361) -------- ------- --------- Net Increase (Decrease) in Net Assets from Operations .............. $(20,360) $33,176 $(254,365) ======== ======= =========
Amounts designated as "--" are either $0 or round to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 72 & 73
STATEMENTS OF CHANGES IN NET ASSETS (000) ------------------------------------------------------------------------------------------------------------------------------------ STI CLASSIC EQUITY FUNDS FOR THE PERIODS ENDED MAY 31, AND NOVEMBER 30, E-COMMERCE CAPITAL CORE OPPORTUNITY BALANCED FUND APPRECIATION FUND EQUITY FUND FUND ------------------- --------------------- ----------- ----------- 06/01/99 06/01/98- 06/01/99- 06/01/98- 09/30/99*- 09/30/99*- 05/31/00 05/31/99 05/31/00 05/31/99 05/31/00 05/31/00 -------- -------- --------- --------- ---------- ----------- Operations: Net Investment Income (Loss) ....................... $ 6,981 $ 5,369 $ (1,560)$ 3,087 $ (265) $ (323) Capital Gain Received from Investments ............. -- -- -- -- -- -- Net Realized Gain (Loss) on Investments ............ 5,831 9,690 240,075 166,440 386 (8,801) Net Realized Loss on Foreign Currency Transactions . -- -- -- -- -- -- Net Change in Unrealized Appreciation (Depreciation) on Foreign Currency and Translation of Other Assets and Liabilities in Foreign Currency .............. -- -- -- -- -- -- Net Change in Unrealized Appreciation (Depreciation) on Investments ................................... 755 11,063 (89,037) 151,103 11,612 (3,438) -------- -------- ---------- ---------- -------- -------- Increase (Decrease) in Net Assets from Operations 13,567 26,122 149,478 320,630 11,733 (12,562) -------- -------- ---------- ---------- -------- -------- Distributions to Shareholders: Net Investment Income: Trust Shares ..................................... (5,433) (4,438) -- (5,572) -- -- Investor Shares .................................. (248) (200) -- (36) -- -- Flex Shares ...................................... (950) (506) -- -- -- -- Capital Gains: Trust Shares ..................................... (4,291) (13,593) (88,647) (240,608) -- -- Investor Shares .................................. (233) (771) (16,187) (41,767) -- -- Flex Shares ...................................... (1,444) (2,745) (8,873) (19,498) -- -- -------- -------- ---------- ---------- -------- -------- Total Distributions ................................ (12,599) (22,253) (113,707) (307,481) -- -- -------- -------- ---------- ---------- -------- -------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued ...................... 93,109 146,574 313,347 673,116 159,873 140,662 Shares Issued in Connection with Crestar Merger .. -- -- -- 139,648 -- -- Shares Issued in Connection with Fund Reorganizations .............................. -- -- -- -- -- -- Reinvestment of Cash Distributions ............... 9,575 17,886 83,171 234,593 -- -- Cost of Shares Repurchased ....................... (131,695) (104,280) (1,096,316) (623,912) (20,053) (26,252) -------- -------- ---------- ---------- -------- -------- Increase (Decrease) in Net Assets From Trust Share Transactions ..................................... (29,011) 60,180 (699,798) 423,445 139,820 114,410 -------- -------- ---------- ---------- -------- -------- Investor Shares: Proceeds from Shares Issued ...................... 1,969 7,551 12,858 32,561 -- -- Shares Issued in Connection with Crestar Merger .. -- -- -- 12,499 -- -- Shares Issued in Connection with ESC Merger ...... -- -- -- -- -- -- Reinvestment of Cash Distributions ............... 477 966 15,949 41,544 -- -- Cost of Shares Repurchased ....................... (7,771) (2,023) (93,208) (49,083) -- -- -------- -------- ---------- ---------- -------- -------- Increase (Decrease) in Net Assets From Investor Share Transactions ............................... (5,325) 6,494 (64,401) 37,521 -- -- -------- -------- ---------- ---------- -------- -------- Flex Shares: Proceeds from Shares Issued ...................... 26,174 54,572 29,168 68,098 4,336 25,730 Shares Issued in Connection with Crestar Merger .. -- -- -- -- 7,867 -- Shares Issued in Connection with ESC Merger ..... -- -- -- -- -- -- Reinvestment of Cash Distributions .............. 2,328 3,206 8,732 19,257 -- -- Cost of Shares Repurchased ...................... (37,791) (12,484) (73,027) (39,576) (121) (952) -------- -------- ---------- ---------- -------- -------- Increase (Decrease) in Net Assets From Flex Share Transactions ......................... (9,289) 45,294 (35,127) 55,646 4,215 24,778 -------- -------- ---------- ---------- -------- -------- Increase (Decrease) in Net Assets From Share Transactions .................................. (43,625) 111,968 (799,326) 516,612 144,035 139,188 -------- -------- ---------- ---------- -------- -------- Total Increase (Decrease) in Net Assets ....... (42,657) 115,837 (763,555) 529,761 155,768 126,626 -------- -------- ---------- ---------- -------- -------- Net Assets: Beginning of Period ............................... 340,240 224,403 2,440,062 1,910,301 -- -- -------- -------- ---------- ---------- -------- -------- End of Period ...................................... $297,583 $340,240 $1,676,507 $2,440,062 $155,768 $126,626 ======== ======== ========== ========== ======== ========
INTERNATIONAL INTERNATIONAL GROWTH AND EQUITY EQUITY INCOME FUND FUND INDEX FUND ----------------------------- ------------------- ------------------ 06/01/99- 12/01/98- 12/01/97- 06/01/99- 06/01/98- 06/01/99- 06/01/98- 05/31/00 05/31/99 11/30/98 05/31/00 05/31/99 05/31/00 05/31/99 --------- --------- --------- --------- --------- --------- --------- Operations: Net Investment Income (Loss) ....................... $ 5,647 $ 1,547 $ 3,859 $ 2,936 $ 3,923 $ 1,346 $ 392 Capital Gain Received from Investments ............. -- -- -- -- -- -- -- Net Realized Gain (Loss) on Investments ............ 28,329 48,404 42,161 76,552 21,269 2,725 7,583 Net Realized Loss on Foreign Currency Transactions . -- -- -- (5,581) (811) (534) (40) Net Change in Unrealized Appreciation (Depreciation) on Foreign Currency and Translation of Other Assets and Liabilities in Foreign Currency .............. -- -- -- 565 (10) 116 (88) Net Change in Unrealized Appreciation (Depreciation) on Investments ................................... 1,238 39,898 33,416 (31,341) (78,440) 37 (3,971) -------- -------- -------- -------- -------- -------- ------- Increase (Decrease) in Net Assets from Operations 35,214 89,849 79,436 43,131 (54,069) 3,690 3,876 -------- -------- -------- -------- -------- -------- ------- Distributions to Shareholders: Net Investment Income: Trust Shares ..................................... (4,628) (935) (3,768) (2,937) (2,385) (276) (1,136) Investor Shares .................................. (188) (66) (212) (22) (6) -- (83) Flex Shares ...................................... -- (7) -- -- -- -- (4) Capital Gains: Trust Shares ..................................... (44,093) (38,443) (110,281) (70,119) (33,895) (863) (8,431) Investor Shares .................................. (2,546) (2,259) (5,275) (1,670) (965) (41) (877) Flex Shares ...................................... (2,921) (1,704) (2,562) (2,014) (1,189) (21) (172) -------- -------- -------- -------- -------- -------- ------- Total Distributions ................................ (54,376) (43,414) (122,098) (76,762) (38,440) (1,201) (10,703) -------- -------- -------- -------- -------- -------- ------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued ...................... 367,032 77,854 92,390 66,686 172,988 297,168 34,363 Shares Issued in Connection with Crestar Merger .. -- -- -- -- -- -- -- Shares Issued in Connection with Fund Reorganizations .............................. -- -- -- 21,915 -- -- -- Reinvestment of Cash Distributions ............... 34,372 11,972 88,294 66,001 33,324 1,011 8,985 Cost of Shares Repurchased ....................... (134,326) (74,302) (153,783) (396,524) (175,047) (33,456) (18,882) -------- -------- -------- -------- -------- ------- ------- Increase (Decrease) in Net Assets From Trust Share Transactions ..................................... 267,078 15,524 26,901 (241,922) 31,265 264,723 24,466 -------- -------- -------- -------- -------- -------- ------- Investor Shares: Proceeds from Shares Issued ...................... 17,046 2,099 11,222 1,176 2,728 2,934 1,083 Shares Issued in Connection with Crestar Merger .. -- -- -- -- -- -- -- Shares Issued in Connection with ESC Merger ...... 7,989 -- -- 1,242 -- -- -- Reinvestment of Cash Distributions ............... 2,496 2,157 5,277 1,683 965 40 959 Cost of Shares Repurchased ....................... (20,339) (4,209) (8,617) (7,206) (4,566) (4,152) (3,668) -------- -------- -------- -------- -------- -------- ------- Increase (Decrease) in Net Assets From Investor Share Transactions ............................... 7,192 47 7,882 (3,105) (873) (1,178) (1,626) -------- -------- -------- -------- -------- -------- ------- Flex Shares: Proceeds from Shares Issued ...................... 37,577 8,350 12,797 2,028 6,324 5,107 980 Shares Issued in Connection with Crestar Merger .. -- -- -- -- -- -- -- Shares Issued in Connection with ESC Merger ..... 1,536 -- -- 666 -- -- -- Reinvestment of Cash Distributions .............. 2,843 1,675 2,504 1,975 1,174 21 174 Cost of Shares Repurchased ...................... (13,227) (2,763) (2,494) (10,061) (8,295) (883) (987) -------- -------- -------- -------- -------- -------- ------- Increase (Decrease) in Net Assets From Flex Share Transactions ......................... 28,729 7,262 12,807 (5,392) (797) 4,245 167 -------- -------- -------- -------- -------- -------- ------- Increase (Decrease) in Net Assets From Share Transactions .................................. 302,999 22,833 47,590 (250,419) 29,595 267,790 23,007 -------- -------- -------- -------- -------- ------- ------- Total Increase (Decrease) in Net Assets ....... 283,837 69,268 4,928 (284,050) (62,914) 270,279 16,180 -------- -------- -------- -------- -------- -------- ------- Net Assets: Beginning of Period ............................... 706,400 637,132 632,204 604,503 667,417 80,990 64,810 -------- -------- -------- -------- -------- -------- ------- End of Period ...................................... $990,237 $706,400 $637,132 $320,453 $604,503 $351,269 $80,990 ======== ======== ======== ======== ======== ======== =======
LIFE VISION AGGRESSIVE GROWTH FUND ----------------------------- 06/01/99- 12/01/98- 12/01/97- 05/31/00 05/31/99 11/30/98 --------- --------- --------- Operations: Net Investment Income (Loss) ....................... $ 87 $ 25 $ 36 Capital Gain Received from Investments ............. 780 499 1,739 Net Realized Gain (Loss) on Investments ............ 158 (42) (463) Net Realized Loss on Foreign Currency Transactions . -- -- -- Net Change in Unrealized Appreciation (Depreciation) on Foreign Currency and Translation of Other Assets and Liabilities in Foreign Currency .............. -- -- -- Net Change in Unrealized Appreciation (Depreciation) on Investments ................................... 461 1,329 (226) ------- ------- ------- Increase (Decrease) in Net Assets from Operations 1,486 1,811 1,086 ------- ------- ------- Distributions to Shareholders: Net Investment Income: Trust Shares ..................................... (88) (24) (35) Investor Shares .................................. -- -- -- Flex Shares ...................................... -- -- -- Capital Gains: Trust Shares ..................................... (807) (1,670) -- Investor Shares .................................. -- -- -- Flex Shares ...................................... -- -- -- ------- ------- ------- Total Distributions ................................ (895) (1,694) (35) ------- ------- ------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued ...................... 11,078 2,114 5,852 Shares Issued in Connection with Crestar Merger .. -- -- -- Shares Issued in Connection with Fund Reorganizations .............................. -- -- -- Reinvestment of Cash Distributions ............... 894 1,694 36 Cost of Shares Repurchased ....................... (12,850) (1,456) (4,421) ------- ------- ------- Increase (Decrease) in Net Assets From Trust Share Transactions ..................................... (878) 2,352 1,467 ------- ------- ------- Investor Shares: Proceeds from Shares Issued ...................... -- -- -- Shares Issued in Connection with Crestar Merger .. -- -- -- Shares Issued in Connection with ESC Merger ...... -- -- -- Reinvestment of Cash Distributions ............... -- -- -- Cost of Shares Repurchased ....................... -- -- -- ------- ------- ------- Increase (Decrease) in Net Assets From Investor Share Transactions ............................... -- -- -- ------- ------- ------- Flex Shares: Proceeds from Shares Issued ...................... -- -- -- Shares Issued in Connection with Crestar Merger .. -- -- -- Shares Issued in Connection with ESC Merger ..... -- -- -- Reinvestment of Cash Distributions .............. -- -- -- Cost of Shares Repurchased ...................... -- -- -- ------- ------- ------- Increase (Decrease) in Net Assets From Flex Share Transactions ......................... -- -- -- ------- ------- ------- Increase (Decrease) in Net Assets From Share Transactions .................................. (878) 2,352 1,467 ------- ------- ------- Total Increase (Decrease) in Net Assets ....... (287) 2,469 2,518 ------- ------- ------- Net Assets: Beginning of Period ............................... 18,699 16,230 13,712 ------- ------- ------- End of Period ...................................... $18,412 $18,699 $16,230 ======= ======= =======
*Commencement of operations. (1) See Note 6 in the notes to the financial statements for additional information. Amounts designated as "--" are either $0 or have been rounded to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 74 & 75
STATEMENTS OF CHANGES IN NET ASSETS (000) ------------------------------------------------------------------------------------------------------------------------------------ STI CLASSIC EQUITY FUNDS FOR THE PERIODS ENDED MAY 31, AND NOVEMBER 30, LIFE VISION LIFE VISION GROWTH AND INCOME FUND MODERATE GROWTH FUND ------------------------------- ----------------------------- 06/01/99- 12/01/98- 12/01/97- 06/01/99- 12/01/98- 12/01/97- 05/31/00 05/31/99 11/30/98 05/31/00 05/31/99 11/30/98 --------- --------- --------- --------- --------- --------- Operations Net Investment Income (Loss) ............................... $ 414 $ 138 $ 357 $ 1,837 $ 867 $ 2,062 Capital Gain Received from Investments ..................... 832 490 2,121 2,705 2,204 6,921 Net Realized Gain (Loss) on Investments .................... (524) (82) (45) (979) 317 (1,004) Net Change in Unrealized Appreciation (Depreciation) on Investments ........................................... 408 922 (580) 264 2,338 (1,024) ------- ------- ------- ------- ------- ------- Increase (Decrease) in Net Assets from Operations .......... 1,130 1,468 1,853 3,827 5,726 6,955 ------- ------- ------- ------- ------- ------- Distributions to Shareholders: Net Investment Income: Trust Shares ............................................. (359) (114) (360) (1,683) (735) (2,072) Investor Shares .......................................... -- -- -- -- -- -- Flex Shares .............................................. -- -- -- -- -- -- Capital Gains: Trust Shares ............................................. (571) (2,475) (22) (3,458) (6,686) (238) Investor Shares .......................................... -- -- -- -- -- -- Flex Shares .............................................. -- -- -- -- -- -- ------- ------- ------- ------- ------- ------- Total Distributions ........................................ (930) (2,589) (382) (5,141) (7,421) (2,310) ------- ------- ------- ------- ------- ------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued .............................. 18,854 2,679 2,591 33,036 5,124 15,849 Shares Issued in Connection with Common Trust Fund Conversion ............................................. -- -- -- -- -- -- Shares Issued in Connection with Crestar Merger .......... -- -- -- -- -- -- Shares Issued in Connection with Fund Reorganizations .... -- -- -- -- -- -- Reinvestment of Cash Distributions ....................... 928 2,589 382 5,141 7,421 2,310 Cost of Shares Repurchased ............................... (11,459) (1,239) (7,923) (55,429) (15,873) (19,035) ------- ------- ------- ------- ------- ------- Increase (Decrease) in Net Assets From Trust Share Transactions ............................................. 8,323 4,029 (4,950) (17,252) (3,328) (876) ------- ------- ------- ------- ------- ------- Investor Shares: Proceeds from Shares Issued .............................. -- -- -- -- -- -- Shares Issued in Connection with Fund Reorganizations .... -- -- -- -- -- -- Shares Issued in Connection with ESC Merger .............. -- -- -- -- -- -- Reinvestment of Cash Distributions ....................... -- -- -- -- -- -- Cost of Shares Repurchased ............................... -- -- -- -- -- -- ------- ------- ------- ------- ------- ------- Increase (Decrease) in Net Assets From Investor Share Transactions ....................................... -- -- -- -- -- -- ------- ------- ------- ------- ------- ------- Proceeds from Shares Issued .............................. -- -- -- -- -- -- Shares Issued in Connection with Crestar Merger .......... -- -- -- -- -- -- Shares Issued in Connection with Fund Reorganizations .... -- -- -- -- -- -- Shares Issued in Connection with ESC Merger .............. -- -- -- -- -- -- Reinvestment of Cash Distributions ....................... -- -- -- -- -- -- Cost of Shares Repurchased ............................... -- -- -- -- -- -- ------- ------- ------- ------- ------- ------- Increase (Decrease) in Net Assets From Flex Share Transactions .................................. -- -- -- -- -- -- ------- ------- ------- ------- ------- ------- Increase (Decrease) in Net Assets From Share Transactions ........................................... 8,323 4,029 (4,950) (17,252) (3,328) (876) ------- ------- ------- ------- ------- ------- Total Increase (Decrease) in Net Assets ................ 8,523 2,908 (3,479) (18,566) (5,023) 3,769 ------- ------- ------- ------- ------- ------- Net Assets: Beginning of Period ........................................ 21,950 19,042 22,521 88,188 93,211 89,442 ------- ------- ------- ------- ------- ------- End of Period .............................................. $30,473 $21,950 $19,042 $69,622 $88,188 $93,211 ======= ======= ======= ======= ======= =======
SMALL CAP MID-CAP EQUITY GROWTH SMALL CAP VALUE FUND STOCK FUND EQUITY FUND -------------------- -------------------- --------- --------- 06/01/99- 06/01/98- 06/01/99- 10/08/98*- 06/01/99- 06/01/98- 05/31/00 05/31/99 05/31/00 05/31/99 05/31/00 05/31/99 --------- --------- --------- --------- --------- --------- Operations Net Investment Income (Loss) ............................... $ (239) $ (1,779) $ (2,813) $ (141) $ 3,756 $ 3,797 Capital Gain Received from Investments ..................... -- -- -- -- -- -- Net Realized Gain (Loss) on Investments .................... 39,061 12,419 22,517 2,335 (3,553) (48,614) Net Change in Unrealized Appreciation (Depreciation) on Investments ........................................... 4,067 (10,771) 40,570 4,550 (20,563) (39,458) -------- -------- -------- ------- -------- -------- Increase (Decrease) in Net Assets from Operations .......... 42,889 (131) 60,274 6,744 (20,360) (84,275) -------- -------- -------- ------- -------- -------- Distributions to Shareholders: Net Investment Income: Trust Shares ............................................. -- -- -- (4) (3,505) (3,830) Investor Shares .......................................... -- (3) -- -- -- -- Flex Shares .............................................. -- -- -- -- (6) (46) Capital Gains: Trust Shares ............................................. (15,785) (26,541) (2,438) (24) -- (17,401) Investor Shares .......................................... (1,189) (1,970) -- -- -- -- Flex Shares .............................................. (1,047) (1,677) (83) (1) -- (1,638) -------- -------- -------- ------- -------- -------- Total Distributions ........................................ ( 18,021) (30,191) (2,521) (29) (3,511) (22,915) -------- -------- -------- ------- -------- -------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued .............................. 155,090 197,227 191,895 69,418 103,359 159,166 Shares Issued in Connection with Common Trust Fund Conversion ............................................. -- -- -- -- -- -- Shares Issued in Connection with Crestar Merger .......... -- -- -- 88,940 -- -- Shares Issued in Connection with Fund Reorganizations .... -- -- 93,889 -- -- -- Reinvestment of Cash Distributions ....................... 14,649 25,335 2,092 28 2,725 19,237 Cost of Shares Repurchased ............................... (239,058) (280,036) (68,278) (12,528) (173,187) (170,356) -------- -------- -------- ------- -------- -------- Increase (Decrease) in Net Assets From Trust Share Transactions ............................................. (69,319) (57,474) 219,598 145,858 (67,103) 8,047 -------- -------- -------- ------- -------- -------- Investor Shares: Proceeds from Shares Issued .............................. 1,381 3,015 2,463 -- -- -- Shares Issued in Connection with Fund Reorganizations .... -- -- 12,481 -- -- -- Shares Issued in Connection with ESC Merger .............. -- -- 34,455 -- -- -- Reinvestment of Cash Distributions ....................... 1,183 1,967 -- -- -- -- Cost of Shares Repurchased ............................... (8,975) (8,523) (7,316) -- -- -- -------- -------- -------- ------- -------- -------- Increase (Decrease) in Net Assets From Investor Share Transactions ....................................... (6,411) (3,541) 42,083 -- -- -- -------- -------- -------- ------- -------- -------- Proceeds from Shares Issued .............................. 3,480 4,866 4,518 3,553 1,802 2,579 Shares Issued in Connection with Crestar Merger .......... -- -- -- 2,699 -- -- Shares Issued in Connection with Fund Reorganizations .... -- -- 2,772 -- -- -- Shares Issued in Connection with ESC Merger .............. -- -- 14,435 -- -- -- Reinvestment of Cash Distributions ....................... 1,037 1,671 83 1 5 1,669 Cost of Shares Repurchased ............................... (7,098) (7,908) (5,119) (378) (11,612) (15,110) -------- -------- -------- ------- -------- -------- Increase (Decrease) in Net Assets From Flex Share Transactions .................................. (2,581) (1,371) 16,689 5,875 (9,805) (10,862) -------- -------- -------- ------- -------- -------- Increase (Decrease) in Net Assets From Share Transactions ........................................... (78,311) (62,386) 278,370 151,733 (76,908) (2,815) -------- -------- -------- ------- -------- -------- Total Increase (Decrease) in Net Assets ................ (53,443) (92,708) 336,123 158,448 (100,779) (110,005) -------- -------- -------- ------- -------- -------- Net Assets: Beginning of Period ........................................ 289,089 381,797 158,448 -- 321,449 431,454 -------- -------- -------- ------- -------- -------- End of Period .............................................. $235,646 $289,089 $494,571 $158,448 $220,670 $321,449 ======== ======== ======== ======== ======== ========
TAX SENSITIVE GROWTH VALUE INCOME STOCK FUND STOCK FUND --------- --------- --------- --------- 06/01/99- 12/11/98*- 06/01/99- 06/01/98- 05/31/00 05/31/99 05/31/00 05/31/99 --------- --------- --------- --------- Operations Net Investment Income (Loss) ............................... $ (1,126) $ 38 $ 30,996 $ 33,942 Capital Gain Received from Investments ..................... -- -- -- -- Net Realized Gain (Loss) on Investments .................... (23,743) 4,943 (147,760) 219,408 Net Change in Unrealized Appreciation (Depreciation) on Investments ........................................... 58,045 14,808 (137,601) (71,294) ---------- -------- ---------- ---------- Increase (Decrease) in Net Assets from Operations .......... 33,176 19,789 (254,365) 182,056 ---------- -------- ---------- ---------- Distributions to Shareholders: Net Investment Income: Trust Shares ............................................. -- (87) (27,678) (30,625) Investor Shares .......................................... -- -- (2,514) (3,178) Flex Shares .............................................. -- -- (1,129) (1,535) Capital Gains: Trust Shares ............................................. -- -- (131,535) (229,623) Investor Shares .......................................... -- -- (14,565) (29,331) Flex Shares .............................................. -- -- (13,032) (25,364) ---------- -------- ---------- ---------- Total Distributions ........................................ -- (87) (190,453) (319,656) ---------- -------- ---------- ---------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued .............................. 556,671 121,119 383,909 354,278 Shares Issued in Connection with Common Trust Fund Conversion ............................................. -- 99,222 -- -- Shares Issued in Connection with Crestar Merger .......... -- -- -- -- Shares Issued in Connection with Fund Reorganizations .... -- -- -- -- Reinvestment of Cash Distributions ....................... -- 87 146,588 241,723 Cost of Shares Repurchased ............................... (95,363) (15,922) (831,377) (621,009) ---------- -------- ---------- ---------- Increase (Decrease) in Net Assets From Trust Share Transactions ............................................. 461,308 204,506 (300,880) (25,008) ---------- -------- ---------- ---------- Investor Shares: Proceeds from Shares Issued .............................. -- -- 6,784 17,566 Shares Issued in Connection with Fund Reorganizations .... -- -- -- -- Shares Issued in Connection with ESC Merger .............. -- -- -- -- Reinvestment of Cash Distributions ....................... -- -- 16,876 32,240 Cost of Shares Repurchased ............................... -- -- (72,831) (51,945) ---------- -------- ---------- ---------- Increase (Decrease) in Net Assets From Investor Share Transactions ....................................... -- -- (49,171) (2,139) Proceeds from Shares Issued .............................. 242,949 77,327 18,991 38,150 Shares Issued in Connection with Crestar Merger .......... -- -- -- -- Shares Issued in Connection with Fund Reorganizations .... -- -- -- -- Shares Issued in Connection with ESC Merger .............. -- -- -- -- Reinvestment of Cash Distributions ....................... -- -- 13,741 26,492 Cost of Shares Repurchased ............................... (36,077) (2,117) (78,588) (65,171) ---------- -------- ---------- ---------- Increase (Decrease) in Net Assets From Flex Share Transactions .................................. 206,872 75,210 (45,856) (529) ---------- -------- ---------- ---------- Increase (Decrease) in Net Assets From Share Transactions ........................................... 668,180 279,716 (395,907) (27,676) ---------- -------- ---------- ---------- Total Increase (Decrease) in Net Assets ................ 701,356 299,418 (840,725) (165,276) ---------- -------- ---------- ---------- Net Assets: Beginning of Period ........................................ 299,418 -- 1,951,263 2,116,539 ---------- -------- ---------- ---------- End of Period .............................................. $1,000,774 $299,418 $1,110,538 $1,951,263 ========== ======== ========== ==========
*Commencement of Operations. (1) See Note 6 in the financial statements for additional information Amounts designated as "--" are either $0 or have been rounded to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 76 & 77
FINANCIAL HIGHLIGHTS ------------------------------------------------------------------------------------------------------------------------------------ STI CLASSIC EQUITY FUNDS FOR THE PERIODS MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS NET ASSET NET REALIZED AND DISTRIBUTIONS VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED VALUE END OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD ------------ --------------- ----------------- ------------- ------------- --------- BALANCED FUND Trust Shares 2000 $13.26 $ 0.32 $ 0.33 $(0.30) $ (0.24) $13.37 1999 13.09 0.28 1.09 (0.28) (0.92) 13.26 1998 11.94 0.31 2.19 (0.32) (1.03) 13.09 1997 11.55 0.33 1.47 (0.32) (1.09) 11.94 1996 10.26 0.33 1.41 (0.34) (0.11) 11.55 Investor Shares 2000 $13.32 $ 0.29 $ 0.31 $(0.25) $ (0.24) $13.43 1999 13.14 0.24 1.10 (0.24) (0.92) 13.32 1998 11.99 0.28 2.19 (0.29) (1.03) 13.14 1997 11.60 0.29 1.48 (0.29) (1.09) 11.99 1996 10.30 0.30 1.41 (0.30) (0.11) 11.60 Flex Shares 2000 $13.17 $ 0.17 $ 0.33 $(0.16) $ (0.24) $13.27 1999 13.02 0.16 1.07 (0.16) (0.92) 13.17 1998 11.90 0.20 2.16 (0.21) (1.03) 13.02 1997 11.53 0.22 1.45 (0.21) (1.09) 11.90 1996(1) 10.36 0.24 1.29 (0.25) (0.11) 11.53 CAPITAL APPRECIATION FUND Trust Shares 2000 $16.62 $ 0.02 $ 1.40 $ -- $ (0.92) $17.12 1999 16.48 0.05 2.70 (0.06) (2.55) 16.62 1998 15.09 0.09 3.96 (0.09) (2.57) 16.48 1997 14.90 0.12 3.13 (0.12) (2.94) 15.09 1996 12.18 0.12 3.32 (0.13) (0.59) 14.90 Investor Shares 2000 $16.53 $(0.11) $ 1.41 $ -- $ (0.92) $16.91 1999 16.43 (0.05) 2.70 -- (2.55) 16.53 1998 15.06 (0.01) 3.95 -- (2.57) 16.43 1997 14.89 0.03 3.10 (0.02) (2.94) 15.06 1996 12.17 0.03 3.32 (0.04) (0.59) 14.89 Flex Shares 2000 $16.18 $(0.24) $ 1.43 $ -- $ (0.92) $16.45 1999 16.22 (0.09) 2.60 -- (2.55) 16.18 1998 14.96 (0.04) 3.87 -- (2.57) 16.22 1997 14.84 (0.01) 3.07 -- (2.94) 14.96 1996(2) 12.20 0.02 3.26 (0.05) (0.59) 14.84 CORE EQUITY FUND Trust Shares 2000(3) $10.00 $(0.02) $ 1.13 $ -- $ -- $11.11 Flex Shares 2000(4) $10.63 $(0.04) $ 0.47 $ -- $ -- $11.06 E-COMMERCE OPPORTUNITY FUND Trust Shares 2000(3) $10.00 $(0.04) $ 5.91 $ -- $ -- $15.87 Flex Shares 2000(4) $18.20 $(0.07) $(2.32) $ -- $ -- $15.81 GROWTH AND INCOME FUND (A) Trust Shares 2000 $16.09 $ 0.11 $ 0.55 $(0.10) $ (1.12) $15.53 1999(5) 15.10 0.04 1.97 (0.02) (1.00) 16.09 For the years ended November 30: 1998 16.55 0.09 1.64 (0.09) (3.09) 15.10 1997 13.39 0.14 3.24 (0.15) (0.07) 16.55 1996 11.60 0.17 2.38 (0.17) (0.59) 13.39 1995 10.73 0.24 2.62 (0.26) (1.73) 11.60 Investor Shares 2000 $16.21 $ 0.09 $ 0.55 $(0.08) $ (1.12) $15.65 1999(5) 15.21 0.04 1.99 (0.03) (1.00) 16.21 For the years ended November 30: 1998 16.64 0.10 1.66 (0.10) (3.09) 15.21 1997 13.47 0.13 3.25 (0.14) (0.07) 16.64 1996 11.66 0.17 2.39 (0.16) (0.59) 13.47 1995 10.78 0.25 2.62 (0.26) (1.73) 11.66 Flex Shares 2000 $16.10 $ -- $ 0.51 $ -- $ (1.12) $15.49 1999(5) 15.14 (0.01) 1.97 -- (1.00) 16.10 For the years ended November 30: 1998 16.59 (0.01) 1.64 -- (3.08) 15.14 1997 13.44 0.04 3.23 (0.05) (0.07) 16.59 1996 11.64 0.09 2.38 (0.08) (0.59) 13.44 1995(6) 11.11 0.12 1.62 (1.14) (1.07) 11.64
RATIO OF NET ASSETS RATIO OF NET INVESTMENT TOTAL END OF EXPENSES TO INCOME (LOSS) TO RETURN+ PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS --------- ------------- ------------------ ------------------ BALANCED FUND Trust Shares 2000 5.02% $ 223,634 0.97% 2.39% 1999 10.98 251,752 0.97 2.19 1998 22.15 188,465 0.96 2.51 1997 16.66 151,358 0.95 2.89 1996 17.26 111,638 0.95 3.00 Investor Shares 2000 4.66% $ 9,627 1.27% 2.07% 1999 10.70 14,962 1.27 1.89 1998 21.72 8,313 1.26 2.21 1997 16.27 6,012 1.25 2.58 1996 16.88 4,896 1.25 2.70 Flex Shares 2000 3.88% $ 64,322 2.03% 1.33% 1999 9.84 73,526 2.03 1.13 1998 20.85 27,625 2.02 1.41 1997 15.40 6,067 2.01 1.84 1996(1) 15.58 3,131 2.00 1.85 CAPITAL APPRECIATION FUND Trust Shares 2000 8.98% $1,296,927 1.17% 0.10% 1999 17.83 1,966,842 1.17 0.29 1998 29.51 1,532,587 1.16 0.61 1997 24.66 1,085,128 1.15 0.83 1996 28.97 981,498 1.15 0.90 Investor Shares 2000 8.29% $ 251,421 1.82% (0.55)% 1999 17.20 311,120 1.82 (0.30) 1998 28.71 271,044 1.81 (0.03) 1997 23.74 218,660 1.80 0.19 1996 28.18 191,078 1.80 0.24 Flex Shares 2000 7.77% $ 128,159 2.29% (1.03)% 1999 16.50 162,100 2.29 (0.86) 1998 28.12 106,670 2.26 (0.46) 1997 23.24 36,753 2.27 (0.29) 1996(2) 27.48 10,969 2.27 (0.29) CORE EQUITY FUND Trust Shares 2000(3) 11.10% $ 151,421 1.20% (0.30)% Flex Shares 2000(4) 4.05% $ 4,347 2.25% (1.39)% E-COMMERCE OPPORTUNITY FUND Trust Shares 2000(3) 58.70% $ 106,425 1.20% (0.54)% Flex Shares 2000(4) (13.13)% $ 20,201 2.25% (1.65)% GROWTH AND INCOME FUND (A) Trust Shares 2000 4.11% $ 885,109 1.01% 0.76% 1999(5) 14.24 634,279 1.14 0.49 For the years ended November 30: 1998 13.64 577,042 1.03 0.63 1997 25.41 590,824 1.02 0.92 1996 22.68 553,648 1.02 1.38 1995 28.76 220,386 1.02 2.16 Investor Shares 2000 3.92% $ 42,666 1.18% 0.58% 1999(5) 14.31 36,958 1.08 0.54 For the years ended November 30: 1998 13.69 34,434 1.03 0.63 1997 25.42 28,112 1.03 0.89 1996 22.63 17,997 1.03 1.35 1995 28.71 12,633 1.03 2.14 Flex Shares 2000 3.11% $ 62,462 1.93% (0.14)% 1999(5) 13.85 35,163 1.83 (0.21) For the years ended November 30: 1998 12.78 25,656 1.78 (0.13) 1997 24.63 13,269 1.73 0.15 1996 21.81 5,131 1.68 0.71 1995(6) 15.78 2,086 1.68 1.13
RATIO OF RATIO OF NET INVESTMENT EXPENSES TO INCOME (LOSS) TO AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE ------------------- ------------------- --------- BALANCED FUND Trust Shares 2000 1.07% 2.29% 182% 1999 1.06 2.10 179 1998 1.08 2.39 154 1997 1.08 2.76 197 1996 1.09 2.86 155 Investor Shares 2000 1.51% 1.83% 182% 1999 1.43 1.73 179 1998 1.59 1.88 154 1997 1.64 2.19 197 1996 1.89 2.06 155 Flex Shares 2000 2.18% 1.18% 182% 1999 2.15 1.01 179 1998 2.23 1.20 154 1997 2.45 1.40 197 1996(1) 2.97 0.88 155 CAPITAL APPRECIATION FUND Trust Shares 2000 1.26% 0.01% 129% 1999 1.26 0.20 147 1998 1.27 0.50 194 1997 1.25 0.73 141 1996 1.27 0.78 156 Investor Shares 2000 1.98% (0.71)% 129% 1999 1.96 (0.44) 147 1998 2.01 (0.23) 194 1997 2.02 (0.03) 141 1996 2.08 (0.04) 156 Flex Shares 2000 2.39% (1.13)% 129% 1999 2.38 (0.95) 147 1998 2.37 (0.57) 194 1997 2.43 (0.45) 141 1996(2) 2.68 (0.70) 156 CORE EQUITY FUND Trust Shares 2000(3) 1.27% (0.37)% 44% Flex Shares 2000(4) 2.70% (1.84)% 44% E-COMMERCE OPPORTUNITY FUND Trust Shares 2000(3) 1.34% (0.68)% 250% Flex Shares 2000(4) 2.40% (1.80)% 250% GROWTH AND INCOME FUND (A) Trust Shares 2000 1.01% 0.76% 53% 1999(5) 1.43 0.20 31 For the years ended November 30: 1998 1.21 0.45 71 1997 1.17 0.77 100 1996 1.17 1.23 82 1995 1.17 2.01 175 Investor Shares 2000 1.31% 0.45% 53% 1999(5) 1.17 0.45 31 For the years ended November 30: 1998 1.18 0.48 71 1997 1.18 0.74 100 1996 1.18 1.20 82 1995 1.18 1.99 175 Flex Shares 2000 2.18% (0.39)% 53% 1999(5) 1.97 (0.35) 31 For the years ended November 30: 1998 2.03 (0.38) 71 1997 2.09 (0.20) 100 1996 2.03 0.36 82 1995(6) 2.03 0.78 175 + Returns are for the period indicated and have not been annualized. Total return figures do not include applicable sales loads. (1) Commenced operations on June 14, 1995. All ratios for the period have been annualized. (2) Commenced operations on June 1, 1995. All ratios for the period have been annualized. (3 Commenced operations on September 30, 1999. All ratios for the period have been annualized. (4) Commenced operations on January 24, 2000. All ratios for the period have been annualized. (5) For the six month period ended May 31, 1999. All ratios for the period have been annualized. (6) Commenced operations on April 19, 1995. All ratios for the period ended November 30, 1995 have been annualized. (A) On May 24, 1999, the CrestFund Value Fund exchanged all of its assets and certain liabilities for shares of the Growth and Income Fund. The CrestFund Value Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. Amounts designated as "--" are either $0 or have been rounded to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
78 & 79
FINANCIAL HIGHLIGHTS ------------------------------------------------------------------------------------------------------------------------------------ STI CLASSIC EQUITY FUNDS FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS NET ASSET NET REALIZED AND DISTRIBUTIONS VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED VALUE END OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD ------------ --------------- ----------------- ------------- ------------- --------- INTERNATIONAL EQUITY FUND Trust Shares 2000 $12.97 $ (0.10) $ 1.42 $(0.07) $(1.66) $12.56 1999 15.00 -- (1.14) (0.05) (0.84) 12.97 1998 13.63 0.04 2.69 (0.04) (1.32) 15.00 1997 11.40 0.03 2.57 (0.02) (0.35) 13.63 1996(1) 10.00 0.05 1.35 -- -- 11.40 Investor Shares 2000 $12.89 $ (0.11) $ 1.37 $(0.02) $(1.66) $12.47 1999 14.92 (0.09) (1.10) -- (0.84) 12.89 1998 13.58 0.02 2.64 -- (1.32) 14.92 1997 11.38 (0.01) 2.56 -- (0.35) 13.58 1996(2) 10.44 0.04 0.90 -- -- 11.38 Flex Shares 2000 $12.58 $ (0.32) $ 1.46 $ -- $(1.66) $12.06 1999 14.68 (0.29) (0.97) -- (0.84) 12.58 1998 13.47 0.07 2.46 -- (1.32) 14.68 1997 11.37 (0.04) 2.49 -- (0.35) 13.47 1996(2) 10.44 0.02 0.91 -- -- 11.37 INTERNATIONAL EQUITY INDEX FUND Trust Shares 2000 $11.82 $ 0.16 $ 2.13 $(0.03) $(0.11) $13.97 1999 13.31 0.09 0.85 (0.24) (2.19) 11.82 1998 11.34 0.11 2.65 (0.11) (0.68) 13.31 1997 10.96 0.10 0.69 (0.11) (0.30) 11.34 1996 10.24 0.10 0.84 (0.13) (0.09) 10.96 Investor Shares 2000 $11.70 $ (0.11) $ 2.32 $ -- $(0.11) $13.80 1999 13.20 (0.11) 0.98 (0.18) (2.19) 11.70 1998 11.26 0.16 2.53 (0.07) (0.68) 13.20 1997 10.88 0.03 0.72 (0.07) (0.30) 11.26 1996 10.20 0.05 0.85 (0.13) (0.09) 10.88 Flex Shares 2000 $11.73 $ 0.08 $ 2.04 $ -- $(0.11) $13.74 1999 13.17 (0.15) 0.94 (0.04) (2.19) 11.73 1998 11.24 0.17 2.44 -- (0.68) 13.17 1997 10.87 (0.05) 0.72 -- (0.30) 11.24 1996(3) 10.24 -- 0.82 (0.10) (0.09) 10.87 LIFE VISION AGGRESSIVE GROWTH FUND (A) Trust Shares 2000 $11.31 $ 0.05 $ 0.74 $(0.05) $(0.44) $11.61 1999(4) 11.32 0.02 1.13 (0.01) (1.15) 11.31 For the years ended November 30: 1998 10.65 0.03 0.67 (0.03) -- 11.32 1997(5) 10.00 0.03 0.65 (0.03) -- 10.65 LIFE VISION GROWTH AND INCOME FUND (A) Trust Shares 2000 $10.33 $ 0.07 $ 0.52 $(0.17) $(0.25) $10.50 1999(4) 11.06 0.08 0.69 (0.06) (1.44) 10.33 For the years ended November 30: 1998 10.51 0.18 0.56 (0.18) (0.01) 11.06 1997(5) 10.00 0.09 0.51 (0.09) -- 10.51 LIFE VISION MODERATE GROWTH FUND (A) Trust Shares 2000 $10.80 $ 0.33 $ 0.13 $(0.21) $(0.44) $10.61 1999(4) 11.01 0.11 0.56 (0.09) (0.79) 10.80 For the years ended November 30: 1998 10.46 0.24 0.58 (0.24) (0.03) 11.01 1997(5) 10.00 0.12 0.45 (0.11) -- 10.46 MID-CAP EQUITY FUND Trust Shares 2000 $12.68 $ (0.04) $ 2.32 $ -- $(0.86) $14.10 1999 13.79 0.01 0.07 -- (1.19) 12.68 1998 13.21 -- 2.54 -- (1.96) 13.79 1997 12.76 0.03 1.69 (0.05) (1.22) 13.21 1996 11.00 0.08 2.63 (0.08) (0.87) 12.76 Investor Shares 2000 $12.50 $ (0.19) $ 2.37 $ -- $(0.86) $13.82 1999 13.67 (0.06) 0.08 -- (1.19) 12.50 1998 13.17 (0.03) 2.49 -- (1.96) 13.67 1997 12.74 (0.03) 1.69 (0.01) (1.22) 13.17 1996 10.99 0.03 2.62 (0.03) (0.87) 12.74 Flex Shares 2000 $12.17 $ (0.22) $ 2.26 $ -- $(0.86) $13.35 1999 13.42 (0.14) 0.08 -- (1.19) 12.17 1998 13.04 (0.04) 2.38 -- (1.96) 13.42 1997 12.69 (0.07) 1.64 -- (1.22) 13.04 1996(6) 11.13 -- 2.45 (0.02) (0.87) 12.69
RATIO OF NET ASSETS RATIO OF NET INVESTMENT TOTAL END OF EXPENSES TO INCOME (LOSS) TO RETURN+ PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS --------- ------------- ------------------ ------------------ INTERNATIONAL EQUITY FUND Trust Shares 2000 10.58% $299,100 1.48% 0.59% 1999 (7.43) 573,255 1.47 0.68 1998 21.87 628,870 1.47 0.61 1997 23.29 489,325 1.46 0.51 1996(1) 14.00 213,306 1.46 1.36 Investor Shares 2000 10.15% $ 10,462 1.83% 0.33% 1999 (7.82) 14,145 1.83 0.30 1998 21.39 17,383 1.82 0.24 1997 22.85 10,674 1.81 0.18 1996(2) 9.00 3,448 1.81 1.73 Flex Shares 2000 9.38% $ 10,891 2.53% (0.38)% 1999 (8.48) 17,103 2.53 (0.40) 1998 20.54 21,164 2.52 (0.46) 1997 21.98 8,375 2.51 (0.27) 1996(2) 8.91 953 2.51 1.08 INTERNATIONAL EQUITY INDEX FUND Trust Shares 2000 19.36% $340,853 1.07% 0.83% 1999 7.87 74,616 1.07 0.69 1998 25.82 56,200 1.06 0.88 1997 7.48 53,516 1.05 0.71 1996 9.29 90,980 1.05 0.84 Investor Shares 2000 18.86% $ 4,563 1.47% 0.07% 1999 7.33 4,909 1.47 0.25 1998 25.25 7,141 1.46 0.50 1997 7.12 5,592 1.45 0.28 1996 8.90 5,597 1.45 0.48 Flex Shares 2000 18.04% $ 5,853 2.12% (0.36)% 1999 6.68 1,465 2.12 (0.30) 1998 24.50 1,469 2.11 (0.03) 1997 6.41 900 2.10 (0.39) 1996(3) 8.32 917 2.10 (0.24) LIFE VISION AGGRESSIVE GROWTH FUND (A) Trust Shares 2000 7.25% $ 18,412 0.25% 0.48% 1999(4) 10.99 18,699 0.27 0.28 For the years ended November 30: 1998 6.53 16,230 0.25 0.23 1997(5) 6.82 13,712 0.25 0.72 LIFE VISION GROWTH AND INCOME FUND (A) Trust Shares 2000 5.81% $ 30,473 0.25% 1.77% 1999(4) 7.75 21,950 0.27 1.38 For the years ended November 30: 1998 7.12 19,042 0.25 1.68 1997(5) 5.97 22,521 0.25 2.11 LIFE VISION MODERATE GROWTH FUND (A) Trust Shares 2000 4.46% $ 69,622 0.25% 2.19% 1999(4) 6.35 88,188 0.27 1.90 For the years ended November 30: 1998 7.90 93,211 0.25 2.21 1997(5) 5.70 89,442 0.25 2.66 MID-CAP EQUITY FUND Trust Shares 2000 19.10% $206,545 1.17% --% 1999 1.61 254,055 1.17 (0.47) 1998 21.14 337,825 1.16 (0.29) 1997 14.23 287,370 1.15 0.23 1996 25.54 253,905 1.15 0.70 Investor Shares 2000 18.55% $ 14,513 1.62% (0.43)% 1999 1.17 19,230 1.62 (0.90) 1998 20.56 24,930 1.61 (0.75) 1997 13.76 20,245 1.60 (0.21) 1996 24.93 17,971 1.60 0.25 Flex Shares 2000 17.87% $ 14,588 2.22% (1.05)% 1999 0.56 15,804 2.22 (1.52) 1998 19.80 19,042 2.21 (1.37) 1997 13.06 10,120 2.20 (0.85) 1996(6) 23.00 5,029 2.20 (0.37)
RATIO OF RATIO OF NET INVESTMENT EXPENSES TO INCOME (LOSS) TO AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE ------------------- ------------------- --------- INTERNATIONAL EQUITY FUND Trust Shares 2000 1.48% 0.59% 179% 1999 1.52 0.63 161 1998 1.48 0.60 108 1997 1.51 0.46 139 1996(1) 1.65 1.17 113 Investor Shares 2000 1.95% 0.21% 179% 1999 1.93 0.20 161 1998 1.91 0.15 108 1997 2.05 (0.06) 139 1996(2) 3.14 0.40 113 Flex Shares 2000 2.74% (0.59)% 179% 1999 2.82 (0.69) 161 1998 2.58 (0.52) 108 1997 3.03 (0.79) 139 1996(2) 5.86 (2.27) 113 INTERNATIONAL EQUITY INDEX FUND Trust Shares 2000 1.18% 0.72% 9% 1999 1.17 0.59 32 1998 1.18 0.76 1 1997 1.15 0.61 2 1996 1.19 0.70 30 Investor Shares 2000 1.79% (0.25)% 9% 1999 1.71 0.01 32 1998 1.84 0.12 1 1997 1.88 (0.15) 2 1996 2.06 (0.13) 30 Flex Shares 2000 2.61% (0.85)% 9% 1999 2.92 (1.10) 32 1998 3.52 (1.44) 1 1997 3.69 (1.98) 2 1996(3) 4.14 (2.28) 30 LIFE VISION AGGRESSIVE GROWTH FUND (A) Trust Shares 2000 0.44% 0.29% 183% 1999(4) 0.63 (0.08) 33 For the years ended November 30: 1998 0.66 (0.18) 75 1997(5) 0.73 0.24 34 LIFE VISION GROWTH AND INCOME FUND (A) Trust Shares 2000 0.42% 1.60% 189% 1999(4) 0.60 1.05 40 For the years ended November 30: 1998 0.59 1.34 57 1997(5) 0.59 1.77 25 LIFE VISION MODERATE GROWTH FUND (A) Trust Shares 2000 0.37% 2.07% 151% 1999(4) 0.42 1.75 48 For the years ended November 30: 1998 0.42 2.04 52 1997(5) 0.42 2.49 43 MID-CAP EQUITY FUND Trust Shares 2000 1.25% (0.08)% 131% 1999 1.28 (0.58) 76 1998 1.27 (0.40) 129 1997 1.26 0.12 152 1996 1.29 0.56 116 Investor Shares 2000 1.81% (0.62)% 131% 1999 1.76 (1.04) 76 1998 1.84 (0.98) 129 1997 1.85 (0.46) 152 1996 1.96 (0.11) 116 Flex Shares 2000 2.44% (1.27)% 131% 1999 2.48 (1.78) 76 1998 2.47 (1.63) 129 1997 2.58 (1.23) 152 1996(6) 3.04 (1.21) 116 + Returns are for the period indicated and have not been annualized. Total return figures do not include applicable sales loads. (1) Commenced operations on December 1, 1995. All ratios for the period have been annualized. (2) Commenced operations on January 2, 1996. All ratios for the period have been annualized. (3) Commenced operations on June 8, 1995. All ratios for the period have been annualized. (4) For the six month period ended May 31, 1999. All ratios for the period have been annualized. (5) Commenced operations on June 30, 1997. All ratios for the period have been annualized. (6) Commenced operations on June 5, 1995. All ratios for the period have been annualized. (A) On May 24, 1999, the CrestFund Life Vision Balanced, CrestFund Life Vision Growth and Income, and CrestFund Life Vision Maximum Growth Portfolios exchanged all of their assets and certain liabilities for shares of the Life Vision Balanced, Life Vision Growth and Income, and Life Vision Maximum Growth Portfolios, respectively. The CrestFund Life Vision Balanced, CrestFund Life Vision Growth and Income, and CrestFund Life Vision Maximum Growth Portfolios are the accounting survivors in these transactions, and as a result, their basis of accounting for assets and liabilities and their operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. Amounts designated as "--" are either $0 or have been rounded to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
80 & 81
FINANCIAL HIGHLIGHTS ------------------------------------------------------------------------------------------------------------------------------------ STI CLASSIC EQUITY FUNDS FOR THE PERIODS ENDED MAY 31, FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS NET ASSET NET REALIZED AND DISTRIBUTIONS VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED VALUE END OF PERIOD INCOME (LOSS) ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD ------------ --------------- ----------------- ------------- ------------- --------- SMALL CAP GROWTH STOCK FUND Trust Shares 2000 $14.55 $(0.08) $ 4.02 $ -- $(0.19) $18.30 1999(3) 10.00 (0.05) 4.62 -- (0.02) 14.55 Investor Shares 2000(4) $16.46 $(0.07) $ 1.88 $ -- $ -- $18.27 Flex Shares 2000 $14.46 $(0.04) $ 3.77 $ -- $(0.19) $18.00 1999(3) 10.00 (0.19) 4.67 -- (0.02) 14.46 SMALL CAP VALUE EQUITY FUND Trust Shares 2000 $ 9.70 $ 0.13 $(0.59) $(0.11) $ -- $ 9.13 1999 12.88 0.13 (2.57) (0.13) (0.61) 9.70 1998 11.07 0.14 2.41 (0.12) (0.62) 12.88 1997(1) 10.00 0.05 1.04 (0.02) -- 11.07 Flex Shares 2000 $ 9.65 $ -- $(0.54) $(0.01) $ -- $ 9.10 1999 12.80 0.01 (2.53) (0.02) (0.61) 9.65 1998(2) 11.28 0.03 2.17 (0.06) (0.62) 12.80 TAX SENSITIVE GROWTH STOCK FUND Trust Shares 2000 $29.96 $ 0.02 $ 3.12 $ -- $ -- $33.10 1999(5) 25.61 0.02 4.34 (0.01) -- 29.96 Flex Shares 2000 $29.85 $(0.16) $ 2.96 $ -- $ -- $32.65 1999(6) 25.52 (0.04) 4.37 -- -- 29.85 VALUE INCOME STOCK FUND Trust Shares 2000 $12.85 $ 0.23 $(1.49) $(0.22) $(0.99) $10.38 1999 13.90 0.24 1.02 (0.24) (2.07) 12.85 1998 13.71 0.26 2.62 (0.27) (2.42) 13.90 1997 13.15 0.30 2.32 (0.30) (1.76) 13.71 1996 11.59 0.35 2.71 (0.34) (1.16) 13.15 Investor Shares 2000 $12.81 $ 0.19 $(1.48) $(0.18) $(0.99) $10.35 1999 13.87 0.19 1.02 (0.20) (2.07) 12.81 1998 13.68 0.20 2.62 (0.21) (2.42) 13.87 1997 13.13 0.25 2.32 (0.26) (1.76) 13.68 1996 11.58 0.30 2.71 (0.30) (1.16) 13.13 Flex Shares 2000 $12.68 $ 0.08 $(1.44) $(0.09) $(0.99) $10.24 1999 13.75 0.10 1.01 (0.11) (2.07) 12.68 1998 13.61 0.12 2.57 (0.13) (2.42) 13.75 1997 13.08 0.18 2.29 (0.18) (1.76) 13.61 1996(7) 11.59 0.26 2.65 (0.26) (1.16) 13.08
RATIO OF NET ASSETS RATIO OF NET INVESTMENT TOTAL END OF EXPENSES TO INCOME (LOSS) TO RETURN+ PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS --------- ------------- ------------------ ------------------ SMALL CAP GROWTH STOCK FUND Trust Shares 2000 27.24% $ 431,478 1.20% (0.86)% 1999(3) 45.70 152,290 1.20 (0.48) Investor Shares 2000(4) 11.00% $ 39,865 1.55% (1.26)% Flex Shares 2000 25.95% $ 23,228 2.25% (1.92)% 1999(3) 44.78 6,158 2.25 (1.50) SMALL CAP VALUE EQUITY FUND Trust Shares 2000 (4.72)% $ 212,074 1.22% 1.31% 1999 (18.72) 301,984 1.22 1.27 1998 23.59 390,841 1.21 1.07 1997(1) 10.97 131,049 1.20 1.86 Flex Shares 2000 (5.65)% $ 8,596 2.27% 0.21% 1999 (19.52) 19,465 2.27 0.21 1998(2) 22.29 40,613 2.06 0.01 TAX SENSITIVE GROWTH STOCK FUND Trust Shares 2000 10.48% $ 710,179 1.20% 0.13% 1999(5) 17.04 223,543 1.20 0.21 Flex Shares 2000 9.38% $ 290,595 2.25% (0.91)% 1999(6) 16.97 75,875 2.25 (0.80) VALUE INCOME STOCK FUND Trust Shares 2000 (10.52)% $ 921,797 0.89% 2.02% 1999 11.13 1,589,951 0.92 1.91 1998 23.10 1,725,418 0.92 1.85 1997 22.18 1,488,062 0.91 2.40 1996 27.91 1,244,399 0.92 2.86 Investor Shares 2000 (10.83)% $ 104,178 1.28% 1.64% 1999 10.71 194,312 1.28 1.55 1998 22.71 210,591 1.27 1.47 1997 21.69 165,999 1.30 2.01 1996 27.39 130,597 1.30 2.47 Flex Shares 2000 (11.50)% $ 84,563 2.02% 0.91% 1999 9.91 167,000 2.02 0.81 1998 21.76 180,530 2.01 0.78 1997 20.91 73,466 2.00 1.33 1996(7) 26.52 26,298 2.00 1.72
RATIO OF RATIO OF NET INVESTMENT EXPENSES TO INCOME (LOSS) TO AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE ------------------- ------------------- --------- SMALL CAP GROWTH STOCK FUND Trust Shares 2000 1.23% (0.89)% 110% 1999(3) 1.49 (0.77) 75 Investor Shares 2000(4) 1.79% (1.50)% 110% Flex Shares 2000 2.42% (2.09)% 110% 1999(3) 3.19 (1.73) 75 SMALL CAP VALUE EQUITY FUND Trust Shares 2000 1.25% 1.28% 65% 1999 1.27 1.22 63 1998 1.31 0.97 55 1997(1) 1.37 1.69 27 Flex Shares 2000 2.56% (0.08)% 65% 1999 2.55 (0.07) 63 1998(2) 2.35 (0.28) 55 TAX SENSITIVE GROWTH STOCK FUND Trust Shares 2000 1.26% 0.07% 30% 1999(5) 1.34 0.07 18 Flex Shares 2000 2.35% (1.01)% 30% 1999(6) 2.48 (1.03) 18 VALUE INCOME STOCK FUND Trust Shares 2000 0.89% 2.02% 62% 1999 0.92 1.91 69 1998 0.92 1.85 99 1997 0.91 2.40 105 1996 0.92 2.86 134 Investor Shares 2000 1.28% 1.64% 62% 1999 1.28 1.55 69 1998 1.27 1.47 99 1997 1.31 2.00 105 1996 1.37 2.40 134 Flex Shares 2000 2.03% 0.90% 62% 1999 2.03 0.80 69 1998 2.01 0.78 99 1997 2.03 1.30 105 1996(7) 2.15 1.57 134 + Returns are for the period indicated and have not been annualized. Total return figures do not include applicable sales loads. (1) Commenced operations on January 31, 1997. All ratios for the period have been annualized. (2) Commenced operations on June 5, 1997. All ratios for the period have been annualized. (3) Commenced operations on October 8, 1998. All ratios for the period have been annualized. (4) Commenced operations on December 12, 1999. All ratios for the period have been annualized. (5) Commenced operations on December 11, 1998. All ratios for the period have been annualized. (6) Commenced operations on December 15, 1998. All ratios for the period have been annualized. (7) Commenced operations on June 1, 1995. All ratios for the period have been annualized. Amounts designated as "--" are either $0 or have been rounded to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
82 & 83 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 1. Organization: The STI Classic Funds (the "Trust") was organized as a Massachusetts business trust under a Declaration of Trust dated January 15, 1992. The Trust is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company with thirty-five funds as of May 31, 2000: the Balanced Fund, the Capital Appreciation Fund (formerly Capital Growth Fund), the Core Equity Fund, the E-Commerce Opportunity Fund, the Growth and Income Fund, the International Equity Fund, the International Equity Index Fund, the Life Vision Aggressive Growth Fund (formerly Life Vision Maximum Growth Portfolio), Life Vision Growth and Income Fund (formerly Life Vision Growth and Income Portfolio), the Life Vision Moderate Growth Fund (formerly Life Vision Balanced Portfolio), the Mid-Cap Equity Fund, the Small Cap Growth Stock Fund, the Small Cap Value Equity Fund (formerly Small Cap Equity Fund), the Tax Sensitive Growth Stock Fund, the Value Income Stock Fund, (collectively the "Equity Funds" or the "Funds"), the Florida Tax-Exempt Bond Fund, the Georgia Tax-Exempt Bond Fund, the High Income Fund, the Investment Grade Bond Fund, the Investment Grade Tax-Exempt Bond Fund, the Limited-Term Federal Mortgage Securities Fund, the Maryland Municipal Bond Fund, the Short-Term Bond Fund, the Short-Term U.S. Treasury Securities Fund, and the U.S. Government Securities Fund, the Virginia Intermediate Municipal Bond Fund, the Virginia Municipal Bond Fund, (collectively the "Fixed Income Funds"), the Prime Quality Money Market Fund, the Tax-Exempt Money Market Fund, the Tax-Free Money Market Fund, the U.S. Government Securities Money Market Fund, the U.S. Treasury Money Market Fund (collectively the "Retail Money Market Funds"), the Classic Institutional Cash Management Money Market Fund, the Classic Institutional U.S. Government Securities Money Market Fund and the Classic Institutional U.S. Treasury Securities Money Market Fund, (collectively the "Institutional Money Market Funds"). The assets of each fund are segregated, and a shareholder's interest is limited to the fund in which shares are held. Each Fund's prospectus provides a description of the Fund's investment objectives, policies and strategies. The financial statements presented herein are those of the Equity Funds. The financial statements of the Fixed Income Funds, Institutional Money Market Funds and Retail Money Market Funds are not presented herein, but presented separately. Effective May 1999, the Board of Trustees of the STI Classic Funds and Board of Directors of the CrestFunds, Inc. ("CrestFunds") approved an Agreement and Plan of Reorganization (the "Reorganization Agreement") providing for the transfer of all assets and certain stated liabilities of the CrestFunds in exchange for the issuance of shares in the Funds in a tax-free reorganization (see Note 10). On August 17, 1999 and May 18, 1999, respectively, the Board of Trustees of the STI Classic Funds approved an Agreement and Plan of Reorganization (the "Reorganization Agreement") providing for the transfer of all the assets and liabilities of the Emerging Markets Equity Fund and the Sunbelt Equity Fund in exchange for the issuance of shares in the International Equity Fund and Small Cap Growth Stock Fund, respectively, in a tax-free reorganization (see Note 11). On February 15, 2000 and November 10, 1999 respectively, the Board of Trustees of the STI Classic Funds and the Board of Directors of the ESC Strategic Funds approved an Agreement and Plan of Reorganization (the "Reorganization Agreement") providing for the transfer of all assets and certain stated liabilities of the ESC Strategic Funds in exchange for the issuance of shares in the Funds in a tax-free reorganization (see Note 12). 2. Significant Accounting Policies: The following is a summary of significant accounting policies followed by the Trust. BASIS OF PRESENTATION OF STATEMENTS -- As more fully described in Note 10, the STI Classic Funds acquired certain CrestFunds in a tax-free business combination. While each Fund now exists as an STI Classic Fund, a number of the surviving funds for accounting purposes are CrestFunds. In accordance with generally accepted accounting principles, the financial statements presented herein represent those of accounting survivors. Accordingly, the Statements of Changes in Net Assets and Financial Highlights presented reflect periods beginning on the first day of the accounting survivor's fiscal year. SECURITY VALUATION -- Investment securities held by the Equity Funds that are listed on a securities exchange for which market quotations are available are valued at the last quoted sales price each business day. If there is no such reported sale, these securities and unlisted securities for which market quotations are readily available are valued at the most recently quoted bid price. Foreign securities in the International Equity Fund and the International Equity Index Fund are valued based upon quotations from the primary market in which they are traded. Debt obligations with sixty days or less remaining until maturity may be valued at their amortized cost. Securities for which current market quotations are not readily available, of which there are none as of May 31, 2000, are valued at their fair value as determined in good faith by, or in accordance with procedures adopted by, the Board of Trustees. 84 -------------------------------------------------------------------------------- FEDERAL INCOME TAXES -- It is each Fund's intention to qualify as a regulated investment company for Federal income tax purposes and distribute all of its taxable income and net capital gains. Accordingly, no provisions for Federal income taxes are required. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are accounted for on the date the security is purchased or sold (trade date). Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Costs used in determining net realized gains and losses on the sales of investment securities are those of the specific securities sold adjusted for the accretion and amortization of purchase discounts and premiums during the respective holding period. Purchase discounts and premiums on securities held by the Funds are accreted and amortized to maturity using the scientific interest method, which approximates the effective interest method. REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase agreements are held by the custodian bank until the respective agreements mature. Provisions of the repurchase agreements ensure that the market value of the collateral, including accrued interest thereon, is sufficient in the event of default of the counterparty. If the counterparty defaults and the value of the collateral declines or if the counterparty enters into an insolvency proceeding, realization of the collateral by the funds may be delayed or limited. NET ASSET VALUE PER SHARE -- The net asset value per share of each fund is calculated each business day, by dividing the total value of each fund's assets, less liabilities, by the number of shares outstanding. The maximum offering price per share for Investor shares of the Balanced, the Capital Appreciation, the Growth and Income, the International Equity, the International Equity Index, the Mid-Cap Equity, the Small Cap Growth Stock, and the Value Income Stock Funds is equal to the net asset value per share plus a sales load of 3.75%. Flex Shares of the Funds may be purchased at their net asset value. Shares redeemed within the first year after purchase will be subject to a contingent deferred sales charge ("CDSC") equal to 2.00% for either the net asset value of the shares at the time of purchase or the net asset value of the shares next calculated after the Fund receives the sale request, whichever is less. The CDSC will not apply to shares redeemed after such time. FOREIGN CURRENCY TRANSLATION -- The books and records of the International Equity and the International Equity Index Funds are maintained in U.S. dollars on the following basis: (I) market value of investment securities, assets and liabilities at the current rate of exchange; and (II) purchases and sales of investment securities, income and expenses at the relevant rates of exchange; and (II) Purchases and sales of investment securities, income and expenses at the relavent rates of exchange prevailing on the respective dates of such transactions. The International Equity and the International Equity Index Funds do not isolate that portion of gains and losses on investments in equity securities that is due to changes in the foreign exchange rates from that which is due to changes in market prices of equity securities. The International Equity and the International Equity Index Funds report certain foreign currency related transactions as components of realized and unrealized gains and losses for financial reporting purposes, whereas such components are treated as ordinary income for Federal income tax purposes. TBA PURCHASE COMMITMENTS -- The Balanced Fund may enter into "TBA" (To Be Announced) purchase commitments to purchase securities for a fixed price at a future date beyond customary settlement time. TBA purchase commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to settlement date. Unsettled TBA purchase commitments are valued at the current market value of the underlying securities, generally according to the procedures described under "Security Valuation." OTHER -- Expenses that are directly related to a specific fund are charged to that fund. Class specific expenses are borne by that class. Other operating expenses of the Trust are pro-rated to the funds on the basis of relative net assets. Fund expenses are pro-rated to the respective classes on the basis of relative net assets. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income are declared and paid each calendar quarter by the Equity Funds, except for the International Equity, and the International Equity Index Funds. These funds distribute income annually. Any net realized capital gains on sales of securities are distributed to shareholders at least annually. RECLASSIFICATION OF COMPONENTS OF NET ASSETS -- The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from generally accepted accounting principles. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These book/tax differences may be temporary or permanent in nature. To the extent these differences are permanent, they are charged or credited to paid-in-capital or accumulated net realized gain, as appropriate, in the period that the differences arise. Accordingly, the following permanent differences, primarily attribut- 85 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 able to net operating losses and the classification of short-term capital gains and ordinary income for tax purposes, have been reclassified to/from the following accounts: UNDISTRIBUTED ACCUMULATEDNET INVESTMENT PAID-IN-CAPITAL REALIZED GAIN/ INCOME/(LOSS) (000) (LOSS)(000) (000) -------------------------------------------------- Capital Appreciation Fund............. $ -- $(352) $ 352 Core Equity Fund... -- (265) 265 E-Commerce Opportunity Fund. (323) -- 323 Growth and Income Fund............. 1,659 (1,916) 257 International Equity Fund............ 976 (1,061) 85 Life Vision Growth and Income Fund..... -- (31) 31 Mid-Cap Equity Fund -- (236) 236 Small Cap Growth Stock Fund....... 2,831 (7,654) 4,823 Tax Sensitive Growth Stock Fund....... (299) 49 250 Value Income Stock Fund....... -- 13 (13) These reclassification have no effect on net assets or net asset values per share. USE OF ESTIMATES -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates. 3. Organization Costs and Transactions with Affiliates In April 1998, the AICPA issued Statement of Position (SOP) No. 98-5, "Reporting on the Costs of Start-Up Activities." This SOP provides guidance on the financial reporting of start-up costs and organization costs and requires costs of start-up activities and organization costs to be expensed as incurred. Investment companies that began operations prior to June 30, 1998 can adopt the SOP prospectively. Therefore, previously capitalized organization costs will continue to be amortized over a period of sixty months. Any future start-up or organization costs will be expensed as incurred. Certain officers of the Trust are also officers of SEI Investments Mutual Funds Services (the "Administrator") and/or SEI Investments Distribution Co. (the "Distributor"). Such officers are paid no fees by the Trust for serving as officers of the Trust. The Fund has entered into an agreement with the Distributor to manage the investments of repurchase agreements for the Funds. For its services the Distributor received $1,846,277 for the year ended May 31, 2000. 4. Administration, Transfer Agency Servicing and Distribution Agreements: The Trust and the Administrator are parties to an Administration Agreement dated May 29, 1995, as amended November 19, 1997 and March 1, 1999 under which the Administrator provides administrative services for an annual fee (expressed as a percentage of the combined average daily net assets of the Trust and STI Classic Variable Trust) of: .12% up to $1 billion, .09% on the next $4 billion, .07% on the next $3 billion, .065% on the next $2 billion and .06% for over $10 billion. Prior to May 24, 1999, administrative and accounting services were provided to the CrestFunds by SEI Investments Mutual Funds Services who was entitled to receive a fee at an annual rate of .15% of the average daily net assets of the CrestFunds. Additionally, SEI Investments Mutual Funds Services was entitled to receive a minimum annual fee of $40,000 for each of the Life Vision Funds. The Trust and Federated Services Company are parties to a Transfer Agency servicing agreement dated May 14, 1994 under which Federated Services Company provides transfer agency services to the Trust. The Trust and the Distributor are parties to a Distribution Agreement dated May 29, 1995 regarding the Flex Shares and a Distribution Agreement dated November 21, 1995 with respect to the Trust and Investor shares. The Distributor will receive no fees for its distribution services under this agreement for the Trust Shares of any fund. With respect to the Investor Shares and Flex Shares, the Distributor receives amounts, pursuant to a Distribution Plan and (in the case of Flex Shares) a Distribution and Service Plan, as outlined in the table in footnote 5 under the column titled "Distribution Fee". Prior to May 1999, the Distributor, a wholly owned subsidiary of SEI Investments Co., served as distributor of each of the CrestFunds shares pursuant to an agreement with the Company. The Trust Class and Investors Class A shares of the CrestFunds had a separate distribution plan (the 12b-1 Plan) pursuant to Rule 12b-1 under the 1940 Act. As provided in the 12b-1 Plan, the Trust Class and Investors Class A shares of the CrestFunds paid the Distributor as compensation for its services .15% of the aggregate average daily net assets of such classes of the CrestFunds. The Distributor had voluntarily agreed to waive any fees payable pursuant to the 12b-1 Plan except for the Value Fund Investors Class A for which after April 15, 1999, eliminated the waiver. Additionally, the Investors Class B Shares of the CrestFunds had a distribution plan (the B Shares Plan) pursuant to Rule 12b-1 under the 1940 Act. As provided in the B Shares Plan, the Investors Class B Shares of the CrestFunds paid the Distributor as compensation for its services .75% of the aggregate average daily net assets of 86 -------------------------------------------------------------------------------- such class of the Funds. In addition, pursuant to the B Shares Plan, the Distributor was compensated at an annual rate of .25% of the B shares' average net assets for providing ongoing Shareholder support services to investors in B shares. The Distributor had agreed to waive a portion of its fees pursuant to the B Shares Plan in order to limit Distribution Fees to .95% for each Fund, except for the Value Fund for which the limit was .90%. Prior to April 1999, the limit was .75% for the Value Fund. Prior to May 1999, the CrestFunds had adopted a shareholder service plan (the "Plan") for Trust Class Shares of the Value Fund, Capital Appreciation Fund and Special Equity Fund. Under the Plan, these Fund's paid the Distributor a negotiated fee at a rate of up to .25% annually of the average daily net assets of such Fund attributable to the shares that are subject to the arrangement in return for provision of a broad range of shareholder and administrative services. The Distributor had agreed to waive a portion of its shareholder service plan for trust class shares in order to limit shareholder service fees to .10%. 5. Investment Advisory and Custodian Agreements: The Trust, Trusco Capital Management ("Trusco") and the SunTrust Bank, Atlanta have entered into advisory agreements dated May 29, 1992, June 15, 1993, and December 20, 1993, respectively. Under terms of the respective agreements, the Funds are charged the following annual fees based upon average daily net assets: MAXIMUM FLEX SHARE MAXIMUM DISTRI- MAXIMUM TRUST INVESTOR INVESTOR BUTION FLEX ANNUAL SHARE SHARE SHARE AND SHARE ADVISORY MAXIMUM DISTRI- MAXIMUM SERVICE MAXIMUM FEE EXPENSE BUTION FEE EXPENSE FEE EXPENSE ------ ------- ---------- -------- -------- ------- Balanced Fund .95% .97% .28% 1.27% 1.00% 2.03% Capital Appreciation Fund .............. 1.15% 1.17% .68% 1.82% 1.00% 2.29% Core Equity Fund ... 1.10% 1.20% -- -- 1.00% 2.25% E-Commerce Opportunity Fund .............. 1.10% 1.20% -- -- 1.00% 2.25% Growth and Income Fund .............. .90% 1.01% .25% 1.18% 1.00% 1.93% International Equity Fund .............. 1.25% 1.48% .33% 1.83% 1.00% 2.53% International Equity Index Fund ........ .90% 1.07% .38% 1.47% 1.00% 2.12% Life Vision Aggressive Growth Fund ....... .25% .25% -- -- -- -- Life Vision Growth and Income Fund ... .25% .25% -- -- -- -- Life Vision Moderate .......... .25% .25% -- -- -- -- Mid-Cap Equity Fund .............. 1.15% 1.17% .43% 1.62% 1.00% 2.22% Small Cap Growth Stock Fund ........ 1.15% 1.20% .50% 1.55% 1.00% 2.25% Small Cap Value Equity Fund ....... 1.15% 1.22% -- -- 1.00% 2.27% Tax Sensitive Growth Stock Fund .............. 1.15% 1.20% -- -- 1.00% 2.25% Value Income Stock Fund ........ .80% .92% .33% 1.28% 1.00% 2.02% The Investment Advisers and the Distributor have voluntarily agreed to waive all or a portion of their fees (and to reimburse funds' expenses) in order to limit operating expenses to an amount as outlined in the table above. Fee waivers and expense reimbursements are voluntary and may be terminated at any time. Prior to May 1999, Crestar Asset Management Company ("CAMCO") provided investment advisory services to the CrestFunds. CAMCO was paid for advisory services at an annual rate of .75% of average daily net assets for the Capital Appreciation Fund, Value Fund and Special Equity Fund, and .25% of average daily net assets for the Life Vision Balanced Fund, Life Vision Growth and Income Fund, and Life Vision Maximum Growth Fund. SunTrust Bank, Atlanta, acts as custodian for all the funds except, the International Equity and the International Equity Index Funds who utilize the Bank of New York as custodian. Fees of the Custodians are paid on the basis of the net assets of the funds. The Custodians play no role in determining the investment 87 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 6. Capital Share Transactions: Capital Share Transactions for the funds were as follows (000):
CAPITAL CORE BALANCED FUND APPRECIATION FUND EQUITY FUND --------------------- ------------------- ----------- 06/01/99- 06/01/98- 06/01/99- 06/01/98- 09/30/99*- 05/31/00 05/31/99 05/31/00 05/31/99 05/31/00 --------- --------- --------- --------- ----------- Trust Shares: Shares Issued ......................................... 7,060 11,211 18,930 40,224 15,465 Shares Issued in Connection with Crestar Merger ....... -- -- -- 8,202 -- Shares Issued in Connection with Fund Reorganizations . -- -- -- -- -- Shares Issued in Lieu of Cash Distributions ........... 734 1,393 5,218 14,645 -- Shares Redeemed ....................................... (10,050) (8,020) (66,755) (37,763) (1,832) -------- ------- -------- -------- ------- Net Trust Share Transactions ............................ (2,256) 4,584 (42,607) 25,308 13,633 -------- ------- -------- -------- ------- Investor Shares: Shares Issued ......................................... 149 570 782 1,967 -- Shares Issued in Connection with Crestar Merger ....... -- -- -- 738 -- Shares Issued in Connection with ESC Merger ........... -- -- -- -- -- Shares Issued in Lieu of Cash Distributions ........... 36 75 1,010 2,607 -- Shares Redeemed ....................................... (591) (154) (5,728) (2,983) -- -------- ------- -------- -------- ------- Net Investor Share Transactions ......................... (406) 491 (3,936) 2,329 -- -------- ------- -------- -------- ------- Flex Shares: Shares Issued ......................................... 1,989 4,165 1,804 4,176 404 Shares Issued in Connection with Crestar Merger ....... -- -- -- 474 -- Shares Issued in Connection with ESC Merger ........... -- -- -- -- -- Shares Issued in Lieu of Cash Distributions ........... 180 252 567 1,228 -- Shares Redeemed ....................................... (2,903) (956) (4,592) (2,440) (11) -------- ------- -------- -------- ------- Net Flex Share Transactions ............................. (734) 3,461 (2,221) 3,438 393 ======== ======= ======== ======== ======= Net Change in Capital Shares ............................ (3,396) 8,536 (48,764) 31,075 14,026 -------- ------- -------- -------- -------
E-COMMERCE GROWTH AND INTERNATIONAL OPPORTUNITY FUND INCOME FUND EQUITY FUND ---------------- ----------------------------- -------------------- 09/30/99*- 06/01/99- 12/01/98- 12/01/97- 06/01/99- 06/01/98- 05/31/00 05/31/00 05/31/99 11/30/98 05/31/00 05/31/99 ---------- ----------------------------- ------------------- Trust Shares: Shares Issued ......................................... 8,128 24,090 5,206 10,513 5,136 12,883 Shares Issued in Connection with Crestar Merger ....... -- -- -- -- -- -- Shares Issued in Connection with Fund Reorganizations . -- -- -- -- 1,794 -- Shares Issued in Lieu of Cash Distributions ........... -- 2,200 840 6,789 5,244 2,626 Shares Redeemed ....................................... (1,422) (8,699) (4,849) (14,789) (32,574) (13,225) ------- ------- ------- -------- -------- -------- Net Trust Share Transactions ............................ 6,706 17,591 1,197 2,513 (20,400) 2,284 ------- ------- ------- -------- -------- -------- Investor Shares: Shares Issued ......................................... -- 1,108 137 764 91 203 Shares Issued in Connection with Crestar Merger ....... -- -- -- -- -- -- Shares Issued in Connection with ESC Merger ........... -- 502 -- -- 103 -- Shares Issued in Lieu of Cash Distributions ........... -- 159 150 402 135 77 Shares Redeemed ....................................... -- (1,321) (272) (591) (585) (350) ------- ------- ------- -------- -------- -------- Net Investor Share Transactions ......................... -- 448 15 575 (256) (70) ------- ------- ------- -------- -------- -------- Flex Shares: Shares Issued ......................................... 1,330 2,436 550 874 165 468 Shares Issued in Connection with Crestar Merger ....... -- -- -- -- -- -- Shares Issued in Connection with ESC Merger ........... -- 97 -- -- 57 -- Shares Issued in Lieu of Cash Distributions ........... -- 182 117 192 163 95 Shares Redeemed ....................................... (52) (867) (178) (171) (839) (648) ------- ------- ------- -------- -------- -------- Net Flex Share Transactions ............................. 1,278 1,848 489 895 (454) (85) ======= ======= ======= ======== ======== ======== Net Change in Capital Shares ............................ 7,984 19,887 1,701 3,983 (21,110) 2,129
INTERNATIONAL LIFE VISION EQUITY INDEX AGGRESSIVE FUND GROWTH FUND --------------------------------------------------- 06/01/99- 06/01/98- 06/01/99- 12/01/98- 12/01/97- 05/31/00 05/31/99 05/31/99 05/31/99 11/30/98 ------------------- ----------------------------- Trust Shares: Shares Issued ......................................... 20,423 2,851 983 192 599 Shares Issued in Connection with Crestar Merger ....... -- -- -- -- -- Shares Issued in Connection with Fund Reorganizations . -- -- -- -- -- Shares Issued in Lieu of Cash Distributions ........... 70 779 81 161 3 Shares Redeemed ....................................... (2,401) (1,537) (1,132) (133) (456) ------- ------- ------- ------ ------ Net Trust Share Transactions ............................ 18,092 2,093 (68) 220 146 ------- ------- ------- ------ ------ Investor Shares: Shares Issued ......................................... 211 88 -- -- -- Shares Issued in Connection with Crestar Merger ....... -- -- -- -- -- Shares Issued in Connection with ESC Merger ........... -- -- -- -- -- Shares Issued in Lieu of Cash Distributions ........... 3 84 -- -- -- Shares Redeemed ....................................... (302) (294) -- -- -- ------- ------- ------- ------ ------ Net Investor Share Transactions ......................... (88) (122) -- -- -- ------- ------- ------- ------ ------ Flex Shares: Shares Issued ......................................... 363 80 -- -- -- Shares Issued in Connection with Crestar Merger ....... -- -- -- -- -- Shares Issued in Connection with ESC Merger ........... -- -- -- -- -- Shares Issued in Lieu of Cash Distributions ........... 1 15 -- -- -- Shares Redeemed ....................................... (63) (82) -- -- -- ------- ------- ------- ------ ------ Net Flex Share Transactions ............................. 301 13 -- -- -- ======= ======= ======= ====== ====== Net Change in Capital Shares ............................ 18,305 1,984 (68) 220 146
LIFE VISION LIFE VISION GROWTH AND INCOME FUND MODERATE GROWTH FUND ----------------------------- ----------------------------- 06/01/99- 12/01/98- 12/01/97- 06/01/99- 12/01/98- 12/01/97- 05/31/00 05/31/99 11/30/98 05/31/00 05/31/99 11/30/98 --------- -------- --------- --------- --------- --------- Trust Shares: Shares Issued ......................................... 1,802 259 239 3,097 476 1,449 Shares Issued in Connection with Common Trust Fund Conversion .......................................... -- -- -- -- -- -- Shares Issued in Connection with Crestar Merger ....... -- -- -- -- -- -- Shares Issued in Connection with Fund Reorganizations -- -- -- -- -- Shares Issued in Lieu of Cash Distributions ........... 90 264 35 491 712 214 Shares Redeemed ....................................... (1,113) (120) (695) (5,194) (1,486) (1,743) ------- ----- ----- ------- ----- ------- Net Trust Share Transactions ............................ 779 403 (421) (1,606) (298) (80) ------- ----- ----- ------- ----- ------- Investor Shares: Shares Issued ......................................... -- -- -- -- -- -- Shares Issued in Connection with Fund Reorganizations . -- -- -- -- -- Shares Issued in Connection with ESC Merger ........... -- -- -- -- -- -- Shares Issued in Lieu of Cash Distributions ........... -- -- -- -- -- -- Shares Redeemed ....................................... -- -- -- -- -- -- ------- ----- ----- ------- ----- ------- Net Investor Share Transactions ......................... -- -- -- -- -- -- ------- ----- ----- ------- ----- ------- Flex Shares: Shares Issued ......................................... -- -- -- -- -- -- Shares Issued in Connection with Crestar Merger ....... -- -- -- -- -- -- Shares Issued in Connection with Fund Reorganizations . -- -- -- -- -- Shares Issued in Connection with ESC Merger ........... -- -- -- -- -- -- Shares Issued in Lieu of Cash Distributions ........... -- -- -- -- -- -- Shares Redeemed -- -- -- -- -- -- ------- ----- ----- ------- ----- ------- Net Flex Share Transactions ............................. -- -- -- -- -- -- ======= ===== ===== ======= ===== ======= Net Change in Capital Shares .......................... 779 403 (421) (1,606) (298) (80) ------- ----- ----- ------- ----- -------
MID-CAP EQUITY SMALL CAP GROWTH SMALL CAP VALUE FUND STOCK FUND STOCK FUND -------------------- -------------------- ------------------- 06/01/99- 06/01/98- 06/01/99- 10/08/98*- 06/01/99- 06/01/98- 05/31/00 05/31/99 05/31/00 05/31/99 05/31/00 05/31/99 --------- --------- --------- --------- --------- --------- Trust Shares: Shares Issued ......................................... 11,917 16,168 11,362 5,174 10,968 16,078 Shares Issued in Connection with Common Trust Fund Conversion .......................................... -- -- -- -- -- -- Shares Issued in Connection with Crestar Merger ....... -- -- 6,174 -- -- -- Shares Issued in Connection with Fund Reorganizations -- -- 5,705 -- -- -- Shares Issued in Lieu of Cash Distributions ........... 1,197 2,230 127 2 294 2,040 Shares Redeemed ....................................... (18,496) (22,862) (4,061) (886) (19,166) (17,349) -------- -------- ------- ------- -------- -------- Net Trust Share Transactions ............................ (5,382) (4,464) 13,133 10,464 (7,904) 769 -------- -------- ------- ------- -------- -------- Investor Shares: Shares Issued ......................................... 108 247 127 -- -- -- Shares Issued in Connection with Fund Reorganizations . -- -- 758 -- -- -- Shares Issued in Connection with ESC Merger ........... -- -- 1,677 -- -- -- Shares Issued in Lieu of Cash Distributions ........... 98 175 -- -- -- -- Shares Redeemed ....................................... (695) (707) (390) -- -- -- -------- -------- ------- ------- -------- -------- Net Investor Share Transactions ......................... (489) (285) 2,172 -- -- -- -------- -------- ------- ------- -------- -------- Flex Shares: Shares Issued ......................................... 273 403 261 266 194 245 Shares Issued in Connection with Crestar Merger ....... -- -- -- 188 -- -- Shares Issued in Connection with Fund Reorganizations . -- -- 170 -- -- -- Shares Issued in Connection with ESC Merger ........... -- -- 712 -- -- -- Shares Issued in Lieu of Cash Distributions ........... 89 152 5 -- 1 179 Shares Redeemed (567) (676) (288) (28) (1,266) (1,580) -------- -------- ------- ------- -------- -------- Net Flex Share Transactions ............................. (205) (121) 860 426 (1,071) (1,156) ======== ======== ======= ======= ======== ======== Net Change in Capital Shares .......................... (6,076) (4,870) 16,165 10,890 (8,975) (387) -------- -------- ------- ------- -------- --------
TAX SENSITIVE GROWTH VALUE INCOME STOCK FUND STOCK FUND --------------------- ------------------- 06/01/99- 12/11/98*- 06/01/99- 06/01/98- 05/31/00 05/31/99 05/31/00 05/31/99 --------- ---------- --------- --------- Trust Shares: Shares Issued ......................................... 16,874 4,133 32,686 28,099 Shares Issued in Connection with Common Trust Fund Conversion .......................................... -- 3,875 -- -- Shares Issued in Connection with Crestar Merger ....... -- -- -- -- Shares Issued in Connection with Fund Reorganizations -- -- -- -- Shares Issued in Lieu of Cash Distributions ........... -- 3 12,665 20,747 Shares Redeemed ....................................... (2,879) (549) (80,311) (49,236) ------- ------- -------- -------- Net Trust Share Transactions ............................ 13,995 7,462 (34,960) (390) ------- ------- -------- -------- Investor Shares: Shares Issued ......................................... -- -- 596 1,391 Shares Issued in Connection with Fund Reorganizations . -- -- -- -- Shares Issued in Connection with ESC Merger ........... -- -- -- -- Shares Issued in Lieu of Cash Distributions ........... -- -- 1,463 2,775 Shares Redeemed ....................................... -- -- (7,163) (4,182) ------- ------- -------- -------- Net Investor Share Transactions ......................... -- -- (5,104) (16) ------- ------- -------- -------- Flex Shares: Shares Issued ......................................... 7,452 2,612 1,626 3,029 Shares Issued in Connection with Crestar Merger ....... -- -- -- -- Shares Issued in Connection with Fund Reorganizations . -- -- -- -- Shares Issued in Connection with ESC Merger ........... -- -- -- -- Shares Issued in Lieu of Cash Distributions ........... -- -- 1,198 2,310 Shares Redeemed (1,094) (70) (7,736) (5,298) ------- ------- -------- -------- Net Flex Share Transactions ............................. 6,358 2,542 (4,912) 41 ======= ======= ======== ======== Net Change in Capital Shares .......................... 20,353 10,004 (44,976) (365) ------- ------- -------- --------
*Commencement of operations. Amounts designated as "--" are either $0 or have been rounded to $0. 88 & 89 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 policies of the Trust or which securities are to be purchased or sold in the funds. 7. Investment Transactions: The cost of purchases and the proceeds from sales of securities, excluding short-term investments and U.S. Government Securities, for the period ended May 31, 2000, were as follows: PURCHASES SALES (000) (000) ---------- ------- Balanced Fund ....................... $ 401,747 $ 415,843 Capital Appreciation Fund ........... 2,501,819 3,380,053 Core Equity Fund .................... 197,528 56,067 E-Commerce Opportunity Fund ......... 327,161 192,385 Growth and Income Fund .............. 690,029 421,330 International Equity Fund ........... 826,079 1,151,751 International Equity Index Fund ..... 279,797 15,490 Life Vision Aggressive Growth Fund .. 33,183 34,007 Life Vision Growth and Income Fund .. 52,356 43,754 Life Vision Moderate Growth Fund .... 125,270 143,249 Mid-Cap Equity Fund ................. 325,395 431,246 Small Cap Growth Stock Fund ......... 571,525 340,046 Small Cap Value Equity Fund ......... 186,805 230,394 Tax Sensitive Growth Stock Fund ..... 840,238 183,201 Value Income Stock Fund ............. 933,611 1,447,331 The cost of U.S. Government security purchases and the proceeds from the sale of U.S. Government Securities for the Balanced Fund during the period ended May 31, 2000, were $149,169,460 and $174,240,675, respectively. Subsequent to October 31, 1999, the Funds recognized net capital losses for tax purposes that have been deferred to 2000 and can be used to offset future capital gains at May 31, 2000. The Funds also had capital loss carryforwards at May 31, 2000 as follows: CAPITAL POST LOSS POST 10/31 CARRY- 10/31 CURRENCY OVER EXPIRES EXPIRES EXPIRES DEFERRED LOSS 5/31/00 2006 2007 2008 LOSS DEFERRED FUND (000) (000) (000) (000) (000) (000) ---- ------ ------ ------- ------- -------- ------- E-Commerce Opportunity Fund $ 18 $ -- $ -- $ 18 $ 4,381 $ -- International Equity Fund 5,954 1,506 4,448 -- -- 4,826 International Equity Index Fund -- -- -- -- -- 431 Small Cap Growth Stock Fund 5,520 1,239 4,281 -- -- -- Small Cap Value Equity Fund 45,722 -- 16,348 29,374 5,503 -- Tax Sensitive Growth Stock Fund 142 -- 142 -- -- -- Value Income Stock Fund -- -- -- -- 169,653 -- For tax purposes, the losses in the Funds can be carried forward for a maximum of eight years to offset any net realized capital gains. The following Funds had cumulative wash sales for the fiscal year ended May 31, 2000: FUND AMOUNT ---- ------------ Balanced Fund ............................... $ 2,569,034 Capital Appreciation Fund ................... 29,286,766 E-Commerce Opportunity Fund ................. 4,401,554 Growth and Income Fund ...................... 886,323 International Equity Fund ................... 3,300,504 International Equity Index Fund ............. 338,922 Life Vision Aggressive Growth Fund .......... 173,123 Life Vision Growth and Income Fund .......... 471,968 Life Vision Moderate Growth Fund ............ 940,008 Mid-Cap Equity Fund ......................... 257,489 Small Cap Growth Stock Fund ................. 2,983,811 Small Cap Value Equity Fund ................. 942,118 Tax Sensitive Growth Stock Fund ............. 281,014 Value Income Stock Fund ..................... 416,425 At May 31, 2000, the total cost of securities and the net realized gains or losses on securities sold for Federal income tax purposes were not materially different from amounts reported for financial reporting purposes. The aggregate gross unrealized appreciation and depreciation for securities held by the funds at May 31, 2000, were as follows: AGGREGATE AGGREGATE NET GROSS GROSS UNREALIZED UNREALIZED UNREALIZED APPRECIATION APPRECIATION (DEPRECIATION) (DEPRECIATION) FUND (000) (000) (000) ---- ------------ ------------ ------------ Balanced Fund ................ $ 54,250 $ (15,932) $ 38,318 Capital Appreciation Fund .... 529,690 (73,048) 456,642 Core Equity Fund ............. 18,936 (7,324) 11,612 E-Commerce Opportunity Fund .. 12,506 (15,944) (3,438) Growth and Income Fund ....... 221,637 (41,799) 179,838 International Equity Fund .... 21,481 (15,177) 6,304 International Equity Index Fund ...................... 33,364 (18,930) 14,434 Life Vision Aggressive Growth Fund ............... 2,380 (76) 2,304 Life Vision Growth and Income Fund ............... 2,115 (362) 1,753 Life Vision Moderate Growth Fund ...................... 6,417 (1,109) 5,308 Mid-Cap Equity Fund .......... 46,653 (13,488) 33,165 Small Cap Growth Stock Fund .. 117,284 (24,554) 92,730 Small Cap Value Equity Fund .. 16,389 (52,721) (36,332) Tax Sensitive Growth Stock Fund ...................... 185,203 (66,827) 118,376 Value Income Stock Fund ...... 109,891 (119,851) (9,960) 8. Concentration of Credit Risk The E-Commerce Opportunity Fund invests a substantial portion of its assets in securities in the technology industry. Therefore, it may be more affected by economic and political developments in that industry than would be comparable general equity fund. 90 -------------------------------------------------------------------------------- Each International Fund invests in securities of foreign issuers in various countries. These investments may involve certain considerations and risks not typically associated with investments in the United States, as a result of, among other factors, the possibility of future political and economic developments and the level of governmental supervision and regulation of securities markets in the respective countries. 9. Common Trust Fund Conversion On December 11, 1998, the SunTrust Quality Growth Stock Common Trust Fund of SunTrust was converted into the STI Classic Tax Sensitive Growth Stock Fund. The assets, which consisted of securities and related receivables, were converted on a tax free basis. At the time of conversion 3,874,558 of Trust Class shares were issued. The net assets of the Sun Trust Quality Growth Stock Common Trust Fund immediately before the conversion were $99,222,180, which included unrealized appreciation of $45,523,361. 10. CrestFunds Merger The Board of Directors and shareholders of the CrestFunds approved a reorganization of the CrestFunds into STI Classic Funds which took place in May 1999. The following table summarizes certain relevant information of the Funds prior to and immediately after the business combinations in May 1999 and is unaudited: SHARES OUTSTANDING UNREALIZED ON MERGER APPRECIATION CRESTFUNDS DATE (DEPRECIATION) ---------- ------------------ ----------------- Capital Appreciation Trust Shares ..................... 7,017,951 $ 50,852,434 Investor Class A ................. 634,910 4,570,273 Investor Class B ................. 405,693 945,904 Special Equity Trust Shares ..................... 6,434,126 8,484,235 Investor Class A* ................ 335,109 461,214 Investor Class B ................. 439,353 (115,351) Value Fund (1) Trust Shares ..................... 39,426,216 185,105,926 Investor Class A ................. 2,284,756 7,740,403 Investor Class B ................. 2,164,932 4,552,822 Life Vision Balanced (1) Trust Shares ..................... 8,168,631 6,271,120 Life Vision Growth and Income (1) Trust Shares ..................... 2,130,709 1,682,009 Life Vision Maximum Growth (1) Trust Shares ..................... 1,650,909 2,180,220 * Investor Class A shares of CrestFund Special Equity were exchanged for Trust Shares of STI Small Cap Growth Stock. (1) Represents the accounting survivor in this business combination. SHARES ISSUED NET ASSETS NAV IN BUSINESS AFTER PER STI CLASSIC FUNDS COMBINATION COMBINATION SHARE ----------------- --------------- ---------------- -------- Capital Appreciation (1) Trust Shares ............... 8,202,045 $2,043,356,370 $17.02 Investor Shares ............ 738,260 321,669,847 16.93 Flex Shares ................ 474,357 165,340,901 16.58 Small Cap Growth Stock (1) Trust Shares ............... 6,174,359 153,356,352 14.40 Investor Shares -- -- -- Flex Shares ................ 188,473 5,980,718 14.32 Growth and Income Trust Shares ............... 39,426,216 649,230,675 16.47 Investor Shares ............ 2,284,756 37,909,335 16.59 Flex Shares ................ 2,164,932 35,677,567 16.48 Life Vision Moderate Growth Trust Shares ............... 8,168,631 89,406,305 10.95 Life Vision Growth and Income Trust Shares ............... 2,130,709 22,352,880 10.49 Life Vision Aggressive Growth Trust Shares ............... 1,650,909 19,002,404 11.51 11. Fund Reorganizations On December 10, 1999 the Small Cap Growth Stock Fund and the International Equity Fund acquired all of the assets of the Sunbelt Equity Fund and Emerging Markets Equity Fund, respectively, pursuant to the plan of reorganization approved by Sunbelt Equity Fund and Emerging Markets Equity Fund on December 10, 1999. The following table summarizes certain relevant information of these funds prior to and immediately after the business combination on December 10, 1999 and is unaudited. SHARES OUTSTANDING UNREALIZED ON MERGER APPRECIATION STI CLASSIC FUNDS DATE (DEPRECIATION) ----------------- ------------------ ----------------- Emerging Markets Equity Trust Shares .................... 2,393,361 $ 55,572* Sunbelt Equity Trust Shares .................... 9,176,663 25,562,904 Investor Shares ................. 1,261,749 1,907,642 Flex Shares ..................... 287,227 (1,283,351) * Includes unrealized gain on investments and unrealized loss on foreign currency (1) Represents the accounting survivor in this business combination. SHARES ISSUED NET ASSETS NAV IN BUSINESS AFTER PER STI CLASSIC FUNDS COMBINATION COMBINATION SHARE ----------------- --------------- ---------------- -------- International Equity (1) Trust Shares ............... 1,794,029 $575,635,094 $12.22 Small Cap Growth Stock (1) Trust Shares ............... 5,705,132 305,649,316 16.46 Investor Shares ............ 758,425 12,481,372 16.46 Flex Shares ................ 170,464 9,892,809 16.26 91 NOTES TO FINANCIAL STATEMENTS (concluded) -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 12. ESC Strategic Funds Merger The Board of Directors and shareholders of the ESC Funds approved a reorganization of the ESC Funds into STI Classic Funds which took place at the close of business on March 24, 2000. The following table summarizes certain relevant information of the Funds prior to and immediately after the business combinations on March 24, 2000 and is unaudited. SHARES OUTSTANDING UNREALIZED ON MERGER APPRECIATION ESC FUNDS DATE (DEPRECIATION) ----------------- ------------------ ----------------- Appreciation Fund Class A ......................... 870,690 $ 2,501,314 Class D ......................... 175,438 (1,297,012) Small Cap Fund Class A ......................... 1,275,432 6,276,446 Class D ......................... 480,442 2,865,501 Small Cap II Fund Class A ......................... 500,936 2,188,506 Class D ......................... 317,826 1,262,314 International Equity Class A ......................... 170,094 315,475* Class D ......................... 96,927 (22,816)* * Includes unrealized gain on investments and unrealized loss on foreign currency (1) Represents the accounting survivor in this business combination. SHARES ISSUED NET ASSETS NAV IN BUSINESS AFTER PER STI CLASSIC FUNDS COMBINATION COMBINATION SHARE ----------------- --------------- ---------------- -------- Growth and Income Fund(1) Investor Shares ............. 502,426 50,200,825 15.90 Flex Shares ................. 97,459 62,797,756 15.76 Small Cap Growth Stock Fund(1) Investor Shares ............. 1,335,449 47,582,016 20.55 Flex Shares ................. 495,872 27,591,623 20.27 Small Cap Growth Stock Fund(1) Investor Shares ............. 341,148 47,582,016 20.55 Flex Shares ................. 216,285 27,591,623 20.27 International Equity(1) Investor Shares ............. 103,172 11,187,283 12.04 Flex Shares ................. 57,124 12,018,530 11.65 13. Subsequent Event Effective June 30, 2000, SunTrustBanks, Inc. reorganized all of the investment management functions of its three institutional money management units, including SunTrust Bank, into Trusco Capital Management, Inc. 92 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 To the Shareholders and Board of Trustees of STI Classic Funds: We have audited the accompanying statements of net assets of the Balanced, Capital Appreciation, Core Equity, Growth & Income, International Equity Index, Life Vision Aggressive Growth, Life Vision Growth & Income, and Life Vision Moderate Growth, Mid-Cap Equity, Small Cap Growth Stock, Small Cap Value Equity, Tax Sensitive Growth Stock, and Value Income Stock Funds of STI Classic Funds, and the statements of assets and liabilities, including the schedule of investments, of the E-Commerce Opportunity and International Equity Funds of STI Classic Funds (the "Trust") as of May 31, 2000, and the related statements of operations, changes in net assets, and financial highlights for the periods presented, excluding the periods indicated below. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The statements of changes for the year ended November 30, 1998 and financial highlights for the periods prior to May 31, 1999, for the Growth & Income Fund and the Life Vision Aggressive Growth, Life Vision Growth & Income, and Life Vision Moderate Growth Portfolios, were audited by other auditors whose report, dated January 15, 1999, expressed an unqualified opinion on this information. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of May 31, 2000, by correspondence with the custodian and the application of alternative auditing procedures with respect to unsettled securities transactions. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights audited by us present fairly, in all material respects, the financial position of the Balanced, Capital Appreciation, Core Equity, E-Commerce Opportunity, Growth & Income, International Equity, International Equity Index, Life Vision Aggressive Growth, Life Vision Growth & Income, and Life Vision Moderate Growth, Mid-Cap Equity, Small Cap Growth Stock, Small Cap Value Equity, Tax Sensitive Growth Stock, and Value Income Stock Funds of STI Classic Funds as of May 31, 2000, the results of their operations, changes in their net assets, and financial highlights for each of the periods described in the first paragraph above, in conformity with accounting principles generally accepted in the United States.. ARTHUR ANDERSEN LLP Philadelphia, Pennsylvania July 18, 2000 93 NOTICE TO SHAREHOLDERS -------------------------------------------------------------------------------- STI CLASSIC EQUITY FUNDS MAY 31, 2000 UNAUDITED For shareholders that do not have a May 31, 2000 tax year end, this notice is for informational purposes only. For shareholders with a May 31, 2000, please consult your tax advisor as to the pertinence of this notice. For the fiscal year ended May 31, 2000, each portfolio is designating the following items with regard to distributions paid during the year:
LONG TERM FOREIGN (20% RATE) ORDINARY TAX CAPITAL GAIN INCOME TAX-EXEMPT TOTAL QUALIFYING WITHHOLDING FUND DISTRIBUTION DISTRIBUTIONS INTEREST DISTRIBUTIONS DIVIDENDS (1) PASS THROUGH (2) -------- ------------ ------------- ---------- ------------- ------------- ---------------- Balanced Fund 36.71% 63.29% --% 100.00% 22.87% --% Capital Appreciation Fund 65.94% 34.06% --% 100.00% 27.41% --% Core Equity Fund --% --% --% --% --% --% E-Commerce Opportunity Fund --% --% --% --% --% --% Growth and Income Fund 74.02% 25.98% --% 100.00% 92.63% --% International Equity Fund 58.24% 41.76% --% 100.00% --% 2.80% International Equity Index Fund 48.14% 51.86% --% 100.00% --% 40.47% Life Vision Aggressive Growth Fund 59.38% 40.62% --% 100.00% --% --% Life Vision Growth and Income Fund 43.51% 56.49% --% 100.00% --% --% Life Vision Moderate Growth Fund 50.19% 49.81% --% 100.00% --% --% Mid-Cap Equity Fund 100.00% --% --% 100.00% --% --% Small Cap Growth Stock Fund 52.22% 47.78% --% 100.00% 11.73% --% Small Cap Value Equity Fund --% 100.00% --% 100.00% 89.39% --% Value Income Stock Fund 35.76% 64.24% --% 100.00% 71.38% --% -------------------------- (1) Qualifying dividends represent dividends which qualify for the corporate dividends received deduction and is reflected as a percentage of "Ordinary Income Distributions". (2) Foreign tax credit pass through represents the amount eligible for the foreign tax credit and is reflected as a percentage of "Ordinary Income Distributions".
94 INVESTMENT ADVISER Trusco Capital Management, Inc. STI Classic Funds are not deposits, are not insured or guaranteed by the FDIC or any other government agency, and are not endorsed by and do not constitute obligations of SunTrust Banks, Inc. or any other of its affiliates. Investment in the Fundsinvolves risk, including the possible loss of principal. There is no guarantee that any STI Classic Fund will achieve its investment objective. The STI Classic Funds are advised by affiliates of SunTrust Banks, Inc. DISTRIBUTOR SEI Investments Distribution Co. This information must be preceded or accompanied by a current prospectus for each Fund described. STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 FLORIDA TAX-EXEMPT BOND FUND -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- MUNICIPAL BONDS (89.2%) FLORIDA (79.5%) Brevard County, Health Facilities Authority, Holmes Regional Medical Center Project, RB, MBIA Callable 10/01/03 @ 102 5.700%, 10/01/08 $3,000 $ 3,038 Broward County, Port Facilities Authority, Ser C, RB, AMT, MBIA 5.375%, 09/01/08 3,360 3,339 Citrus County, Pollution Control Authority, Florida Power, Crystal River, Ser B, RB Callable 08/01/02 @ 102 6.350%, 02/01/22 335 337 Dade County, Aviation, Ser A, RB, AMBAC Callable 10/01/05 @ 102 6.000%, 10/01/09 500 520 Dade County, Aviation Revenue, Ser B, RB, AMT, MBIA Callable 10/01/02 @ 102 6.600%, 10/01/22 825 844 Dade County, Educational Facilities Authority, University of Miami, Ser A, RB, MBIA 6.000%, 04/01/08 505 527 Dade County, Seaport, GO, MBIA 6.500%, 10/01/09 1,000 1,084 Dade County, Ser CC, GO, AMBAC 7.125%, 10/01/15 1,000 1,149 Daytona Beach, Water & Sewer Authority, Ser 1978, RB, ETM Callable 11/15/00 @ 101.75 6.750%, 11/15/07 1,000 1,050 Deerfield Beach, Water & Sewer Authority, RB, FGIC 6.125%, 10/01/06 250 259 Florida State, Board of Education, Capital Outlay, Public Education, Ser B, GO Prerefunded @ 101(F) 6.000%, 06/01/01 1,000 1,022 Florida State, Board of Education, Capital Outlay, Public Education, GO Callable 06/01/02 @ 101 6.400%, 06/01/19 1,300 1,340 Florida State, Board of Education, Capital Outlay, Ser A, GO Callable 01/01/09 @ 101 4.750%, 01/01/19 1,860 1,579 Florida State, Board of Education, Capital Outlay, Ser A, GO 6.100%, 06/01/00 125 125 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- FLORIDA--CONTINUED Florida State, Board of Education, Capital Outlay, Ser C, ETM, GO Callable 06/22/00 @ 100 7.100%, 06/01/07 $ 190 $ 192 Florida State, Department of Transportation, Right of Way, Ser A, GO Callable 07/01/07 @ 101 5.000%, 07/01/22 500 434 Florida State, Finance Department of General Services, Environmental Preservation 2000, Ser A, RB, AMBAC Callable 07/01/07 @ 101 5.000%, 07/01/13 1,200 1,138 Florida State, Finance Department of General Services, Environmental Protection, Ser B, RB, AMBAC 6.000%, 07/01/12 2,000 2,093 Florida State, Finance Department of General Services, Save Our Coast, Department of National Resources, RB, MBIA Prerefunded @ 101 (F) 6.500%, 07/01/01 720 740 Florida State, Finance Department of General Services, Department of Natural Resources, Preservation 2000, Ser A, RB, AMBAC Prerefunded @ 102 (F) 6.750%, 07/01/01 80 83 Florida State, Housing Financing Authority, Homeowner Mortgage, Ser 7, RB, AMT, FSA Callable 07/01/09 @ 100 5.200%, 01/01/31 1,000 977 Florida State, Ports Financing Commission, Transportation Trust Fund, RB, AMT, FGIC Callable 10/01/09 @ 101 5.250%, 10/01/13 1,305 1,244 5.375%, 10/01/15 1,000 951 Florida State, Turnpike Authority, Ser A, RB, FSA Callable 07/01/09 @ 101 5.000%, 07/01/22 3,545 3,083 Gainesville, Utility Systems, Ser A, RB 5.750%, 10/01/04 1,000 1,026 Hillsborough County, Industrial Development Authority, University Community Hospital, RB, MBIA 6.500%, 08/15/19 145 157 26 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- FLORIDA--CONTINUED Indian, Trace Community, Community Development District, Water Management Split Benefit, Ser A-1, RB, MBIA Callable 05/01/05 @ 102 5.500%, 05/01/07 $ 330 $ 335 Jacksonville, Excise Tax, Ser B, RB, AMT, FGIC Callable 10/01/01 @ 101 5.200%, 10/01/04 1,500 1,499 Jacksonville, Sales Tax Authority, River City Renaissance Project, RB, FGIC 6.000%, 10/01/04 2,430 2,517 Keys, Aqueduct Authority, RB, AMBAC Prerefunded @ 101(F) 6.750%, 09/01/01 170 176 Lakeland, Electric & Water Authority, First Lien, Ser B, RB, FSA 6.550%, 10/01/05 2,590 2,753 Lakeland, Electric & Water Authority, First Lien, Ser C, RB, FSA 6.050%, 10/01/07 1,000 1,050 Lee County, Industrial Development Authority, Bonita Springs Utilities Project, RB, AMT, MBIA Callable 11/01/06 @ 101 5.750%, 11/01/10 1,480 1,498 Lee County, Water & Sewer Authority, Ser A, RB, AMBAC Callable 10/01/09 @ 101 4.750%, 10/01/19 1,720 1,460 Miami, Parking Facilities Authority, RB, MBIA 5.250%, 10/01/15 1,000 959 Miami-Dade County, Educational Authority, Ser A, RB, AMBAC Callable 04/01/10 @ 101 5.500%, 04/01/19 1,405 1,346 North Broward, Hospital District, RB, ETM, MBIA 5.950%, 01/01/01 1,000 1,008 Orange County, Health Facilities Authority, Ser A, RB, ETM, MBIA 6.250%, 10/01/07 2,120 2,245 Orlando, Aviation Authority, Airport Facilities, RB, AMT, FGIC 5.250%, 10/01/13 725 692 5.500%, 10/01/17 1,810 1,755 Orlando, Aviation Authority, Airport Facilities, Ser A, RB, AMT, AMBAC Callable 10/01/03 @ 102 5.400%, 10/01/06 1,340 1,344 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- FLORIDA--CONTINUED Orlando, Utilities Commission Water & Sewer Authority, Sub-Ser D, RB 6.750%, 10/01/17 $5,385 $ 5,991 Osceola County, School Board Certificates Authority, Ser A, COP, AMBAC 6.250%, 06/01/01 1,080 1,097 Palm Beach County, Acquisitions Program Authority, Ser B, GO Callable 08/01/09 @101 5.375%, 08/01/15 1,000 968 Palm Beach County, Apartment System Authority, RB, MBIA Callable 10/01/01 @ 102 7.625%, 10/01/04 1,410 1,482 Palm Beach County, Solid Waste Authority, Ser A, RB, ETM, AMBAC 6.000%, 10/01/09 300 315 Pensacola, Airport Authority, Ser A, RB, AMT, MBIA 6.250%, 10/01/09 505 532 Pensacola, Airport Authority, Ser A, RB, AMT, MBIA Callable 10/01/08 @ 102 6.000%, 10/01/12 1,075 1,102 Pinellas County, Health Facilities Authority, Morton Plant Health Systems Project, RB, MBIA Callable 11/15/03 @ 102 5.500%, 11/15/08 1,500 1,506 Plant City, Utility System, RB, MBIA 6.000%, 10/01/15 400 418 Polk County, Utility System, RB, ETM, FGIC 6.000%, 10/01/08 2,250 2,329 Reedy Creek, Improvement District, Ser 1991-1, RB, MBIA Prerefunded @ 101(F) 6.250%, 10/01/01 405 416 South Broward, Hospital District Authority, RB, AMBAC Callable 05/01/03 @ 102 7.500%, 05/01/08 1,000 1,078 Sunrise, Utility System Authority, RB, AMBAC Callable 10/01/18 @ 100 5.000%, 10/01/28 1,500 1,292 Tallahassee, Energy Systems Authority, Ser A, RB, FSA Callable 10/01/08 @ 101 5.000%, 10/01/28 5,040 4,286 27 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 FLORIDA TAX-EXEMPT BOND FUND--CONCLUDED -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- FLORIDA--CONTINUED Tampa, Allegany Health Systems Authority, St Mary's Hospital, RB, ETM, MBIA Callable 12/01/03 @ 102 5.000%, 12/01/12 $7,280 $ 6,960 Tampa, Guaranteed Entitlement, RB, AMBAC Callable 10/01/01 @ 102 7.050%, 10/01/07 1,000 1,045 Tampa, Special Utility, TA, AMBAC Callable 10/01/01 @ 102 6.900%, 10/01/09 1,500 1,564 Tampa, Sports Authority, Local Option Sales Tax, Stadium Project, RB, MBIA Callable 01/01/07 @ 101 5.250%, 01/01/27 3,000 2,688 -------- 84,037 -------- PUERTO RICO (9.7%) Commonwealth, Aqueduct & Sewer Authority, RB, MBIA 6.250%, 07/01/12 1,000 1,076 Commonwealth, Electric Power Authority, Ser S, RB 5.500%, 07/01/00 200 200 Commonwealth, Electric Power Authority, Ser X, RB Prerefunded @ 102 (F) 6.125%, 07/01/05 240 258 Commonwealth, Highway & Transportation Authority, Ser Z, RB, MBIA 6.250%, 07/01/14 3,000 3,228 Commonwealth, Municipal Financing Agency, Ser A, GO, FSA Callable 08/01/09 @ 101 5.500%, 08/01/23 2,340 2,231 Commonwealth, Public Buildings Authority, Government Facilities, Ser A, RB, AMBAC 6.250%, 07/01/13 1,000 1,077 6.250%, 07/01/14 750 807 Commonwealth, Public Improvements, GO, MBIA Callable 07/01/07 @ 100 5.375%, 07/01/25 1,500 1,390 -------- 10,267 -------- Total Municipal Bonds (Cost $96,770) 94,304 -------- -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- CASH EQUIVALENTS (8.6%) AIM Management Institutional Tax Free Fund 4,512,541 $ 4,513 SEI Institutional Tax Free Fund 4,576,465 4,576 -------- Total Cash Equivalents (Cost $9,089) 9,089 -------- Total Investments (97.8%) (Cost $105,859) 103,393 -------- OTHER ASSETS AND LIABILITIES, NET (2.2%) 2,313 -------- NET ASSETS: Fund shares of Trust Shares (unlimited authorization -- no par value) based on 9,244,819 outstanding shares of beneficial interest 97,121 Fund shares of Investor Shares (unlimited authorization -- no par value) based on 285,455 outstanding shares of beneficial interest 2,838 Fund shares of Flex Shares (unlimited authorization -- no par value) based on 970,788 outstanding shares of beneficial interest 10,500 Distributions in excess of net investment income (5) Accumulated net realized loss on investments (2,282) Net unrealized depreciation on investments (2,466) -------- Total Net Assets (100.0%) $105,706 ======== Net Asset Value and Redemption Price Per Share -- Trust Shares $ 10.06 ======== Net Asset Value and Redemption Price Per Share -- Investor Shares $ 10.07 ======== Maximum Offering Price Per Share -- Investor Shares ($10.07 / 96.25%) $ 10.46 ======== Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 10.09 ======== (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 28 -------------------------------------------------------------------------------- GEORGIA TAX-EXEMPT BOND FUND -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- MUNICIPAL BONDS (93.5%) GEORGIA (93.5%) Albany-Dougherty County, State Hospital Authority, Ser B, RB, AMBAC Prerefunded @ 102 (F) 7.500%, 09/01/00 $ 255 $ 262 Athens, Water & Sewer Authority, RB, ETM 5.700%, 07/01/00 165 165 Atlanta, Airport Facilities Authority, RB, AMBAC 6.000%, 01/01/03 1,000 1,021 6.000%, 01/01/04 500 514 6.500%, 01/01/06 1,000 1,058 Atlanta, Water & Sewer Authority, RB, ETM 6.000%, 01/01/11 1,000 1,044 Augusta, Water & Sewer Authority, RB Prerefunded @ 102 (F) 6.200%, 05/01/02 130 135 Bibb County, GO 7.000%, 01/01/04 985 1,043 Brunswick, Water & Sewer Authority, RB, MBIA 6.100%, 10/01/14 1,000 1,051 Carroll County, Water Authority, RB, AMBAC Callable 07/01/09 @ 102 5.000%, 07/01/10 720 693 Catoosa, Utility District Authority, RB, MBIA Callable 04/01/09 @ 102 5.000%, 04/01/12 710 670 Cherokee County, School System, GO 5.000%, 02/01/12 1,690 1,611 5.000%, 02/01/13 1,370 1,297 Clarke County, Hospital Authority, Athens Regional Medical Center Project, RB, MBIA 5.375%, 01/01/07 1,425 1,431 Clayton County, Water & Sewer Authority, RB, AMBAC Callable 05/01/06 @ 102 5.350%, 05/01/09 800 800 Cobb County, Water & Sewer Authority, RB Callable 07/01/04 @102 5.125%, 07/01/06 1,000 998 Cobb-Marietta County, Coliseum & Expo Project, RB, MBIA 5.500%, 10/01/12 940 939 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- GEORGIA--CONTINUED Cobb-Marietta County, Water Authority, RB 5.000%, 11/01/03 $ 1,255 $ 1,252 5.100%, 11/01/04 1,000 1,000 Columbia County, Courthouse/ Detention Center Projects, GO Callable 02/01/08 @ 102 5.000%, 02/01/10 720 690 Dalton, Utilities Authority, RB, MBIA 6.000%, 01/01/08 3,240 3,380 Dalton-Whitfield County, Hospital Authority, RB Prerefunded @ 102 (F) 7.000%, 07/01/00 355 363 DeKalb County, Development Authority, Emory University Project, Ser A, RB 5.375%, 11/01/05 1,650 1,669 DeKalb County, Development Authority, Emory University Project, Ser A, RB Callable 11/01/05 @ 101 5.200%, 11/01/08 500 498 DeKalb County, School District, Ser A, GO 6.250%, 07/01/11 1,500 1,609 Douglasville - Douglas County, Water & Sewer Authority, RB, AMBAC 5.625%, 06/01/15 1,370 1,381 Fayette County, School District, GO, ETM 6.250%, 03/01/07 450 474 Fayette County, Water Authority, Ser 1985-A, RB, ETM, MBIA Callable 10/01/00 @ 100 8.550%, 10/01/01 300 314 Forsyth County, Water & Sewer Authority, RB 5.000%, 04/01/04 1,000 996 Forsyth County, Water & Sewer Authority, RB, Callable 04/01/08 @ 101 5.000%, 04/01/09 1,000 971 Forsyth County, School District, GO Callable 02/01/10 @ 102 5.750%, 02/01/11 3,000 3,062 6.000%, 02/01/15 1,000 1,024 Forsyth County, School District, GO 6.400%, 07/01/05 750 790 6.500%, 07/01/06 1,000 1,064 29 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 GEORGIA TAX-EXEMPT BOND FUND--CONCLUDED -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- GEORGIA--CONTINUED Forsyth County, School District, GO, MBIA Prerefunded @ 102 (F) 5.350%, 07/01/05 $ 780 $ 800 Fulton County, Hospital Authority, Northside Hospital Project, Ser B, RB, MBIA Prerefunded @ 102 (F) 6.600%, 10/01/02 2,000 2,104 Fulton County, School District, GO 5.250%, 01/01/12 1,000 981 6.375%, 05/01/17 500 538 Fulton County, Water & Sewer Authority, RB, ETM, FGIC 6.375%, 01/01/14 1,000 1,075 Georgia State, Ser A, GO 6.250%, 04/01/11 1,000 1,074 Georgia State, Ser C, GO 6.500%, 04/01/08 1,000 1,077 6.250%, 08/01/08 1,360 1,447 6.250%, 08/01/13 650 699 6.250%, 08/01/13 1,000 1,075 Georgia State, Ser D, GO 6.700%, 08/01/10 2,250 2,484 Georgia State, Housing & Financial Authority, Single-Family Mortgage, Sub-Ser B-1, RB Callable 06/01/05 @ 102 5.550%, 12/01/07 550 550 Georgia State, Housing & Financial Authority, Single-Family Mortgage, Sub-Ser B-1, RB, FHA Callable 06/01/06 @ 102 5.550%, 12/01/10 325 324 5.600%, 12/01/11 450 448 Georgia State, Housing & Financial Authority, Single-Family Mortgage, Sub-Ser C-1, RB Callable 12/01/07 @ 101.50 5.550%, 12/01/16 500 481 Georgia State, Municipal Electric Authority, RB, ETM Callable 06/22/00 @ 100 8.000%, 01/01/15 1,900 2,320 Gwinnett County, Recreation Authority, RB 5.800%, 02/01/06 785 808 5.875%, 02/01/07 500 517 Gwinnett County, School District, Ser B, GO 6.400%, 02/01/06 500 529 6.400%, 02/01/07 1,500 1,594 Hall County, School District, Ser B, GO 6.300%, 12/01/05 675 710 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- GEORGIA--CONTINUED Henry County, Henry Medical Center Project, RB, AMBAC Prerefunded @ 102 (F) 5.500%, 07/01/07 $ 1,640 $ 1,683 Henry County, Henry Medical Center Project, RB, AMBAC Callable 07/01/07 @ 102 5.500%, 07/01/08 545 550 Henry County, School District, Ser A, GO 6.150%, 08/01/06 150 157 6.300%, 08/01/08 300 319 6.450%, 08/01/11 500 537 Henry County, School District, Ser A, GO, MBIA 5.500%, 08/01/01 350 353 Henry County, Water & Sewer Authority, RB, AMBAC 6.150%, 02/01/20 2,250 2,339 Houston County, School District, Intergovernmental Contract, COP, MBIA Prerefunded @ 102 (F) 6.000%, 03/01/04 2,000 2,094 Jackson County, School District, GO Callable 07/01/08 @ 101 5.000%, 07/01/10 1,020 982 Medical Center Hospital Authority, Columbus Regional Health Care System, RB, MBIA Prerefunded @ 102 (F) 6.000%, 08/01/05 1,340 1,410 Meriwether County, School District, GO, FSA 7.000%, 02/01/06 740 802 Metropolitan Atlanta, Rapid Transportation Authority, Ser A, RB, MBIA 6.250%, 07/01/07 500 528 Metropolitan Atlanta, Rapid Transportation Authority, Ser N, RB 6.000%, 07/01/07 1,000 1,035 Metropolitan Atlanta, Rapid Transportation Authority, Ser P, RB, AMBAC 6.250%, 07/01/08 1,000 1,060 Milledgeville, Water & Sewer Authority, RB, FSA 6.000%, 12/01/16 1,000 1,032 6.000%, 12/01/21 1,000 1,013 30 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- GEORGIA--CONTINUED Newton County, Hospital Authority, Newton Health Systems Project, RB, AMBAC Callable 02/01/10 @ 101 5.750%, 02/01/11 $ 780 $ 787 5.750%, 02/01/12 825 828 Paulding County, School District, GO, MBIA 6.000%, 02/01/10 1,000 1,043 Paulding County, School District, Ser A, GO 6.625%, 02/01/07 1,000 1,073 6.625%, 02/01/08 525 566 Private Colleges & Universities, Agnes Scott College Project, RB, MBIA Callable 06/01/09 @ 101 5.250%, 06/01/10 1,360 1,344 Private Colleges & Universities, Emory University Project, Ser A, RB, Callable 11/01/07 @ 101 5.000%, 11/01/10 1,000 962 Private Colleges & Universities, Mercer University Project, RB, ETM, MBIA 6.400%, 11/01/11 1,675 1,816 Private Colleges & Universities, Mercer University Project, Ser A, RB Callable 10/01/09 @ 101 5.250%, 10/01/13 1,000 915 Rome, Water & Sewer Authority, RB, AMBAC 5.250%, 01/01/09 775 769 Savannah, Water & Sewer Authority, RB, ETM Callable 12/01/00 6.450%, 12/01/04 1,000 1,054 Upper Oconee, Basin Water Authority, RB, FGIC Callable 07/01/08 @ 102 5.000%, 07/01/12 500 469 Vidalia, Water & Sewer Authority, RB, ETM Callable 07/01/00 @ 101 6.000%, 07/01/07 605 632 Walker, Dade & Catoosa Counties, Hutchinson Medical, Ser A, RB, FSA Callable 10/01/07 @ 102 5.500%, 10/01/08 1,370 1,374 -------- 86,430 -------- Total Municipal Bonds (Cost $89,672) 86,430 -------- -------------------------------------------------------------------------------- SHARES VALUE (000) -------------------------------------------------------------------------------- CASH EQUIVALENTS (5.1%) AIM Management Institutional Tax Free Portfolio 2,010,202 $ 2,010 SEI Institutional Tax Free Fund 2,682,922 2,683 -------- Total Cash Equivalents (Cost $4,693) 4,693 -------- Total Investments (98.6%) (Cost $94,365) 91,123 -------- OTHER ASSETS AND LIABILITIES, NET (1.4%) 1,322 -------- NET ASSETS: Fund shares of Trust Shares (unlimited authorization -- no par value) based on 8,544,266 outstanding shares of beneficial interest 84,551 Fund shares of Investor Shares (unlimited authorization -- no par value) based on 258,359 outstanding shares of beneficial interest 2,529 Fund shares of Flex Shares (unlimited authorization -- no par value) based on 928,499 outstanding shares of beneficial interest 9,444 Distributions in excess of net investment income (1) Accumulated net realized loss on investments (836) Net unrealized depreciation on investments (3,242) -------- Total Net Assets (100.0%) $92,445 ======== Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 9.50 ======== Net Asset Value and Redemption Price Per Share -- Investor Shares $ 9.51 ======== Maximum Offering Price Per Share -- Investor Shares ($9.51 / 96.25%) $ 9.88 ======== Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 9.51 ======== (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 31 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 HIGH INCOME FUND -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- U.S. TREASURY OBLIGATION (47.2%) U.S. Treasury Bill 5.866%, 09/07/00 $1,475 $1,452 ------ Total U.S. Treasury Obligation (Cost $1,452) 1,452 ------ CORPORATE BONDS (49.4%) INDUSTRIAL (34.1%) Canandaigua Brands Callable 03/01/04 @ 104.25 8.500%, 03/01/09 100 91 Echostar DBS Callable 02/01/04 @ 104.689 9.375%, 02/01/09 100 94 Finlay Fine Jewelry Callable 05/01/03 @ 104.188 8.375%, 05/01/08 100 89 Hollywood Park, Ser B Callable 08/01/02 @ 104.75 9.500%, 08/01/07 100 99 Lyondell Chemical 9.625%, 05/01/07 100 97 NBTY, Ser B Callable 09/15/02 @ 104.313 8.625%, 09/15/07 100 87 Playtex Family Products Callable 08/16/00 @ 103 9.000%, 12/15/03 100 96 Polaroid 11.500%, 02/15/06 100 101 Primedia Callable 04/01/03 @ 103.813 7.625%, 04/01/08 100 89 R&B Falcon 9.500%, 12/15/08 100 98 Waste Management 6.625%, 07/15/02 115 108 ------ 1,049 ------ TELEPHONE (6.2%) Nextel Communications Callable 11/15/04 @ 104.688 9.375%, 11/15/09 100 94 Rural Cellular Callable 05/15/03 @ 104.813 9.625%, 05/15/08 100 97 ------ 191 ------ -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- TRANSPORTATION (NON-RAIL--9.1%) Continental Airlines 8.000%, 12/15/05 $100 $ 89 Greyhound Lines Callable 04/15/02 @ 105.75 11.500%, 04/15/07 290 191 ------ 280 ------ Total Corporate Bonds (Cost $1,682) 1,520 ------ REPURCHASE AGREEMENT (4.1%) JP Morgan 6.250%, dated 05/31/00, matures 06/01/00, repurchase price $124,620 (collateralized by a U.S. Treasury Note: total market value $127,124) (G) 125 $ 125 ------ Total Repurchase Agreement (Cost $125) 125 ------ Total Investments (100.7%) (Cost $3,259) 3,097 ------ OTHER ASSETS AND LIABILITIES, NET (-0.7%) (22) ------ NET ASSETS: Fund shares of Flex Shares (unlimited authorization -- no par value) based on 390,031 outstanding shares of beneficial interest 4,006 Accumulated net realized loss on investments (769) Net unrealized depreciation on investments (162) ------ Total Net Assets (100.0%) $3,075 ====== Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 7.88 ====== (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 32 -------------------------------------------------------------------------------- INVESTMENT GRADE BOND FUND -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS (26.3%) U.S. Treasury Bonds 7.500%, 11/15/16 $56,050 $ 61,986 8.750%, 08/15/20 77,250 97,405 U.S. Treasury Notes 6.500%, 08/31/01 88,000 87,708 6.500%, 02/15/10 26,350 26,728 -------- Total U.S. Treasury Obligations (Cost $269,854) 273,827 -------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (10.2%) FHLMC 7.375%, 05/15/03 51,250 51,266 5.750%, 03/15/09 16,375 14,512 FNMA 7.125%, 01/15/30 41,900 40,719 -------- Total U.S. Agency Mortgage-Backed Obligations (Cost $107,560) 106,497 -------- CORPORATE OBLIGATIONS (48.4%) BANKS (4.1%) Wachovia 5.625%, 12/15/08 13,150 11,145 Washington Mutual 8.600%, 02/01/02 18,000 18,113 7.500%, 08/15/06 13,525 12,984 -------- 42,242 -------- FINANCE (19.7%) Aristar 7.250%, 06/15/06 26,800 25,594 Associates 6.250%, 11/01/08 24,500 21,621 Countrywide Home Loan 6.850%, 06/15/04 17,750 16,796 Countrywide Home Loan, MTN, Ser F 6.510%, 02/11/05 23,300 21,378 Donaldson Lufkin Jenrette, MTN 6.150%, 05/04/04 8,400 7,854 Finova Capital 7.250%, 11/08/04 13,400 11,189 7.250%, 07/12/06 21,500 17,227 Finova Capital, MTN, Ser E 7.300%, 09/22/03 28,850 24,919 Household Finance 7.200%, 07/15/06 21,000 19,845 Morgan Stanley Dean Witter MTN, Ser C 7.375%, 04/15/03 20,000 19,772 Paine Webber Group, MTN, Ser C 6.020%, 04/22/02 20,250 19,465 -------- 205,660 -------- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- INDUSTRIAL (11.4%) Avon Products 7.150%, 11/15/09 $ 8,650 $ 8,055 Cooper Tire & Rubber 7.750%, 12/15/09 22,700 21,494 Dillards 6.430%, 08/01/04 24,550 21,082 Florida Power & Light 5.875%, 04/01/09 30,500 27,031 Marriot International, Ser C 7.875%, 09/15/09 24,600 23,585 Philip Morris 7.500%, 04/01/04 8,700 8,352 Times Mirror 7.450%, 10/15/09 9,500 9,144 -------- 118,743 -------- LIFE/HEALTH INSURANCE (13.2%) Aon 6.900%, 07/01/04 35,000 33,687 Conseco 8.750%, 02/09/04 41,600 28,496 6.800%, 06/15/05 22,700 14,982 6.400%, 06/15/11 8,800 6,600 Provident 7.000%, 07/15/18 30,600 23,753 Reliastar Financial 8.000%, 10/30/06 14,600 14,454 6.500%, 11/15/08 16,750 15,263 -------- 137,235 -------- Total Corporate Obligations (Cost $563,100) 503,880 -------- ASSET-BACKED OBLIGATION (3.6%) Commercial, Series 1999-1, Cl A2 6.455%, 06/15/08 41,750 37,998 -------- Total Asset-Backed Obligation (Cost $38,627) 37,998 -------- REPURCHASE AGREEMENTS (15.9%) Greenwich 6.330%, dated 05/31/00, matures 06/01/00, repurchase price $114,786,061 (collateralized by U.S. Treasury Note: total market value $117,062,258) (G) 114,766 114,766 33 STATEMENT OF NET ASSETS/SCHEDULE OF INVESTMENTS -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 INVESTMENT GRADE BONDFUND--CONCLUDED -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- REPURCHASE AGREEMENTS--CONTINUED Warburg Dillion 6.330%, dated 05/31/00, matures 06/01/00, repurchase price $30,811,734 (collateralized by U.S. Treasury Notes: total market value $31,425,526) (G) $ 30,806 $ 30,806 Salomon Smith Barney 6.330%, dated 05/31/00, matures 06/01/00, repurchase price $20,005,261 (collateralized by U.S. Treasury STRIPS: total market value $20,427,914) (G) 20,002 20,002 ---------- Total Repurchase Agreements (Cost $165,574) 165,574 ---------- Total Investments (104.4%) (Cost $1,144,715) 1,087,776 ---------- SECURITIES PURCHASED PAYABLE (-5.9%) (61,806) ---------- OTHER ASSETS AND LIABILITIES, NET (1.5%) 15,235 ---------- NET ASSETS: Fund shares of Trust Shares (unlimited authorization -- no par value) based on 104,192,073 outstanding shares of beneficial interest 1,093,168 Fund shares of Investor Shares (unlimited authorization -- no par value) based on 2,353,329 outstanding shares of beneficial interest 25,310 Fund shares of Flex Shares (unlimited authorization -- no par value) based on 2,091,237 outstanding shares of beneficial interest 22,416 Distributions in excess of net investment income (3) Accumulated net realized loss on investments (42,747) Net unrealized depreciation on investments (56,939) ---------- Total Net Assets (100.0%) $1,041,205 ========== -------------------------------------------------------------------------------- VALUE (000) -------------------------------------------------------------------------------- Net Asset Value and Redemption Price Per Share -- Trust Shares $ 9.58 ========== Net Asset Value and Redemption Price Per Share -- Investor Shares $ 9.58 ========== Maximum Offering Price Per Share -- Investor Shares ($9.58 / 96.25%) $ 9.95 ========== Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 9.59 ========== (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE,SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 34 -------------------------------------------------------------------------------- INVESTMENT GRADE TAX-EXEMPT BOND FUND -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- MUNICIPAL BONDS (98.9%) ALABAMA (2.1%) Birmingham, Ser A, GO Callable 04/01/08 @ 102 5.000%, 04/01/19 $ 2,000 $ 1,753 Huntsville, Ser B, GO 4.000%, 11/01/01 1,410 1,389 ------- 3,142 ------- ARIZONA (9.5%) Arizona State, Highway Transportation Board, RB Callable 07/01/09 @ 100 6.125%, 07/01/14 6,020 6,240 Maricopa County, Community College Project, Ser C, GO 5.250%, 07/01/01 5,000 5,030 Maricopa County, Unified School District, GO, FGIC Callable 07/01/01 @ 101 6.400%, 07/01/10 3,050 3,123 ------- 14,393 ------- CALIFORNIA (1.4%) Orange County, Loma Ridge/Data Center Project, COP, AMBAC Callable 12/01/00 @ 101.5 6.000%, 06/01/21 2,075 2,147 ------- DISTRICT OF COLUMBIA (1.3%) District of Columbia, American College Obstetricians, RB, AMBAC Prerefunded @ 102 (F) 6.500%, 08/15/01 1,930 2,005 ------- FLORIDA (7.1%) Florida State, Department of Transportation, Right of Way, GO Prerefunded @101 (F) 5.800%, 07/01/05 1,400 1,454 Orange County, Health Facilities Authority, Ser A, RB, MBIA 6.250%, 10/01/12 1,170 1,241 Tampa, Occupational License Tax, Ser A, RB, FGIC (C) 3.850%, 10/01/18 4,500 4,500 Tampa, Sports Authority, Local Option Sales Tax-Stadium Project, RB, MBIA Callable 01/01/07 @ 101 5.250%, 01/01/27 4,000 3,584 ------- 10,779 ------- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- GEORGIA (1.4%) Georgia, Municipal Electric Power Authority, Ser Y, RB, MBIA 6.500%, 01/01/17 $ 1,985 $ 2,147 ------- ILLINOIS (8.8%) Chicago, School Finance Authority, Ser A, GO, FGIC Callable 6/01/02 @102 6.250%, 06/01/09 6,000 6,217 Cook County, Ser A, GO, FGIC Callable 11/15/08 @ 101 5.000%, 11/15/15 2,000 1,798 Illinois State, Health Facilities Authority, Trinity Medical Center, RB, FSA Prerefunded @ 102 (F) 7.000%, 07/01/02 5,000 5,280 ------- 13,295 ------- IOWA (1.4%) Des Moines, Public Parking System, Ser A, RB, FGIC Callable 06/01/10 @ 100 6.375%, 06/01/18 2,005 2,076 ------- KENTUCKY (5.1%) Kentucky State, Economic Development Finance Authority, Health Alliance Project, Ser C, RB, MBIA (C) 3.950%, 01/01/22 7,800 7,800 ------- MARYLAND (2.4%) Washington, Suburban Sanitation District, 2nd Ser, GO Callable 01/01/02 @ 102 6.400%, 01/01/08 3,500 3,625 ------- MASSACHUSETTS (0.8%) Boston, Finance Housing Authority, City Hospital Project, Ser A, RB Callable 08/15/00 @ 102 7.650%, 02/15/10 1,260 1,293 ------- MICHIGAN (5.7%) Detroit, Sewer Disposal, Ser B, RB, MBIA (C) 3.950%, 07/01/23 5,500 5,500 Michigan State, Building Authority, Ser II, RB Callable 10/01/01 @ 102 6.750%, 10/01/11 2,950 3,067 ------- 8,567 ------- 35 SCHEDULE OF INVESTMENTS -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 INVESTMENT GRADE TAX-EXEMPT BOND FUND--CONCLUDED -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- MISSOURI (6.6%) Missouri State, Third Street Building Project, Ser A, GO Callable 08/01/03 @102 4.900%, 08/01/05 $ 8,500 $ 8,426 Missouri State, Health & Educational Facilities Authority, SSM Health Care Projects, Ser B, RB, ETM, MBIA Callable 06/26/00 @ 102 7.000%, 06/01/05 1,500 1,533 ------- 9,959 ------- NEW JERSEY (4.9%) New Jersey State, Transportation System, Ser A, RB 5.625%, 06/15/13 1,000 1,007 5.750%, 06/15/15 1,250 1,262 New Jersey State, Transportation System, Ser A, RB, FSA Callable 06/15/08 @ 100 5.000%, 06/15/18 1,000 892 New Jersey State, Turnpike Authority, Ser C, RB, FSA 6.500%, 01/01/16 1,000 1,085 New Jersey State, Turnpike Authority, Ser C, RB, MBIA 6.500%, 01/01/16 3,000 3,255 ------- 7,501 ------- NEW YORK (8.4%) Metropolitan Transportation Authority, Service Contract, Ser Q, RB, MBIA Callable 07/01/07 @ 101 5.250%, 07/01/14 3,345 3,182 New York State, Dormitory Authority, City University System, Ser A, RB, FSA 5.750%, 07/01/13 1,250 1,275 New York State, Dormitory Authority, City University System, 3rd Ser, RB, FGIC Callable 07/01/08 @101 5.000%, 07/01/18 1,750 1,557 New York State, Dormitory Authority, City University System, 2nd Ser, RB, FSA 5.750%, 07/01/18 3,175 3,178 Triborough Bridge & Tunnel Authority, Ser V, RB, FGIC Callable 01/01/01 @ 102 6.875%, 01/01/05 3,500 3,609 ------- 12,801 ------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- NORTH CAROLINA (0.7%) North Carolina State, Medical Care Community Hospital, Mercy Hospital Project, RB, ETM Callable 08/01/02 @ 102 6.500%, 08/01/15 $ 1,000 $ 1,047 ------- OHIO (1.1%) Cleveland, City School District, Ser A, GO, FGIC Callable 12/01/02 @ 102 5.875%, 12/01/11 1,650 1,678 ------- SOUTH DAKOTA (4.6%) South Dakota State, Health & Educational Facility Authority, St. Lukes Midland Regional Medical, RB, MBIA Callable 07/01/01 @ 102 6.625%, 07/01/11 6,675 6,906 ------- TENNESSEE (2.7%) Metropolitan Nashville, Airport Authority, Ser C, RB, FGIC Callable 07/01/01 @ 102 6.600%, 07/01/15 3,900 4,039 ------- TEXAS (19.4%) Dallas, GO Callable 02/15/08 @ 100 5.000%, 02/15/13 4,500 4,175 Ennis, Independent School District, GO Callable 08/15/10 @ 40.4318 (A) 0.000%, 08/15/24 3,265 682 Harris County, Toll Road, Sub Lien, RB, FGIC 6.000%, 08/01/14 10,000 10,193 Houston, Independent School District, Ser A, GO Callable 02/15/09 @ 100 5.000%, 02/15/24 4,000 3,403 Irving, Independent School District, GO Callable 02/15/07 @ 100 5.000%, 02/15/21 2,500 2,171 McAllen, Independent School District, GO Callable 10/01/09 @100 5.250%, 04/01/16 1,600 1,502 5.250%, 04/01/17 1,695 1,577 5.250%, 04/01/18 1,795 1,654 University of Texas, Ser B, RB Callable 08/15/01 @ 102 6.750%, 08/15/13 1,475 1,533 36 -------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- TEXAS--CONTINUED Waxahachie, Independent School District, GO Callable 08/15/10 @ 39.372 (A) 0.000%, 08/15/24 $ 6,385 $ 1,288 Waxahachie, Independent School District, GO Callable 08/15/10 @ 45.084 (A) 0.000%, 08/15/22 5,000 1,157 -------- 29,335 -------- VERMONT (1.4%) Burlington, Electric Authority, Ser A, RB, MBIA Callable 07/01/02 @102 6.250%, 07/01/14 2,000 2,061 -------- VIRGINIA (0.2%) Virginia State, Public Building Authority, RB Callable 08/01/10 @100 5.750%, 08/01/20 250 245 -------- WASHINGTON (1.9%) Clark County, Public Utility District, RB, AMBAC Callable 01/01/03 @ 102 5.100%, 01/01/08 3,000 2,929 -------- Total Municipal Bonds (Cost $150,636) 149,770 -------- CASH EQUIVALENTS (9.8%) AIM Management Institutional Tax Free Portfolio 7,381,127 7,381 SEI Institutional Tax Free Fund 7,461,934 7,462 -------- Total Cash Equivalents (Cost $14,843) 14,843 -------- Total Investments (108.7%) (Cost $165,479) 164,613 -------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- U.S. TREASURY OBLIGATION (15.5%) U.S. Treasury Note 6.500%, 08/31/01 $20,000 $ 19,934 -------- Total U.S. Treasury Obligation (Cost $19,920) 19,934 -------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (67.5%) FHLMC 8.000%, 12/01/02 664 664 FHLMC REMIC, Ser 1614, Cl H 6.000%, 06/15/20 4,550 4,495 FHLMC REMIC, Ser 1624, Cl KC 6.000%, 06/15/08 11,084 10,576 FHLMC REMIC, Ser 1666, Cl E 6.000%, 12/15/19 5,000 4,909 FHLMC REMIC, Ser 29, Cl Q 7.500%, 06/25/20 15,000 14,952 FNMA 6.500%, 06/01/13 8,334 7,912 6.000%, 09/01/13 9,691 9,024 5.500%, 06/01/14 18,783 17,081 8.500%, 04/01/17 414 418 FNMA REMIC, Ser 206, Cl G 6.000%, 04/25/19 11,000 10,793 FNMA REMIC, Ser 223, Cl PH 6.050%, 10/25/22 5,375 5,125 GNMA 9.000%, 11/15/17 566 589 -------- Total U.S. Agency Mortgage-Backed Obligations (Cost $89,158) 86,538 -------- REPURCHASE AGREEMENT (17.0%) Morgan Stanley Dean Witter 6.450%, dated 05/31/00, matures 06/01/00, repurchase price $21,795 (collateralized by FNMA obligation: total market value $22,675) (G) 21,791 21,791 -------- Total Repurchase Agreement (Cost $21,791) 21,791 -------- Total Investments (100.0%) (Cost $130,869) 128,263 -------- OTHER ASSETS AND LIABILITIES, NET (0.0%) (8) -------- -------------------------------------------------------------------------------- VALUE (000) -------------------------------------------------------------------------------- NET ASSETS: Fund shares of Trust Shares (unlimited authorization -- no par value) based on 13,035,532 outstanding shares of beneficial interest $131,248 Fund shares of Investor Shares (unlimited authorization -- no par value) based on 124,256 outstanding shares of beneficial interest 1,281 Fund shares of Flex Shares (unlimited authorization -- no par value) based on 177,386 outstanding shares of beneficial interest 1,817 Distributions in excess of net investment income (7) Accumulated net realized loss on investments (3,478) Net unrealized depreciation on investments (2,606) -------- Total Net Assets (100.0%) $128,255 ======== Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 9.62 ======== Net Asset Value and Redemption Price Per Share -- Investor Shares $ 9.60 ======== Maximum Offering Price Per Share -- Investor Shares ($9.60 / 97.50%) $ 9.85 ======== Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 9.62 ======== (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 38 -------------------------------------------------------------------------------- MARYLAND MUNICIPAL BOND FUND -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- MUNICIPAL BONDS (94.9%) MARYLAND (81.2%) Anne Arundel County, GO Callable 02/01/08 @ 101 5.125%, 02/01/24 $ 750 $ 666 Baltimore County, Consolidated Public Improvement, GO Callable 06/01/06 @ 101 5.500%, 06/01/16 250 246 Baltimore County, Consolidated Public Improvement, GO Callable 07/01/08 @101 4.750%, 07/01/09 500 475 Baltimore, Emergency Telecommunication Facilities, Ser A, COP, AMBAC Callable 10/01/07 @ 102 5.000%, 10/01/17 400 364 Baltimore, Pollution Control Authority, General Motors Project, RB 5.350%, 04/01/08 250 251 Calvert County, Economic Development Authority, Asbury-Solomons Project, RB, MBIA Callable 01/01/08 @ 102 5.000%, 01/01/17 250 226 Calvert County, Pollution Control Authority, Baltimore Gas & Electric Project, RB Callable 07/15/04 @ 102 5.550%, 07/15/14 250 246 Carroll County, Consolidated Public Improvement, GO Callable 12/01/06 @ 101 5.125%, 12/01/14 500 475 Maryland State, Aviation Administration Facilities, COP, AMT Callable 05/01/09 @101 4.750%, 05/01/13 1,500 1,341 Maryland State, GO (C) 4.380%, 08/01/12 700 700 Maryland State, Community Development Administration, Ser B, RB, AMT, FHA Callable 03/01/07 @ 101.50 5.875%, 09/01/25 500 475 Maryland State, Community Development Administration, Ser D, RB, AMT Callable 03/01/09 @ 101 5.250%, 09/01/19 1,000 893 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- MARYLAND--CONTINUED Maryland State, Community Development Administration, Ser E, RB, FHA Callable 09/01/09 @ 100 5.700%, 09/01/17 $1,000 $ 960 Maryland State, Community Development Administration, Ser F, RB, AMT Callable 09/01/09 @ 100 5.900%, 09/01/19 1,000 951 Maryland State, Community Development Administration, Single-Family Housing, 1st Ser, RB Callable 04/01/07 @ 101.50 5.600%, 04/01/18 375 355 Maryland State, Community Development Administration, Single-Family Program, 2nd Ser, RB Callable 04/01/09 @ 101 5.000%, 04/01/17 1,000 884 Maryland State, Economic Development Authority, Chesapeake Bay Foundation, RB (C) (E) 4.350%, 11/01/23 500 500 Maryland State, Health & Higher Educational Facilities Authority, Anne Arundel Medical Center Project, RB, FSA Callable 7/01/08 @ 101 5.125%, 07/01/28 1,250 1,089 Maryland State, Health & Higher Educational Facilities Authority, Broadmead Project, RB Callable 07/01/07 @ 102 5.500%, 07/01/17 300 265 Maryland State, Health & Higher Educational Facilities Authority, Calvert Memorial Hospital Project, RB Callable 07/01/08 @ 102 5.000%, 07/01/13 400 349 Maryland State, Health & Higher Educational Facilities Authority, Catholic Health Initiatives, Ser A, RB Callable 06/01/10 @ 101 6.000%, 12/01/24 250 243 Maryland State, Health & Higher Educational Facilities Authority, Greater Baltimore Medical Center, RB 4.350%, 07/01/25 1,000 1,000 39 -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 MARYLAND MUNICIPAL BOND FUND--CONCLUDED -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- MARYLAND--CONTINUED Maryland State, Health & Higher Educational Facilities Authority, Johns Hopkins Health System Project, RB, AMBAC Callable 07/01/07 @ 102 5.250%, 07/01/17 $ 350 $ 326 Maryland State, Health & Higher Educational Facilities Authority, Loyola College Project, RB Callable 10/01/09 @ 101 5.250%, 10/01/29 1,250 1,101 Maryland State, Health & Higher Educational Facilities Authority, Loyola College Project, Ser A, RB, MBIA Callable 10/01/06 @ 102 5.500%, 10/01/16 250 242 Maryland State, Health & Higher Educational Facilities Authority, Pickersgill Project, Ser A, RB Callable 01/01/07 @ 102 6.000%, 01/01/15 350 333 Maryland State, Health & Higher Educational Facilities Authority, University of Maryland Medical Systems Project, Ser A, RB, FGIC Prerefunded @ 100 (F) 6.500%, 07/01/01 200 204 Maryland State, Health & Higher Educational Facilities Authority, Upper Chesapeake Hospital Project, Ser A, RB, FSA Callable 01/01/08 @ 101 5.125%, 01/01/33 1,250 1,078 Maryland State, Industrial Development Financing Authority, Holy Cross Health System, RB Callable 12/01/03 @ 102 5.500%, 12/01/15 100 96 Maryland State, State & Local Facilities Loan, First Ser, GO Callable 02/15/06 @ 101.50 4.700%, 02/15/10 300 281 Maryland State, State & Local Facilities Loan, Third Ser, GO 5.500%, 10/15/04 500 510 Maryland State, Stadium Authority, Sports Facility Project, RB, AMBAC Callable 03/01/06 @ 101 5.800%, 03/01/26 250 243 Maryland State, Transportation Authority, RB, ETM 6.800%, 07/01/16 120 132 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- MARYLAND--CONTINUED Montgomery County, Economic Development Authority, Genomic Research Facility, RB (C) (E) Callable 06/02/00 @ 100 4.400%, 03/01/09 $ 700 $ 700 Montgomery County, Housing Opportunity, Kensington Park Project, RB, MBIA 3.950%, 07/01/28 1,600 1,600 Montgomery County, Housing Opportunity, The Grande Project Issue I, RB, AMT (C) 3.950%, 06/01/30 1,300 1,300 Montgomery County, Human Services Headquarters Project, RB 5.400%, 08/01/06 200 203 Montgomery County, Pollution Control Authority, Potomac Electric Power Project, RB, MBIA Callable 02/15/04 @ 102 5.375%, 02/15/24 1,700 1,556 Montgomery County, Pollution Control Authority, Potomac Electric Power Project, RB Callable 02/15/04 @ 102 5.375%, 02/15/24 100 90 Montgomery County, Consolidated Public Improvement, Ser A, GO 5.800%, 07/01/07 500 519 Northeast Maryland, Waste Disposal Authority, Montgomery County Resource Project, RB Callable 07/01/03 @ 102 6.200%, 07/01/10 275 278 Prince Georges County, Consolidated Public Improvements, Ser A, GO, MBIA Callable 03/01/02 @ 102 5.625%, 09/01/04 250 255 Queen Annes County, Public Facilities, GO, FGIC 5.125%, 11/15/06 350 350 Saint Mary's County, Public Facilities, GO, AMBAC Callable 11/01/03 @ 102 5.500%, 11/01/07 150 152 Saint Mary's County, Consolidated Public Improvements, GO, MBIA 4.500%, 09/01/00 500 500 University of Maryland, Ser A, RB Callable 04/01/08 @ 100 5.000%, 04/01/19 500 446 40 -------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- MARYLAND--CONTINUED University of Maryland, Ser A, RB 5.000%, 04/01/05 $ 400 $ 398 University of Maryland, Ser A, RB Callable 04/01/06 @ 101 5.500%, 04/01/08 100 101 Washington County, Consolidated Public Improvement, GO, FGIC Callable 01/01/03 @ 102 5.250%, 01/01/07 100 100 Washington County, Suburban Sanitation District, GO Callable 06/01/06 @ 100 5.600%, 06/01/19 250 243 ------- 26,291 ------- Puerto Rico (13.7%) Puerto Rico Commonwealth, Highway & Transportation Authority, Ser Y, RB Callable 07/01/06 @ 101.50 5.500%, 07/01/26 1,700 1,576 Puerto Rico Commonwealth, Housing, Bank & Finance Agency, Affordable Housing Mortgage Porfolio, Ser I, RB, AMT, GNMA Callable 04/01/05 @ 102 6.250%, 04/01/29 660 650 Puerto Rico Commonwealth, Medical & Environmental Control Facilities, San Lucas & Cristo Project, Ser A, RB Callable 06/01/09 @ 101 5.750%, 06/01/29 740 604 Puerto Rico Commonwealth, Public Finance, Ser PA 502, RB (C) 3.900%, 06/01/19 1,600 1,600 ------- 4,430 ------- Total Municipal Bonds (Cost $32,457) 30,721 ------- Cash Equivalents (5.0%) AIM Tax Free Institutional Cash Reserve 808,589 809 Federated Maryland Municipal Cash Trust 808,236 808 ------- Total Cash Equivalents (Cost $1,617) 1,617 ------- Total Investments (99.9%) (Cost $34,074) 32,338 ------- Other Assets and Liabilities, Net (0.1%) 50 ------- -------------------------------------------------------------------------------- VALUE (000) -------------------------------------------------------------------------------- NET ASSETS: Fund shares of Trust Shares (unlimited authorization -- no par value) based on 2,767,603 outstanding shares of beneficial interest $27,677 Fund shares of Flex Shares (unlimited authorization -- no par value) based on 655,599 outstanding shares of beneficial interest 6,738 Distributions in excess of net investment income (35) Accumulated net realized loss on investments (256) Net unrealized depreciation on investments (1,736) ------- Total Net Assets (100.0%) $32,388 ======= Net Asset Value and Redemption Price Per Share-- Trust Shares $ 9.46 ======= Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 9.48 ======= (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 41 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 SHORT-TERM BOND FUND -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS (18.9%) U.S. Treasury Notes 5.000%, 04/30/01 $11,000 $ 10,833 5.250%, 05/31/01 1,500 1,478 6.500%, 08/31/01 7,000 6,977 5.625%, 09/30/01 1,000 985 6.375%, 09/30/01 6,000 5,969 6.250%, 10/31/01 1,750 1,738 7.500%, 11/15/01 2,500 2,524 6.250%, 06/30/02 1,250 1,237 6.000%, 07/31/02 2,000 1,970 U.S. Treasury STRIPS 0.000%, 08/15/03 1,250 1,013 -------- Total U.S. Treasury Obligations (Cost $35,373) 34,724 -------- U.S. GOVERNMENT AGENCY OBLIGATION (0.5%) FFCB 7.125%, 06/01/01 1,000 999 -------- Total U.S. Government Agency Obligation (Cost $1,001) 999 -------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (7.4%) FHLMC 6.500%, 12/01/00 660 655 6.000%, 07/01/06 8,422 7,900 FNMA 7.000%, 01/01/27 1,531 1,453 FNMA REMIC, Ser 1996-30, Cl PC 7.000%, 11/25/20 2,600 2,559 GNMA 8.000%, 11/15/09 1,071 1,081 -------- Total U.S. Agency Mortgage-Backed Obligations (Cost $14,155) 13,648 -------- CORPORATE OBLIGATIONS (63.4%) BANKS (2.4%) Banc One 6.400%, 08/01/02 3,000 2,921 Key Bank 5.800%, 04/01/04 1,675 1,562 -------- 4,483 -------- FINANCE (26.0%) American General 6.250%, 03/15/03 1,100 1,057 American General Finance 5.900%, 01/15/03 2,000 1,908 Associates, Ser H, MTN 7.080%, 04/15/03 1,500 1,470 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- FINANCE--CONTINUED CIT Group Holdings, MTN 6.500%, 06/14/02 $ 3,000 $ 2,918 Commercial Credit 6.375%, 09/15/02 2,500 2,434 Diageo Capital PLC 6.625%, 06/24/04 2,500 2,406 Daimler Chrysler NA Holdings, Ser B, MTN 6.460%, 12/01/01 2,500 2,454 Ford Capital 10.125%, 11/15/00 2,000 2,024 Ford Motor Credit 6.000%, 01/14/03 3,500 3,356 General Electric Capital, Ser A, MTN 6.330%, 09/17/01 3,000 2,963 General Motors Acceptance 5.950%, 03/14/03 1,000 955 Household Finance 8.000%, 05/09/05 2,500 2,475 Household Finance, MTN 7.080%, 06/03/02 2,500 2,459 International Lease Finance, Ser J, MTN 5.500%, 09/29/03 2,000 1,873 Merrill Lynch, Ser B, MTN 5.640%, 01/27/03 3,750 3,563 Morgan Stanley Dean Witter, Ser C, MTN 5.625%, 04/12/02 1,750 1,689 PNC Funding 6.950%, 09/01/02 3,000 2,955 Salomon Smith Barney Holdings 6.750%, 02/15/03 3,000 2,921 Transamerica Finance, Ser F, MTN 6.800%, 12/14/01 3,000 2,954 US West Capital Funding 6.875%, 08/15/01 3,000 2,973 -------- 47,807 -------- INDUSTRIAL (21.7%) American Home Products 7.900%, 02/15/05 2,000 2,015 Clark Equipment 9.750%, 03/01/01 1,750 1,774 Computer Associates International, Ser B 6.375%, 04/15/05 2,300 2,105 Conoco 5.900%, 04/15/04 1,150 1,084 Cox Communications 7.000%, 08/15/01 3,000 2,966 Daimler Chrysler NA Holdings 7.400%, 01/20/05 2,000 1,965 42 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- Industrial--continued Dayton Hudson (C) 5.950%, 06/15/00 $ 500 $ 499 Eastman Kodak, Ser A, MTN 6.500%, 08/15/01 4,000 3,945 General Foods Callable 08/16/00 @ 100 6.000%, 06/15/01 500 488 Hasbro 7.950%, 03/15/03 3,000 2,982 Nabisco 6.800%, 09/01/01 1,500 1,457 Norfolk Southern 7.875%, 02/15/04 1,500 1,494 Philip Morris 7.500%, 01/15/02 500 493 Procter & Gamble 5.250%, 09/15/03 3,000 2,828 Raytheon 6.450%, 08/15/02 2,900 2,828 Safeway Stores 7.000%, 09/15/02 3,000 2,944 TCI Communications 6.375%, 05/01/03 2,250 2,168 TRW 6.500%, 06/01/02 3,000 2,910 TRW, Ser A, MTN 9.000%, 02/09/01 1,000 1,005 Tyco International Group SA(C) 6.250%, 06/15/03 2,000 1,885 -------- 39,835 -------- UTILITIES (13.3%) Alabama Power 7.850%, 05/15/03 3,250 3,245 Baltimore Gas and Electric 6.125%, 07/01/03 1,750 1,682 Northern States Power 6.125%, 12/01/05 5,000 4,644 Pacific Gas and Electric, Ser 93-E 5.875%, 10/01/05 3,500 3,203 Philadelphia Electric 7.125%, 09/01/02 2,000 1,975 Scottish Power PLC, Ser H, MTN 6.750%, 07/15/04 2,500 2,393 Southern New England Telephone, Ser C, MTN 6.125%, 12/15/03 3,000 2,861 Sprint Capital 5.700%, 11/15/03 2,000 1,875 Vodaphone Airtouch PLC (B) 6.698%, 12/19/01 2,500 2,497 -------- 24,375 -------- Total Corporate Obligations (Cost $119,792) 116,500 -------- -------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- REGIONAL GOVERNMENT AGENCY (1.4%) Province of Quebec 8.800%, 04/15/03 $ 2,500 $ 2,584 -------- Total Regional Government Agency (Cost $2,655) 2,584 -------- ASSET-BACKED OBLIGATIONS (6.6%) CoreStates Home Equity Trust, Ser 1994-1, Cl A 6.650%, 05/15/09 455 449 Discover Card Master Trust I, Ser 1998-4, Cl A 5.750%, 10/16/03 1,990 1,960 Discover Card Master Trust I, Ser 1999-2, Cl A 5.900%, 10/15/04 3,000 2,918 EQCC Home Equity Loan Trust, Ser 1994-1, Cl A 5.800%, 03/15/09 386 373 Equivantage Home Equity Loan Trust, Ser 1996-1, Cl A 6.550%, 10/25/25 452 440 Metris Master Trust, Ser 1997-1, Cl A 6.870%, 10/20/05 2,000 1,980 Premier Auto Trust, Ser 1998-5, Cl A-4 5.190%, 04/08/03 3,500 3,373 Spiegel Master Trust, Ser 1995-A, Cl A 7.500%, 09/15/04 333 334 Union Acceptance, Ser 2000-A, Cl A1 5.993%, 02/08/01 337 337 -------- Total Asset-Backed Obligations (Cost $12,412) 12,164 -------- CASH EQUIVALENTS (0.6%) AIM Liquid Assets Portfolio 968,315 968 SEI Daily Income Trust Prime Obligation Fund 54,190 54 -------- Total Cash Equivalents (Cost $1,022) 1,022 -------- Total Investments (98.8%) (Cost $186,410) 181,641 -------- OTHER ASSETS AND LIABILITIES, NET (1.2%) 2,272 -------- 43 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 SHORT-TERM BOND FUND--CONCLUDED -------------------------------------------------------------------------------- VALUE (000) -------------------------------------------------------------------------------- NET ASSETS: Fund shares of Trust Shares (unlimited authorization -- no par value) based on 18,701,923 outstanding shares of beneficial interest $189,921 Fund shares of Investor Shares (unlimited authorization -- no par value) based on 149,580 outstanding shares of beneficial interest 1,506 Fund shares of Flex Shares (unlimited authorization -- no par value) based on 213,649 outstanding shares of beneficial interest 2,159 Distributions in excess of net investment income (4) Accumulated net realized loss on investments (4,900) Net unrealized depreciation on investments (4,769) -------- Total Net Assets (100.0%) $183,913 ======== Net Asset Value and Redemption Price Per Share -- Trust Shares $ 9.65 ======== Net Asset Value and Redemption Price Per Share -- Investor Shares $ 9.67 ======== Maximum Offering Price Per Share -- Investor Shares ($9.67 / 98.00%) $ 9.87 ======== Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 9.67 ======== (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 44 SHORT-TERM U.S. TREASURY SECURITIES FUND -------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS (97.0%) U. S. Treasury Bills 6.081%, 08/17/00 $ 5,000 $ 4,942 5.605%, 10/12/00 6,000 5,872 U.S. Treasury Notes 5.750%, 10/31/00 2,000 1,995 5.375%, 02/15/01 12,800 12,681 4.875%, 03/31/01 4,000 3,940 6.375%, 03/31/01 11,500 11,464 6.250%, 10/31/01 3,000 2,979 7.500%, 11/15/01 7,500 7,573 6.250%, 01/31/02 4,500 4,463 6.625%, 03/31/02 10,500 10,471 6.250%, 06/30/02 2,000 1,980 5.875%, 09/30/02 4,500 4,417 5.500%, 03/31/03 5,000 4,845 ------- Total U.S. Treasury Obligations (Cost $78,450) 77,622 ------- CASH EQUIVALENT (2.4%) SEI Daily Income Trust Treasury II Fund 1,903,850 1,904 ------- Total Cash Equivalent (Cost $1,904) 1,904 ------- Total Investments (99.4%) (Cost $80,354) 79,526 ------- Other Assets and Liabilities, Net (0.6%) 501 ------- Net Assets: Fund shares of Trust Shares (unlimited authorization -- no par value) based on 7,368,421 outstanding shares of beneficial interest 73,271 Fund shares of Investor Shares (unlimited authorization -- no par value) based on 209,753 outstanding shares of beneficial interest 2,137 Fund shares of Flex Shares (unlimited authorization -- no par value) based on 548,512 outstanding shares of beneficial interest 5,484 Distributions in excess of net investment income (21) Accumulated net realized loss on investments (16) Net unrealized depreciation on investments (828) ------- Total Net Assets (100.0%) $80,027 ======= -------------------------------------------------------------------------------- VALUE -------------------------------------------------------------------------------- Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 9.85 ======= Net Asset Value and Redemption Price Per Share-- Investor Shares $ 9.85 ======= Maximum Offering Price Per Share -- Investor Shares ($9.85 / 99.00%) $ 9.95 ======= Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 9.83 ======= (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 45 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 U.S. GOVERNMENT SECURITIES FUND -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS (12.8%) U.S. Treasury Bonds 7.250%, 05/15/16 $ 1,000 $ 1,080 7.625%, 02/15/25 400 463 6.125%, 11/15/27 2,220 2,171 5.250%, 11/15/28 2,350 2,038 U.S. Treasury Notes 6.250%, 04/30/01 510 508 8.000%, 05/15/01 90 91 6.625%, 06/30/01 580 579 7.500%, 05/15/02 750 760 6.250%, 06/30/02 550 544 7.250%, 05/15/04 500 510 7.875%, 11/15/04 275 288 7.500%, 02/15/05 500 517 6.500%, 10/15/06 2,000 1,991 6.625%, 05/15/07 550 552 ------- Total U.S. Treasury Obligations (Cost $12,531) 12,092 ------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (86.2%) FHLMC 6.000%, 02/01/01 42 40 7.000%, 01/01/09 65 63 7.000%, 04/01/09 198 191 7.000%, 08/01/10 390 377 7.000%, 01/01/11 227 220 7.000%, 02/01/12 799 774 6.500%, 03/01/12 2,391 2,273 7.000%, 05/01/12 472 457 6.500%, 12/01/12 1,152 1,095 7.000%, 06/01/17 4,699 4,465 FHLMC REMIC, Ser 2039, Cl PC 6.000%, 05/15/09 1,000 945 FNMA 6.000%, 11/01/07 600 565 7.500%, 06/01/11 288 283 7.000%, 09/01/11 509 493 7.000%, 05/01/12 518 501 7.000%, 06/01/12 408 395 7.000%, 07/01/12 484 468 6.500%, 06/01/13 1,414 1,344 6.500%, 09/01/13 165 157 7.000%, 11/01/14 4,890 4,732 7.000%, 10/25/16 482 457 6.500%, 07/01/18 875 814 6.290%, 08/01/18 1,441 1,340 6.500%, 08/01/18 855 791 6.000%, 12/01/18 1,844 1,655 7.000%, 01/01/27 766 726 7.500%, 04/01/27 418 406 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- FNMA--CONTINUED 6.000%, 03/01/28 $ 822 $ 737 6.500%, 03/02/28 780 721 6.500%, 03/01/29 3,738 3,458 6.250%, 05/15/29 10,000 8,687 FNMA REMIC, Ser 143, Cl J 8.750%, 12/25/20 45 46 FNMA REMIC, Ser 156, Cl B 6.500%, 04/25/18 100 98 FNMA REMIC, Ser 30, Cl PC 7.000%, 11/25/20 2,000 1,969 FNMA REMIC, Ser 34, Cl VC 7.500%, 05/01/12 1,000 979 FNMA REMIC, Ser 40, Cl VC 6.500%, 08/25/10 261 241 FNMA REMIC, Ser 6, Cl H 7.000%, 08/18/08 1,058 1,010 FNMA REMIC, Ser 63, Cl PC 6.500%, 03/18/26 1,140 1,082 FNMA REMIC, Ser 68, Cl C 6.500%, 08/18/18 1,000 969 FNMA REMIC, Ser 9, Cl H 6.500%, 11/25/13 1,337 1,232 GNMA 7.500%, 10/20/09 32 32 8.000%, 11/15/09 693 699 8.250%, 01/15/12 55 55 6.000%, 07/15/13 875 817 6.000%, 01/15/14 1,708 1,595 9.000%, 04/15/17 163 168 8.500%, 05/15/17 561 571 10.000%, 06/15/19 2 2 7.500%, 05/15/22 194 190 7.000%, 11/15/22 310 297 8.000%, 02/15/23 14 14 8.500%, 03/15/23 30 31 7.500%, 04/15/23 84 83 7.500%, 09/15/23 605 594 6.500%, 10/15/23 739 691 6.500%, 11/15/23 994 930 7.000%, 01/15/24 92 89 7.500%, 04/15/24 492 483 7.000%, 06/15/24 571 548 8.000%, 08/15/24 36 36 8.000%, 09/15/24 11 11 8.000%, 10/15/24 18 18 8.000%, 11/15/24 14 14 8.500%, 12/15/24 32 33 8.500%, 02/15/25 5 5 7.000%, 12/15/25 308 296 7.500%, 01/15/26 332 326 46 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- GNMA--CONTINUED 7.500%, 09/15/26 $ 496 $ 487 7.000%, 03/15/27 211 203 7.000%, 04/15/27 703 674 7.500%, 07/15/27 296 291 7.000%, 09/15/27 62 60 7.000%, 10/15/27 694 667 7.500%, 10/15/27 36 35 7.000%, 11/15/27 964 925 7.000%, 12/15/27 833 799 7.000%, 01/15/28 1,121 1,075 7.500%, 01/15/28 282 277 6.500%, 02/15/28 868 812 6.500%, 03/15/28 107 100 6.500%, 04/15/28 78 73 6.500%, 05/20/28 1,747 1,626 6.500%, 06/15/28 38 35 6.500%, 09/15/28 2,794 2,614 6.250%, 10/15/28 1,866 1,720 6.500%, 02/15/29 658 616 7.500%, 10/15/29 10,801 10,606 GNMA REMIC, Ser 6, Cl E 7.500%, 05/20/23 1,000 985 GNMA REMIC, Ser 9, Cl D 6.500%, 08/20/24 1,000 897 ------- Total U.S. Agency Mortgage-Backed Obligations (Cost $84,961) 81,461 ------- ASSET-BACKED OBLIGATION (0.0%) EQCC Home Equity Loan Trust, Ser 1, Cl A 5.800%, 03/15/09 40 38 ------- Total Asset-Backed Obligation (Cost $40) 38 ------- CASH EQUIVALENT (1.0%) AIM Liquid Assets Portfolio 970,967 971 ------- Total Cash Equivalent (Cost $971) 971 ------- Total Investments (100.0%) (Cost $98,503) 94,562 ------- OTHER ASSETS AND LIABILITIES, NET (0.0%) 15 ------- -------------------------------------------------------------------------------- VALUE (000) -------------------------------------------------------------------------------- NET ASSETS: Fund shares of Trust Shares (unlimited authorization -- no par value) based on 8,659,920 outstanding shares of beneficial interest $91,170 Fund shares of Investor Shares (unlimited authorization -- no par value) based on 142,703 outstanding shares of beneficial interest 1,456 Fund shares of Flex Shares (unlimited authorization -- no par value) based on 785,689 outstanding shares of beneficial interest 8,432 Undistributed net investment income 4 Accumulated net realized loss on investments (2,544) Net unrealized depreciation on investments (3,941) ------- Total Net Assets (100.0%) $94,577 ======= Net Asset Value and Redemption Price Per Share -- Trust Shares $ 9.86 ======= Net Asset Value and Redemption Price Per Share -- Investor Shares $ 9.86 ======= Maximum Offering Price Per Share -- Investor Shares ($9.86 / 96.25%) $ 10.24 ======= Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 9.86 ======= (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 47 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- MUNICIPAL BONDS (96.2%) VIRGINIA (96.2%) Alexandria, Consolidated Public Improvement, GO 4.500%, 01/01/15 $ 2,000 $ 1,729 Alexandria, Redevelopment & Housing Authority, Residential Care Facilities, Goodwin House Project, Ser B, RB Callable 06/02/00 @ 100 4.450%, 10/01/06 2,650 2,650 Arlington County, GO 5.400%, 08/01/01 1,000 1,008 Arlington County, Industrial Development Authority, Alexandria/Arlington Project, Ser A, RB, FSA 5.250%, 01/01/05 4,000 4,011 Arlington County, Industrial Development Authority, Alexandria/Arlington Waste Project, Ser B, RB, AMT, FSA Callable 07/01/08 @ 101 5.375%, 01/01/11 3,000 2,909 Arlington County, GO Callable 10/01/08 @ 101 5.000%, 10/01/11 3,220 3,104 Chesapeake Bay, Bridge & Tunnel Authority, General Resolution, RB, MBIA Prerefunded @ 102 (F) 6.375%, 07/01/01 7,000 7,257 Chesapeake, GO 5.400%, 12/01/08 2,500 2,522 Chesapeake, Hospital Authority, General Hospital Project, RB, Callable 07/01/00 @ 102 8.200%, 07/01/05 1,000 1,022 Chesterfield County, Public Improvements, Ser A, GO Callable 01/01/08 @ 100 4.700%, 01/01/12 3,215 2,946 Danville, Industrial Development Authority, Danville Regional Medical Center Project, RB, AMBAC 5.250%, 10/01/28 4,250 3,788 Dinwiddie County, Industrial Development Authority, Ser A, RB Callable 07/03/00 @ 100 4.750%, 07/15/01 3,150 3,127 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- VIRGINIA--CONTINUED Fairfax County, Industrial Development Authority, Health Care Inova Health System Project, RB Callable 08/15/06 @ 102 5.300%, 08/15/07 $ 1,500 $ 1,475 Fairfax County, Industrial Development Authority, Health Care Inova Health System Project, Ser A, RB Callable 02/15/08 @ 101 5.000%, 08/15/10 2,890 2,672 Fairfax County, Public Improvement, Ser A, GO Callable 06/01/07 @ 102 4.500%, 06/01/10 3,000 2,731 Fairfax County, Ser B, GO Prerefunded @ 102 (F) 5.200%, 06/01/01 5,000 5,121 Fairfax County, Sewer Authority, RB, AMBAC Callable 11/15/03 @ 102 5.500%, 11/15/09 3,000 3,020 Fairfax County, Water Authority, RB Callable 04/01/07 @ 102 6.000%, 04/01/22 5,000 5,016 Fredericksburg, Industrial Development Authority, Medicorp Health System, RB, AMBAC Callable 06/15/07 @ 102 5.250%, 06/15/16 5,000 4,583 Hanover County, Industrial Development Authority, Covenant Woods Project, RB Callable 07/03/00 @ 100 (C) (D) (E) 4.450%, 07/01/29 3,000 3,000 Harrisonburg, Industrial Development Authority, Rockingham Memorial Hospital Project, RB, MBIA Callable 12/01/02 @ 102 5.750%, 12/01/13 3,000 2,994 Henrico County, Industrial Development Authority, Educational Facilities, Collegiate Schools, RB Callable 10/15/08 @ 102 5.000%, 10/15/19 2,250 1,950 Henrico County, Industrial Development Authority, Bon Secours Health System Project, RB, FSA 4.950%, 08/15/03 1,000 992 48 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- VIRGINIA--CONTINUED Henrico County, Industrial Development Authority, Governmental Projects, RB Callable 06/01/06 @ 102 5.150%, 06/01/07 $ 2,500 $ 2,485 Henrico County, Industrial Development Authority, Solid Waste Facility, Browning Ferris Project, RB, AMT 5.300%, 12/01/11 1,000 904 Henrico County, Industrial Development Authority, Westminster-Canterbury Project, RB Callable 10/1/09 @ 101 5.700%, 10/01/23 1,610 1,428 Henrico County, Water & Sewer Authority, RB Callable 05/01/09 @ 102 4.625%, 05/01/17 1,900 1,601 Henry County, GO Callable 07/15/04 @ 102 6.000%, 07/15/14 1,000 1,012 Loudoun County, Sanitation Authority, Water & Sewer, RB, FGIC Callable 01/01/03 @ 102 6.100%, 01/01/04 1,250 1,290 Louisa, Industrial Development Authority, Virginia Electric & Power Project, Ser A, RB, AMT 5.150%, 04/01/02 2,500 2,480 Lynchburg, GO Callable 04/01/03 @ 102 5.250%, 04/01/08 2,000 1,995 Lynchburg, Industrial Development Authority, Centra Health Project, RB Callable 01/01/08 @ 101 5.200%, 01/01/23 500 419 Martinsville, GO Callable 06/19/00 @ 100 3.600%, 01/15/01 1,500 1,490 Medical College, Hospital Authority, RB, MBIA Callable 07/01/08 @102 4.900%, 07/01/12 1,500 1,381 Montgomery County, Industrial Development Authority, Ser A, RB, MBIA Callable 07/03/00 @ 100 3.850%, 01/15/01 1,250 1,242 Newport News, Ser A, GO 4.000%, 07/01/07 2,000 1,798 Norfolk, Ser A, GO 5.250%, 02/01/01 2,200 2,209 Norfolk, GO Callable 06/01/04 @ 101 5.250%, 06/01/08 5,000 4,965 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- VIRGINIA--CONTINUED Norfolk, Industrial Development Authority, Childrens Hospital Kings Group, RB, AMBAC 6.900%, 06/01/06 $ 1,000 $ 1,075 Norfolk, Industrial Development Authority, Health Care Bon Secours Health Project, RB, MBIA Callable 08/15/07 @ 102 5.250%, 08/15/26 4,200 3,662 Norfolk, Industrial Development Authority, Sentara Hospital Project, Ser A, RB Callable 11/01/04 @ 102 4.900%, 11/01/07 2,500 2,398 5.000%, 11/01/08 2,500 2,408 Norfolk, Redevelopment & Housing Authority, Educational Facilities Revenue, Tidewater Community College Campus Project, RB Callable 11/01/05 @ 102 5.800%, 11/01/08 700 719 Poquoson, Sewer System, RB 4.250%, 11/01/00 3,000 2,993 Portsmouth, GO Callable 08/01/03 @ 102 5.450%, 08/01/07 2,000 2,014 Prince William County, Park Authority, RB, ETM 5.800%, 10/15/01 500 506 Prince William County, Park Authority, RB Prerefunded @ 102 (F) 6.200%, 10/15/04 500 527 Richmond, Metropolitan Expressway Authority, Ser A, RB, FGIC Callable 07/15/02 @ 102 5.900%, 07/15/03 1,500 1,534 Roanoke, Industrial Development Authority, Roanoke Memorial Hospital Project, Ser B, RB Callable 07/01/02 @ 102 5.900%, 07/01/06 2,500 2,530 Roanoke County, Industrial Development Authority, Roanoke Memorial Hospital Project, Ser C, RB Callable 06/02/00 @ 100 4.300%, 07/01/19 200 200 Roanoke Valley, Resources Authority, RB 5.400%, 09/01/02 1,450 1,454 Roanoke Valley, Resources Authority, RB Prerefunded @102 (F) 5.750%, 09/01/02 500 516 49 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND--CONCLUDED -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- VIRGINIA--CONTINUED Suffolk, GO 5.200%, 08/01/02 $ 1,500 $ 1,506 Suffolk, GO Callable 08/01/03 @ 102 5.600%, 08/01/06 2,000 2,033 5.700%, 08/01/07 2,000 2,036 University of Virginia, Ser A, RB Callable 06/01/08 @ 101 5.000%, 06/01/24 4,000 3,449 Virginia Beach, GO 5.450%, 07/15/11 1,000 997 Virginia Beach, Development Authority, Residential & Health Care Facility Project, 1st Mortgage, Our Lady of Perpetual Hope Project, RB Callable 07/01/07 @102 6.050%, 07/01/20 1,500 1,336 Virginia Beach, Development Authority, Sentara Bayside Hospital Project, RB Prerefunded @ 102 (F) 6.300%, 11/01/01 1,750 1,818 Virginia Beach, Development Authority, Sentra Health System, RB Callable 11/01/08 @ 101 5.250%, 11/01/11 1,000 956 Virginia Beach, Public Improvements, GO Prerefunded @ 102 (F) 5.750%, 11/01/04 3,500 3,641 Virginia State, GO 5.600%, 06/01/02 4,750 4,814 Virginia State, College Building Authority, 21st Century College Program, RB Callable 08/01/06 @ 102 5.400%, 08/01/16 1,000 941 Virginia State, College Building Authority, Public Higher Education Financing Program, Ser A, RB Callable 09/01/08 @ 100 4.625%, 09/01/15 3,080 2,654 Virginia State, College Building Authority, University of Richmond Project, RB Callable 11/01/02 @ 102 6.250%, 11/01/12 2,000 2,065 Virginia State, College Building Authority, University of Richmond Project, RB Callable 11/01/04 @ 100 5.550%, 11/01/19 6,500 6,487 Virginia State, Education Loan Authority, Guaranteed Student Loan Program, Ser B, RB, AMT 5.550%, 09/01/10 1,800 1,825 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- VIRGINIA--CONTINUED Virginia State, Education Loan Authority, Guaranteed Student Loan Program, Ser B, RB, AMT, ETM 4.850%, 09/01/01 $ 520 $ 520 Virginia State, Education Loan Authority, Guaranteed Student Loan Program, Ser D, RB, AMT, ETM 5.600%, 03/01/03 2,500 2,525 Virginia State, Housing Development Authority, Commonwealth Mortgage, Sub-Ser B-3, RB Callable 01/01/06 @ 102 6.350%, 01/01/15 3,000 3,036 Virginia State, Housing Development Authority, Commonwealth Mortgage, Sub-Ser E-1, RB Callable 07/01/08 @ 101 4.950%, 01/01/11 1,250 1,174 Virginia State, Housing Development Authority, Multi-Family Housing, Ser E, RB Callable 01/01/08 @ 102 5.350%, 11/01/11 1,250 1,204 Virginia State, Housing Development Authority, Multi-Family Housing, Ser B, RB Callable 07/03/00 @ 102 7.375%, 05/01/05 1,000 1,021 Virginia State, Housing Development Authority, Multi-Family Housing, Ser I, RB, AMT Callable 01/01/09 @ 101 4.875%, 11/01/12 1,950 1,773 Virginia State, Housing Development Authority, Rental Housing, Ser H, RB, AMT Callable 11/01/09 @ 100 5.625%, 11/01/18 3,500 3,281 Virginia State, Housing Development Authority, Single-Family Housing, Sub-Ser C-4, RB Callable 01/01/02 @ 102 5.550%, 01/01/11 3,000 2,968 Virginia State, Housing Development Authority, Sub-Ser B-1, RB, AMT Callable 07/01/06 @ 102 6.375%, 07/01/26 2,500 2,513 50 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- VIRGINIA--CONTINUED Virginia State, Housing Development Authority, Sub-Ser C-8, RB Callable 01/01/02 @ 102 6.000%, 07/01/06 $ 2,000 $ 2,025 Virginia State, Housing Development Authority, Sub-Ser C-1, RB Callable 01/01/08 @ 102 4.850%, 07/01/09 1,600 1,515 Virginia State, Polytechnic Institute & University, Ser A, RB Callable 06/01/06 @ 102 5.350%, 06/01/09 2,000 1,993 5.450%, 06/01/13 2,500 2,448 5.500%, 06/01/16 4,435 4,289 Virginia State, Port Authority, RB, AMT 4.400%, 07/01/00 2,815 2,814 Virginia State, Public School Authority, RB Callable 01/01/02 @ 102 6.250%, 01/01/08 2,000 2,062 Virginia State, Public School Authority, School Financing, Ser I, RB 5.250%, 08/01/09 5,000 4,960 Virginia State, Public School Authority, Ser B, RB Callable 07/03/00 @ 101.5 5.850%, 01/01/02 1,500 1,520 Virginia State, Transportation Board, Northern Virginia Tranportation District, Ser A, RB Callable 05/15/06 @ 101 5.125%, 05/15/12 2,000 1,902 -------- 200,963 -------- Total Municipal Bonds (Cost $207,345) 200,963 -------- CASH EQUIVALENTS (2.6%) AIM Tax Free Institutional Cash Reserve 2,758,671 2,759 Federated Virginia Municipal Cash Trust 2,759,482 2,759 -------- Total Cash Equivalents (Cost $5,518) 5,518 -------- Total Investments (98.8%) (Cost $212,863) 206,481 -------- OTHER ASSETS AND LIABILITIES, NET (1.2%) 2,536 -------- -------------------------------------------------------------------------------- VALUE (000) -------------------------------------------------------------------------------- NET ASSETS: Fund shares of Trust Shares (unlimited authorization -- no par value) based on 21,099,614 outstanding shares of beneficial interest $210,191 Fund shares of Investor Shares (unlimited authorization -- no par value) based on 710,206 outstanding shares of beneficial interest 7,315 Distribution in excess of net investment income (42) Accumulated net realized loss on investments (2,065) Net unrealized depreciation on investments (6,382) -------- Total Net Assets (100.0%) $209,017 ======== Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 9.58 ======== Net Asset Value and Redemption Price Per Share -- Investor Shares $ 9.59 ======== Maximum Offering Price Per Share -- Investor Shares ($9.59 / 96.25%) $ 9.96 ======== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 51 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 VIRGINIA MUNICIPAL BOND FUND -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- MUNICIPAL BONDS (94.7%) VIRGINIA (93.6%) Albemarle County, Industrial Development Authority, Martha Jefferson Hospital Project, RB Callable 10/01/03 @ 102 5.800%, 10/01/09 $ 500 $ 503 Alexandria, Industrial Development Authority, Episcopal High School Project, RB Callable 01/01/06 @ 102 5.300%, 01/01/11 500 490 Alexandria, Industrial Development Authority, Potomac Electric Project, Ser A, RB, MBIA Callable 02/15/04 @ 102 5.375%, 02/15/24 400 365 Alexandria, Redevelopment & Housing Authority, Buckingham Village Apartments Project, Ser A, RB, AMT Callable 01/01/06 @ 102 6.050%, 07/01/16 250 249 Alexandria, Redevelopment & Housing Authority, Essex House Project, Ser A, RB, AMT Callable 01/01/08 @ 102 5.550%, 07/01/28 1,000 892 Arlington County, Industrial Development Authority, Nature Conservancy, Ser A, RB Callable 07/01/07 @ 102 5.250%, 07/01/12 300 290 Arlington County, GO Callable 06/01/05 @ 101.50 5.400%, 06/01/12 250 249 Arlington County, Industrial Development Authority, Alexandria/Arlington Waste Project, Ser B, RB, AMT Callable 07/01/08 @ 101 5.375%, 01/01/13 1,000 953 Brunswick County, Industrial Development Authority, RB, MBIA Callable 07/01/06 @ 102 5.700%, 07/01/10 1,000 1,017 5.500%, 07/01/17 400 384 Chesapeake Bay, Bridge & Tunnel Commission, RB, MBIA Callable 07/01/05 @ 102 5.000%, 07/01/22 1,000 865 Chesterfield County, GO Callable 01/15/10 5.750%, 01/15/15 1,315 1,328 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- VIRGINIA--CONTINUED Culpeper County, 4.250%, 09/01/00 $ 1,325 $ 1,325 Fairfax County, Industrial Development Authority, Fairfax Hospital, Ser C, RB (C) 4.250%, 10/01/25 500 500 Fairfax County, Economic Development Authority, National Wildlife Federation, RB, MBIA Callable 09/01/09 @ 101 5.375%, 09/01/29 1,000 908 Fairfax County, Industrial Development Authority, Fairfax Hospital, Ser A, RB (C) 3.900%, 10/01/25 800 800 Fairfax County, Industrial Development Authority, Inova Health System Project, RB, FSA 5.250%, 08/15/19 500 460 Fairfax County, Public Improvements, Ser A, GO Callable 06/01/03 @ 102 5.000%, 06/01/07 500 494 Fairfax County, Redevelopment & Housing Authority, Mott & Gum Springs Community Centers, RB Callable 06/01/06 @ 102 5.500%, 06/01/12 425 415 Fairfax County, Redevelopment & Housing Authority, Paul Spring Center Project, Ser A, RB, FHA Callable 12/01/06 @ 103 5.900%, 06/15/17 250 242 Fairfax County, Sewer Improvement Authority, RB, MBIA Callable 07/15/06 @ 102 5.800%, 07/15/22 1,000 979 Fairfax County, Water Authority, RB Callable 04/01/07 @ 102 6.000%, 04/01/22 315 316 Fredericksburg, Industrial Development Authority, Medicorp Health System Obligation, RB, AMBAC Callable 06/15/07 @ 102 5.300%, 06/15/10 500 488 5.250%, 06/15/23 300 265 Giles County, Industrial Development Authority, Hoechst Celanese, RB, AMT Callable 05/01/06 @ 102 6.450%, 05/01/26 500 472 52 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- VIRGINIA--CONTINUED Greater Richmond, Convention Center Authority, Convention Center Expansion Project, RB Callable 06/15/10 @ 101 5.900%, 06/15/16 $ 835 $ 830 Greater Richmond, Convention Center Hotel, Convention Center Expansion Project, RB Callable 6/15/10 @ 101 6.125%, 06/15/25 1,200 1,193 Hampton, Golf Course Project, RB 6.000%, 12/01/12 1,410 1,394 Henrico County, Economic Development Authority, Beth Sholom Assisted Living, Ser A, RB, GNMA Callable 07/20/09 @ 102 5.850%, 07/20/19 400 387 5.900%, 07/20/29 500 477 Henrico County, Industrial Development Authority, Educational Facility, Collegiate Schools, RB Callable 10/15/08 @ 102 5.000%, 10/15/19 1,000 867 Henrico County, Industrial Development Authority, Westminster-Canterbury Project, RB Callable 10/1/09 @ 101 5.700%, 10/01/23 1,000 887 5.700%, 10/01/29 800 698 Henry County, Industrial Development Authority, Memorial Hospital, Martinsville & Henry Hospital Project, RB Callable 01/01/07 @ 101 6.000%, 01/01/17 500 492 James City County, GO, FGIC Callable 12/15/05 @ 102 5.250%, 12/15/14 250 241 Loudoun County, Sanitation Authority, Water & Sewer Project, RB, FGIC Callable 01/01/07 @ 102 5.125%, 01/01/26 500 435 Loudoun County, Public Improvement Project, Ser C, GO Callable 12/01/09 @ 101 5.750%, 12/01/19 1,050 1,035 Lynchburg, Industrial Development Authority, Health Care Facility, Centra Health Project, RB Callable 01/01/08 @ 101 5.200%, 01/01/23 500 419 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- VIRGINIA--CONTINUED Lynchburg, Public Improvements, GO Callable 05/01/06 @ 102 5.100%, 05/01/11 $ 500 $ 484 Manassas Park, GO, FSA Callable 04/01/09 @ 101 5.100%, 04/01/22 500 442 Manassas, Ser A, GO Callable 01/01/08 @ 102 5.000%, 01/01/18 500 447 Newport News, BAN 4.500%, 06/15/00 1,500 1,500 Newport News, Ser A, GO, MBIA Callable 07/01/05 @ 102 5.625%, 07/01/14 1,500 1,500 Newport News, Redevelopment & Housing Authority, Ser A, RB, GNMA Callable 08/20/07 @102 5.850%, 12/20/30 500 475 Norfolk, Water Authority, RB, AMBAC Callable 11/01/03 @ 102 5.625%, 11/01/23 690 631 Norfolk, Industrial Development Authority, Health Care, Bon Secours Health System Project, RB, MBIA Callable 08/15/07 @ 102 5.250%, 08/15/17 750 686 Norfork, GO Callable 02/01/03 @ 102 5.500%, 02/01/13 475 468 Portsmouth, GO, FGIC Callable 08/01/06 @ 101 5.250%, 08/01/21 500 453 Richmond, Public Improvements, Ser B, GO, Callable 01/15/01 @ 102 6.250%, 01/15/18 1,000 1,028 Riverside, Regional Jail Authority, Correctional Facility Improvements Project, RB, MBIA Callable 07/01/05 @ 102 5.875%, 07/01/14 2,000 2,019 Roanoke County, Industrial Development Authority, Roanoke Memorial Hospital Project, Ser C, RB Callable 06/09/00 @ 100 4.300%, 07/01/19 965 965 Roanoke, Public Improvements, GO Callable 08/01/04 @ 102 5.150%, 08/01/12 250 240 Spotsylvania County, GO, FSA 5.000%, 07/15/14 1,000 941 Spotsylvania County, Water & Sewer System, RB, MBIA Callable 06/01/07 @ 102 5.250%, 06/01/12 500 484 53 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 VIRGINIA MUNICIPAL BOND FUND--CONCLUDED -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- VIRGINIA--CONTINUED Spotsylvania County, Water & Sewer System Authority, RB, MBIA Callable 06/01/07 @ 102 5.400%, 06/01/27 $ 1,000 $ 915 Virginia Beach, GO 5.450%, 07/15/11 200 199 Virginia State, Biotechnology Research Park Authority, Biotech Two Project, RB Callable 09/01/06 @ 101 5.250%, 09/01/18 500 461 Virginia State, College Building Authority, Educational Facilities, Marymount University Project, RB, Callable 07/01/08 @ 102 5.100%, 07/01/18 1,000 881 Virginia State, College Building Authority, Washington & Lee University Project, RB, MBIA 5.250%, 01/01/31 1,100 989 Virginia State, Housing Development Authority, Commonwealth Mortgage Project, Sub-Ser E-3, RB Callable 07/01/08 @ 101 5.125%, 07/01/17 2,000 1,795 Virginia State, Housing Development Authority, Commonwealth Mortgage Project, Sub-Ser A-4, RB, AMT, MBIA Callable 01/01/06 @ 102 6.350%, 07/01/18 150 151 Virginia State, Housing Development Authority, Commonwealth Mortgage Project, Sub-Ser A-1, RB Callable 01/01/03 @ 102 6.400%, 07/01/17 875 886 Virginia State, Housing Development Authority, Commonwealth Mortgage Project, Sub-Ser E-2, RB Callable 07/01/08 @101 5.250%, 07/01/17 1,000 912 Virginia State, Polytechnic Institute & State University, University Service Systems, Ser C, RB Callable 06/01/06 @ 102 5.500%, 06/01/16 200 193 Virginia State, Public Building Authority, Public Improvements, RB Callable 08/01/05 @ 101 5.200%, 08/01/16 300 279 -------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- VIRGINIA--CONTINUED Virgina State, Public Building Authority, Ser A, Callable 08/01/10 @ 100 5.750%, 08/01/16 $ 1,500 $ 1,494 Virginia State, Public School Authority, School Financing, Ser A, RB Callable 08/01/07 @ 102 5.375%, 08/01/18 500 470 Virginia State, Resource Authority, RB, MBIA Callable 05/01/11 @ 101 5.800%, 05/01/30 1,500 1,456 Virginia State, University of Virginia, Ser A, RB Callable 05/01/06 @ 102 5.625%, 05/01/16 1,000 981 West Point, Industrial Development Authority, Chesapeake Project, Ser B, RB Callable 03/01/04 @ 102 6.250%, 03/01/19 165 151 Williamsburg, Industrial Development Authority, Williamsburg Community Hospital, RB Callable 10/01/03 @ 102 5.750%, 10/01/22 1,450 1,302 ------- 50,882 ------- PUERTO RICO (1.1%) Commonwealth, San Lucas & Cristo Project, Ser A , RB Callable 06/01/09 @ 101 5.750%, 06/01/29 740 604 ------- Total Municipal Bonds (Cost $53,737) 51,486 ------- CASH EQUIVALENTS (2.2%) AIM Tax Free Institutional Cash Reserve 602,404 602 Federated Virginia Municipal Cash Trust 601,758 602 ------- Total Cash Equivalents (Cost $1,204) 1,204 ------- Total Investments (96.9%) (Cost $54,941) 52,690 ------- OTHER ASSETS AND LIABILITIES, NET (3.1%) 1,657 ------- 54 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- VALUE (000) -------------------------------------------------------------------------------- NET ASSETS: Fund shares of Trust Shares (unlimited authorization -- no par value) based on 5,080,916 outstanding shares of beneficial interest $51,256 Fund shares of Flex Shares (unlimited authorization -- no par value) based on 554,190 outstanding shares of beneficial interest 5,910 Distribution in excess of net investment income (24) Accumulated net realized loss on investments (544) Net unrealized depreciation on investments (2,251) ------- Total Net Assets (100.0%) $54,347 ======= Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 9.64 ======= Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 9.68 ======= (1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 56. 55 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 KEY TO ABBREVIATIONS USED IN THE STATEMENT OF NET ASSETS AMBAC Security insured by the American Municipal Bond Assurance Corporation AMT Alternative Minimum Tax BAN Bond Anticipation Note Cl Class COP Certificate of Participation ETM Escrowed to Maturity FGIC Security insured by the Financial Guaranty Insurance Company FFCB Federal Farm Credit Bank FHA Federal Housing Authority FHLMC Federal Home Loan Mortgage Corporation FNMA Federal National Mortgage Association FSA Security insured by Financial Security Assurance GNMA Government National Mortgage Association GO General Obligation MBIA Security insured by the Municipal Bond Insurance Association MTN Medium Term Note PLC Public Limited Company RB Revenue Bond REMIC Real Estate Mortgage Investment Conduit Ser Series STRIPS Separately Traded Registered Interest and Principal Security TA Tax Allocation (A) Zero Coupon Bond (B) Private Placement Security (C) Adjustable rate security. The rate reported on the Statement of Net Assets is the rate in effect on May 31, 2000. (D) Put and demand features exist requiring the issuer to repurchase the instrument prior to maturity. (E) Securities are held in connection with a letter of credit issued by a major bank. (F) Prerefunded Security. The maturity date shown is the prerefunded date. (G) Tri-Party Repurchase Agreement 56 STATEMENT OF ASSETS AND LIABILITIES (000) -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000
Investment Grade Tax-Exempt Bond Fund ---------------- ASSETS: Investments at value (Cost $165,479) ............................................. $164,613 Cash ............................................................................. 182 Accrued income ................................................................... 2,952 Receivable for investment securities sold ........................................ 10,273 Receivable for portfolio shares purchased ........................................ 184 -------- Total Assets ..................................................................... 178,204 -------- LIABILITIES: Payable for investment securities purchased ...................................... 25,883 Accrued expenses ................................................................. 146 Payable for portfolio shares redeemed ............................................ 134 Distributions payable ............................................................ 536 -------- Total liabilities ................................................................... 26,699 -------- Net Assets .......................................................................... $151,505 ======== NET ASSETS: Fund shares of Trust Shares (unlimited authorization -- no par value) based on 10,998,329 outstanding shares of beneficial interest ............................. $122,291 Fund shares of Investor Shares (unlimited authorization -- no par value) based on 1,820,120 outstanding shares of beneficial interest .............................. 19,153 Fund shares of Flex Shares (unlimited authorization -- no par value) based on 1,375,312 outstanding shares of beneficial interest .............................. 15,610 Distribution in excess of net investment income ..................................... (5) Accumulated net realized loss on investments ........................................ (4,678) Net unrealized depreciation on investments .......................................... (866) -------- Total Net Assets (100.0%) ........................................................... $151,505 ======== Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares ............ $ 10.67 ======== Net Asset Value and Redemption Price Per Share -- Investor Shares ................... $ 10.68 ======== Maximum Offering Price Per Share -- Investor Shares ($10.68 / 96.25%) ............... $ 11.10 ======== Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) ......... $ 10.67 ========
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 57 STATEMENTS OF OPERATIONS (000) -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS FOR THE PERIODS ENDED MAY 31, 2000 AND MARCH 31, 2000
INVESTMENT FLORIDA GEORGIA HIGH INVESTMENT GRADE TAX-EXEMPT TAX-EXEMPT INCOME GRADE BOND TAX-EXEMPT BOND FUND BOND FUND FUND (1) FUND BOND FUND ---------- ---------- -------------------- ----------- ----------- 06/01/99- 06/01/99 - 04/01/00 04/01/99 - 06/01/99 - 06/01/99 - 05/31/00 05/31/00 05/31/00 03/31/00 05/31/00 05/31/00 ---------- ---------- -------------------- ----------- ----------- Interest Income ....................................... $ 5,916 $ 4,720 $ 35 $ 643 $ 78,585 $8,255 ------- ------- ---- ----- -------- ------ Expenses: Investment Advisory Fees ........................... 780 637 3 60 8,537 1,285 Less: Investment Advisory Fees Waived (Reimbursed) ............................ (130) (113) (3) (74) (798) (109) Administrator Fees ................................. 85 69 -- 9 817 123 Transfer Agent Fees-- Trust Shares ................. 17 16 -- -- 21 16 Transfer Agent Fees-- Investor Shares .............. 13 15 -- -- 31 17 Transfer Agent Fees-- Flex Shares .................. 17 16 3 -- 39 21 Transfer Agent Out of Pocket Expenses .............. 9 7 -- 19 28 4 Printing Expenses .................................. 8 7 -- -- 35 -- Custody Fees ....................................... 7 5 -- 9 42 -- Professional Fees .................................. 8 7 -- 14 65 -- Trustee Fees ....................................... 1 1 -- -- 12 -- Registration Fees .................................. 7 11 -- 16 62 13 Distribution Fees-- Investor Shares ................ 6 6 -- -- 129 96 Less: Distribution Fees Waived-- Investor Shares ... (6) (6) -- -- (38) (22) Distribution Fees-- Flex Shares .................... 127 113 4 18 249 163 Less: Distribution Fees Waived-- Flex Shares ....... (53) (47) (2) -- (65) (38) Insurance and Other Fees ........................... 7 1 1 36 53 2 ------- ------- ---- ----- -------- ------ Total Expenses ..................................... 903 745 6 107 9,219 1,571 ------- ------- ---- ----- -------- ------ Net Investment Income ................................. 5,013 3,975 29 536 69,366 6,684 ------- ------- ---- ----- -------- ------ Net Realized and Unrealized Gain (Loss) on Investments: Net Realized Loss on Securities Sold ............... (2,256) (836) -- (768) (37,713) (4,664) Net Change in Unrealized Depreciation on Investments ...................................... (3,755) (4,265) (30) (130) (50,059) (287) ------- ------- ---- ----- -------- ------ Total Net Realized and Unrealized Loss on Investments ...................................... (6,011) (5,101) (30) (898) (87,772) (4,951) ------- ------- ---- ----- -------- ------ Net Increase (Decrease) in Net Assets from Operations ................................ $ (998) $(1,126) $ (1) $(362) $(18,406) $1,733 ======= ======= ==== ===== ======== ====== Amounts designated as "--" are either $0 or round to $0. (1) ON MARCH 27, 2000, THE ESC STRATEGIC INCOME FUND EXCHANGED ALL OF ITS ASSETS AND CERTAIN LIABILITIES FOR SHARES OF THE HIGH INCOME FUND. THE ESC STRATEGIC INCOME FUND IS THE ACCOUNTING SURVIVOR IN THIS TRANSACTION, AND AS A RESULT, ITS BASIS OF ACCOUNTING FOR ASSETS AND LIABILITIES AND ITS OPERATING RESULTS FOR THE PERIODS PRIOR TO MARCH 27, 2000 HAVE BEEN CARRIED FORWARD IN THESE FINANCIAL HIGHLIGHTS. SUBSEQUENT TO THE MERGER, THE HIGH INCOME FUND CHANGED ITS FISCAL YEAR-END TO MAY 31.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 58 --------------------------------------------------------------------------------
LIMITED- TERM FEDERAL SHORT-TERM VIRGINIA MORTGAGE MARYLAND U.S. TREASURY U.S. INTERMEDIATE VIRGINIA SECURITIES MUNICIPAL SHORT-TERM SECURITIES GOVERNMENT MUNICIPAL MUNICIPAL FUND BOND FUND BOND FUND FUND SECURITIES FUND BOND FUND BOND FUND ------------ ---------- ---------- ------------- --------------- ------------ ----------- 06/01/99 - 06/01/99 - 06/01/99 - 06/01/99 - 06/01/99 - 06/01/99 - 06/01/99 - 05/31/00 05/31/00 05/31/00 05/31/00 05/31/00 05/31/00 05/31/00 ------------ ---------- ---------- ------------- --------------- ------------ ----------- $ 8,706 $ 1,726 $12,129 $3,593 $ 6,711 $ 11,824 $ 2,433 ------- ------- ------- ------ ------- -------- ------- 904 228 1,295 435 758 1,551 300 (162) (42) (185) (88) (88) -- (20) 98 25 141 47 73 170 36 13 16 17 15 16 7 16 12 -- 14 14 14 13 -- 14 15 14 16 22 -- 13 14 2 14 6 7 -- 2 10 2 13 5 8 4 3 8 1 8 4 6 4 3 13 2 10 4 7 20 5 1 -- 3 1 1 -- -- 17 -- 9 7 11 -- 2 4 -- 4 5 8 11 -- (3) -- (4) (5) (8) (11) -- 22 75 21 56 104 -- 62 (22) (18) (21) (47) (48) -- (26) 9 2 2 2 4 -- 3 ------- ------- ------- ------ ------- -------- ------- 952 308 1,355 477 895 1,769 399 ------- ------- ------- ------ ------- -------- ------- 7,754 1,418 10,774 3,116 5,816 10,055 2,034 ------- ------- ------- ------ ------- -------- ------- (2,174) (237) (2,130) (8) (1,586) (1,940) (544) (2,454) (1,990) (3,306) (621) (2,873) (11,451) (2,611) ------- ------- ------- ------ ------- -------- ------- (4,628) (2,227) (5,436) (629) (4,459) (13,391) (3,155) ------- ------- ------- ------ ------- -------- ------- $ 3,126 $ (809) $ 5,338 $2,487 $ 1,357 $ (3,336) $(1,121) ======= ======= ======= ====== ======= ======== =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 59 STATEMENTS OF CHANGES IN NET ASSETS (000) -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS FOR THE PERIODS ENDED MAY 31, MARCH 31, AND NOVEMBER 30, FLORIDA TAX-EXEMPT GEORGIA TAX-EXEMPT BOND FUND BOND FUND HIGH INCOME FUND ---------------------- ----------------------- ------------------------------ 06/01/99- 06/01/98- 06/01/99- 06/01/98- 04/01/00- 04/01/99 04/01/98 05/31/00 05/31/99 05/31/00 05/31/99 05/31/00 03/31/00 03/31/99 ---------------------- ----------------------- --------- -------- -------- Operations: Net Investment Income ....................... $ 5,013 $ 4,737 $ 3,975 $ 3,344 $ 29 $ 536 $ 852 Net Realized Gain (Loss) on Investments ..... (2,256) 1,160 (836) 414 -- (768) 57 Net Change in Unrealized Appreciation (Depreciation) on Investments ............. (3,755) (1,845) (4,265) (1,241) (30) (130) (194) -------- -------- --------- -------- ------ ------- -------- Increase (Decrease) in Net Assets from Operations ......................... (998) 4,052 (1,126) 2,517 (1) (362) 715 -------- -------- --------- -------- ------ ------- -------- Distributions to Shareholders: Net Investment Income: Trust Shares .............................. (4,437) (4,235) (3,459) (2,897) -- -- -- Investor Shares ........................... (127) (134) (129) (128) -- -- -- Flex Shares ............................... (449) (369) (388) (318) (29) (479)* (759) Class D Shares ............................ -- -- -- -- -- (39) (33) Tax Return of Capital: Class D Shares ............................ -- -- -- -- -- -- (77) Flex Shares ............................... -- -- -- -- -- -- (3)* Capital Gains: Trust Shares .............................. (400) (1,037) (301) (162) -- -- -- Investor Shares ........................... (12) (37) (13) (8) -- -- -- Flex Shares ............................... (46) (122) (42) (20) -- -- (105)* Class D Shares ............................ -- -- -- -- -- -- (9) -------- -------- --------- -------- ------ ------- -------- Total Distributions ......................... (5,471) (5,934) (4,332) (3,533) (29) (518) (986) -------- -------- --------- -------- ------ ------- -------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued ............... 28,674 51,929 26,583 36,255 -- -- -- Shares Issued in Connection with Crestar Merger .......................... -- -- -- -- -- -- -- Reinvestment of Cash Distributions 889 1,663 1,355 1,180 -- -- -- Cost of Shares Repurchased (49,546) (27,307) (29,630) (11,514) -- -- -- -------- -------- --------- -------- ------ ------- -------- Increase (Decrease) in Net Assets From Trust Share Transactions (19,983) 26,285 (1,692) 25,921 -- -- -- -------- -------- --------- -------- ------ ------- -------- Investor Shares: Proceeds from Shares Issued 165 1,105 557 1,195 -- -- -- Shares Issued in Connection with Crestar Merger .......................... -- -- -- -- -- -- -- Reinvestment of Cash Distributions ........ 120 143 108 118 -- -- -- Cost of Shares Repurchased ................ (1,034) (780) (1,698) (1,586) -- -- -- -------- -------- --------- -------- ------ ------- -------- Increase (Decrease) in Net Assets From Investor Share Transactions ........................ (749) 468 (1,033) (273) -- -- -- -------- -------- --------- -------- ------ ------- -------- Flex Shares: Proceeds from Shares Issued ............... 2,953 11,906 1,933 5,982 1,165 851 926 Shares Issued in Connection with ESC Merger -- -- -- -- -- 352 -- Shares Issued in Connection with Crestar Merger ......................... -- -- -- -- -- -- -- Reinvestment of Cash Distributions ....... 427 433 410 304 21 463 894 Cost of Shares Repurchased ............... (7,643) (5,520) (6,201) (1,034) (113) (6,073) (18,743) -------- -------- --------- -------- ------ ------- -------- Increase (Decrease) in Net Assets From Flex Share Transactions ....................... (4,263) 6,819 (3,858) 5,252 1,073 (4,407) (16,923) -------- -------- --------- -------- ------ ------- -------- Class D: Proceeds from Shares Issued .............. -- -- -- -- -- 42 156 Reinvestment of Cash Distributions ....... -- -- -- -- -- 42 41 Value of Shares Exchanged in Connection with Merger ...................... -- -- -- -- -- (352) -- Cost of Shares Repurchased ............... -- -- -- -- -- (191) (461) -------- -------- --------- -------- ------ ------- -------- Increase (Decrease) in Net Assets From Class D Share Transactions ............... -- -- -- -- -- (459) (264) -------- -------- --------- -------- ------ ------- -------- Increase (Decrease) in Net Assets From Share Transactions ....................... (24,995) 33,572 (6,583) 30,900 1,073 (4,866) (17,187) -------- -------- --------- -------- ------ ------- -------- Total Increase (Decrease) in Net Assets (31,464) 31,690 (12,041) 29,884 1,043 (5,746) (17,458) -------- -------- --------- -------- ------ ------- -------- Net Assets: Beginning of Period ........................ 137,170 105,480 104,486 74,602 2,032 7,778 25,236 -------- -------- --------- -------- ------ ------- -------- End of Period .............................. $105,706 $137,170 $ 92,445 $104,486 $3,075 $ 2,032 $ 7,778 ======== ======== ========= ======== ====== ======= ======== * Formerly Class A Shares (1) See Note 6 in the notes to the financial statements for additional information. Amounts designated as "--" are either $0 or round to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 60 ----------------------------------------------------------------------------------------------------------------------------------- INVESTMENT GRADE INVESTMENT GRADE TAX- LIMITED-TERM FEDERAL MARYLAND MUNICIPAL BOND FUND EXEMPT BOND FUND MORTGAGE SECURITIES FUND BOND FUND -------------------- -------------------- ------------------------ ------------------------------ 06/01/99- 06/01/98- 06/01/99- 06/01/98- 06/01/99- 06/01/98- 06/01/99- 12/01/98- 12/01/97- 05/31/00 05/31/99 05/31/00 05/31/99 05/31/00 05/31/99 05/31/00 05/31/99 11/30/98 --------- --------- --------- --------- --------- ---------- --------- --------- --------- $ 69,366 $ 45,781 $ 6,684 $ 6,793 $ 7,754 $ 7,741 $ 1,418 $ 497 $ 701 (37,713) 15,248 (4,664) 4,833 (2,174) 88 (237) (19) 58 (50,059) (27,720) (287) (3,278) (2,454) (1,037) (1,990) (437) 406 ---------- --------- ------- ------- ------- --------- ------- ------- ------- (18,406) 33,309 1,733 8,348 3,126 6,792 (809) 41 1,165 ---------- --------- ------- ------- ------- --------- ------- ------- ------- (66,271) (43,474) (5,389) (5,587) (7,518) (7,568) (1,195) (425) (645) (1,676) (1,621) (798) (901) (93) (125) -- -- -- (1,277) (807) (504) (305) (110) (83) (257) (77) (56) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- (13,468) (1,805) (4,790) -- (1,611) -- (24) -- -- (547) (295) (914) -- (28) -- -- -- -- (306) (216) (323) -- (19) -- (4) -- -- -- -- -- -- -- -- -- -- ---------- --------- ------- ------- ------- --------- ------- ------- ------- (69,224) (60,223) (9,007) (12,820) (7,721) (9,434) (1,452) (530) (701) ---------- --------- ------- ------- ------- --------- ------- ------- ------- 254,865 310,338 29,272 58,516 52,959 54,404 18,759 15,770 13,041 -- 314,362 -- -- -- -- -- -- -- 36,906 42,773 2,726 5,421 4,795 6,287 200 14 11 (358,628) (286,648) (63,059) (52,929) (63,196) (60,354) (20,670) (4,854) (5,813) ---------- --------- ------- ------- ------- --------- ------- ------- ------- (66,857) 380,825 (31,061) 11,008 (5,442) 337 (1,711) 10,930 7,239 ---------- --------- ------- ------- ------- --------- ------- ------- ------- 3,327 8,100 686 2,158 307 853 -- -- -- -- 2,385 -- -- -- -- -- -- -- 1,676 2,052 980 1,627 93 151 -- -- -- (15,192) (9,990) (6,471) (6,100) (1,359) (1,458) -- -- -- ---------- --------- ------- ------- ------- --------- ------- ------- ------- (10,189) 2,547 (4,805) (2,315) (959) (454) -- -- -- ---------- --------- ------- ------- ------- --------- ------- ------- ------- 9,687 19,438 7,055 10,543 792 1,082 2,326 4,739 2,772 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 1,235 1,002 670 551 103 96 216 66 41 (15,042) (6,765) (8,916) (2,643) (1,233) (566) (3,563) (226) (177) ---------- --------- ------- ------- ------- --------- ------- ------- ------- (4,120) 13,675 (1,191) 8,451 (338) 612 (1,021) 4,579 2,636 ---------- --------- ------- ------- ------- --------- ------- ------- ------- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ---------- ---------- ------- ------- ------- --------- ------- ------- ------- -- -- -- -- -- -- -- -- -- ---------- ---------- ------- ------- ------- --------- ------- ------- ------- (81,166) 397,047 (37,057) 17,144 (6,739) 495 (2,732) 15,509 9,875 ---------- ---------- ------- ------- ------- --------- ------- ------- ------- (168,796) 370,133 (44,331) 12,672 (11,334) (2,147) (4,993) 15,020 10,339 ---------- ---------- ------- ------- ------- --------- ------- ------- ------- 1,210,001 839,868 195,836 183,164 139,589 141,736 37,381 22,361 12,022 ---------- ---------- -------- ------- ------- --------- ------- ------- ------- $1,041,205 $1,210,001 $151,505 $195,836 $128,255 $139,589 $32,388 $37,381 $22,361 ========== ========== ======== ======== ======== ======== ======= ======= =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 61 STATEMENTS OF CHANGES IN NET ASSETS (000) ----------------------------------------------------------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS FOR THE PERIODS ENDED MAY 31, AND NOVEMBER 30, SHORT-TERM SHORT-TERM U.S. TREASURY BOND FUND SECURITIES FUND ------------------------- -------------------------- 06/01/99- 06/01/98- 06/01/99- 06/01/98- 05/31/00 05/31/99 05/31/00 05/31/99 ---------- ---------- ---------- ----------- Operations: Net Investment Income ................................ $ 10,774 $ 6,990 $ 3,116 $ 2,525 Net Realized Gain (Loss) on Investments .............. (2,130) 414 (8) 243 Net Change in Unrealized Appreciation (Depreciation) on Investments .................. (3,306) (2,357) (621) (388) -------- -------- ------- ------- Increase (Decrease) in Net Assets from Operations .. 5,338 5,047 2,487 2,380 -------- -------- ------- ------- Distributions to Shareholders: Net Investment Income: Trust Shares ....................................... (10,579) (6,805) (2,756) (2,281) Investor Shares .................................... (91) (92) (122) (133) Flex Shares ........................................ (103) (95) (238) (111) Capital Gains: Trust Shares ....................................... (139) (356) (7) -- Investor Shares .................................... (1) (4) -- -- Flex Shares ........................................ (2) (5) (1) -- -------- -------- ------- ------- Total Distributions .................................. (10,915) (7,357) (3,124) (2,525) -------- -------- ------- ------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued ........................ 51,792 57,981 31,143 17,499 Shares Issued in Connection with Crestar Merger .... -- 72,757 -- -- Reinvestment of Cash Distributions ................. 4,667 3,614 1,435 951 Cost of Shares Repurchased ......................... (80,493) (42,626) (15,480) (9,243) -------- -------- ------- ------- Increase (Decrease) in Net Assets From Trust Share Transactions ....................................... (24,034) 91,726 17,098 9,207 -------- -------- ------- ------- Investor Shares: Proceeds from Shares Issued ........................ 402 589 738 1,382 Reinvestment of Cash Distributions ................. 88 94 122 133 Cost of Shares Repurchased ......................... (821) (781) (1,566) (1,983) -------- -------- ------- ------- Increase (Decrease) in Net Assets From Investor Share Transactions ................................. (331) (98) (706) (468) -------- -------- ------- ------- Flex Shares: Proceeds from Shares Issued ........................ 1,164 2,540 3,365 5,314 Shares Issued in Connection with Crestar Merger .... -- -- -- -- Reinvestment of Cash Distributions ................. 107 96 218 94 Cost of Shares Repurchased ......................... (1,486) (2,365) (3,068) (1,855) -------- -------- ------- ------- Increase (Decrease) in Net Assets From Flex Share Transactions .............................. (215) 271 515 3,553 -------- -------- ------- ------- Increase (Decrease) in Net Assets From Share Transactions .................................... (24,580) 91,899 16,907 12,292 -------- -------- ------- ------- Total Increase (Decrease) in Net Assets .......... (30,157) 89,589 16,270 12,147 -------- -------- ------- ------- Net Assets: Beginning of Period .................................. 214,070 124,481 63,757 51,610 -------- -------- ------- ------- End of Period ........................................ $183,913 $214,070 $ 80,027 $63,757 ======== ======== ======== ======= (1) See Note 6 in the notes to the financial statements for additional information. Amounts designated as "--" are either $0 or round to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 62 ------------------------------------------------------------------------------------------------------------------------------------ U. S. GOVERNMENT SECURITIES FUND VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND VIRGINIA MUNICIPAL BOND FUND ----------------------- ----------------------------------------- ---------------------------------- 06/01/99- 06/01/98- 06/01/99- 12/01/98- 12/01/97- 06/01/99- 12/01/98- 12/01/97- 05/31/00 05/31/99 05/31/00 05/31/99 11/30/98 05/31/00 05/31/99 11/30/98 --------- --------- ----------- ---------- -------- --------- -------- --------- $ 5,816 $ 2,793 $ 10,055 $ 5,222 $ 10,809 $ 2,034 $ 734 $ 1,203 (1,586) 15 (1,940) 1,177 1,725 (544) 31 175 (2,873) (1,299) (11,451) (5,509) 2,380 (2,611) (722) 507 ------- ------- -------- -------- -------- -------- ------ ------- 1,357 1,509 (3,336) 890 14,914 (1,121) 43 1,885 ------- ------- -------- -------- -------- -------- ------ ------- (5,199) (2,385) (9,828) (5,069) (10,471) (1,835) (650) (1,116) (111) (153) (320) (166) (364) -- -- -- (506) (252) -- -- -- (223) (88) (87) -- -- (1,262) (1,670) (793) (27) (155) (50) -- -- (39) (56) (28) -- -- -- -- -- -- -- -- (4) (20) (4) ------- ------- -------- -------- -------- -------- ------ ------- (5,816) (2,790) (11,449) (6,961) (11,656) (2,089) (913) (1,257) ------- ------- -------- -------- -------- -------- ------ ------- 27,984 23,161 26,550 26,357 36,891 32,391 7,281 13,751 -- 56,128 -- -- -- -- -- -- 1,272 520 952 43 629 262 29 60 (42,103) (11,462) (51,050) (24,041) (34,155) (12,912) (3,890) (5,172) ------- ------- -------- -------- -------- -------- ------ ------- (12,847) 68,347 (23,548) 2,359 3,365 19,741 3,420 8,639 ------- ------- -------- -------- -------- -------- ------ ------- 416 956 1,441 653 2,174 -- -- -- 111 152 275 164 289 -- -- -- (1,560) (1,762) (2,155) (821) (2,503) -- -- -- ------- ------- -------- -------- -------- -------- ------ ------- (1,033) (654) (439) (4) (40) -- -- -- ------- ------- -------- -------- -------- -------- ------ ------- 2,396 5,920 -- -- -- 1,607 3,816 2,474 -- 3,174 -- -- -- -- -- -- 443 206 -- -- -- 153 77 64 (6,144) (1,637) -- -- -- (2,822) (514) (376) ------- ------- -------- -------- -------- -------- ------ ------- (3,305) 7,663 -- -- -- (1,062) 3,379 2,162 ------- ------- -------- -------- -------- -------- ------ ------- (17,185) 75,356 (23,987) 2,355 3,325 18,679 6,799 10,801 ------- ------- -------- -------- -------- -------- ------ ------- (21,644) 74,075 (38,772) (3,716) 6,583 15,469 5,929 11,429 ------- ------- -------- -------- -------- -------- ------ ------- 116,221 42,146 247,789 251,505 244,922 38,878 32,949 21,520 ------- ------- -------- -------- -------- -------- ------ ------- $ 94,577 $116,221 $209,017 $247,789 $251,505 $ 54,347 $38,878 $32,949 ======== ======== ======== ======== ======== ======== ======= =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 63 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS NET ASSET NET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS FROM TAX NET ASSET BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED RETURN OF VALUE END OF PERIOD INCOME ON INVESTMENTS INCOME CAPITAL GAINS CAPITAL OF PERIOD ---------- ----------- ---------------- ------------- ------------- ------------- --------- Florida Tax-Exempt Bond Fund Trust Shares 2000 $10.59 $ 0.44 $(0.49) $(0.44) $(0.04) $ -- $10.06 1999 10.72 0.42 (0.02) (0.42) (0.11) -- 10.59 1998 10.28 0.44 0.45 (0.44) (0.01) -- 10.72 1997 10.06 0.46 0.25 (0.46) (0.03) -- 10.28 1996 10.18 0.46 (0.07) (0.46) (0.05) -- 10.06 Investor Shares 2000 $10.60 $ 0.42 $(0.49) $(0.42) $(0.04) $ -- $10.07 1999 10.72 0.40 (0.01) (0.40) (0.11) -- 10.60 1998 10.29 0.42 0.44 (0.42) (0.01) -- 10.72 1997 10.07 0.44 0.25 (0.44) (0.03) -- 10.29 1996 10.18 0.44 (0.06) (0.44) (0.05) -- 10.07 Flex Shares 2000 $10.62 $ 0.36 $(0.49) $(0.36) $(0.04) $ -- $10.09 1999 10.74 0.35 (0.01) (0.35) (0.11) -- 10.62 1998 10.30 0.37 0.45 (0.37) (0.01) -- 10.74 1997 10.08 0.39 0.25 (0.39) (0.03) -- 10.30 1996(1) 10.19 0.39 (0.06) (0.39) (0.05) -- 10.08 Georgia Tax-Exempt Bond Fund Trust Shares 2000 $10.03 $ 0.40 $(0.49) $(0.40) $(0.04) $ -- $ 9.50 1999 10.11 0.39 (0.06) (0.39) (0.02) -- 10.03 1998 9.73 0.41 0.39 (0.41) (0.01) -- 10.11 1997 9.56 0.42 0.22 (0.42) (0.05) -- 9.73 1996 9.63 0.43 (0.05) (0.43) (0.02) -- 9.56 Investor Shares 2000 $10.05 $ 0.38 $(0.50) $(0.38) $(0.04) $ -- $ 9.51 1999 10.13 0.37 (0.06) (0.37) (0.02) -- 10.05 1998 9.74 0.39 0.40 (0.39) (0.01) -- 10.13 1997 9.58 0.40 0.21 (0.40) (0.05) -- 9.74 1996 9.65 0.41 (0.05) (0.41) (0.02) -- 9.58 Flex Shares 2000 $10.04 $ 0.33 $(0.49) $(0.33) $(0.04) $ -- $ 9.51 1999 10.12 0.32 (0.06) (0.32) (0.02) -- 10.04 1998 9.73 0.34 0.40 (0.34) (0.01) -- 10.12 1997 9.56 0.35 0.22 (0.35) (0.05) -- 9.73 1996(2) 9.72 0.36 (0.14) (0.36) (0.02) -- 9.56 High Income Fund (A) Flex Shares 2000(4) $ 7.98 $ 0.09 $(0.10) $(0.09) $ -- $ -- $ 7.88 For the years ended March 31: 2000 9.77 0.87 (1.85) (0.81) -- -- 7.98 1999 9.99 0.51 0.04 (0.57) (0.15) (0.05) 9.77 1998 9.73 0.34 0.44 (0.52) -- -- 9.99 1997 9.89 0.60 (0.16) (0.60) -- -- 9.73 1996 9.94 0.59 0.16 (0.59) (0.21) -- 9.89 Investment Grade Bond Fund Trust Shares 2000 $10.36 $ 0.61 $(0.78) $(0.61) $ -- $ -- $ 9.58 1999 10.65 0.56 (0.11) (0.56) (0.18) -- 10.36 1998 10.16 0.60 0.49 (0.60) -- -- 10.65 1997 10.07 0.60 0.09 (0.60) -- -- 10.16 1996 10.26 0.60 (0.19) (0.60) -- -- 10.07 Investor Shares 2000 $10.36 $ 0.57 $(0.78) $(0.57) $ -- $ -- $ 9.58 1999 10.65 0.52 (0.11) (0.52) (0.18) -- 10.36 1998 10.16 0.55 0.49 (0.55) -- -- 10.65 1997 10.06 0.56 0.10 (0.56) -- -- 10.16 1996 10.26 0.56 (0.20) (0.56) -- -- 10.06 Flex Shares 2000 $10.37 $ 0.52 $(0.78) $(0.52) $ -- $ -- $ 9.59 1999 10.66 0.47 (0.11) (0.47) (0.18) -- 10.37 1998 10.17 0.51 0.49 (0.51) -- -- 10.66 1997 10.07 0.51 0.10 (0.51) -- -- 10.17 1996 (3) 10.33 0.52 (0.26) (0.52) -- -- 10.07 * Annualized. + Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (1) Commenced operations on June 1, 1995. All ratios for the period have been annualized. (2) Commenced operations on June 6, 1995. All ratios for the period have been annualized. (3) Commenced operations on June 7, 1995. All ratios for the period have been annualized. (4) Commenced operations on April 1, 2000. All ratios for the period have been annualized.
64 ------------------------------------------------------------------------------------------------------------------------ RATIO OF RATIO OF NET INVESTMENT RATIO OF RATIO OF EXPENSES TO INCOME TO NET ASSETS EXPENSES TO NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO TOTAL END OF AVERAGE INCOME TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER RETURN(+) PERIOD(000 NET ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE ---------- ----------- ------------ ------------------ ------------------- ------------------- --------- (0.48)% $ 93,040 0.67% 4.25% 0.78% 4.14% 88% 3.72 118,609 0.67 3.90 0.77 3.80 72 8.77 93,939 0.66 4.16 0.80 4.02 69 7.22 50,487 0.65 4.48 0.80 4.33 135 3.87 30,790 0.65 4.49 0.88 4.26 63 (0.68)% $ 2,875 0.87% 4.05% 1.36% 3.56% 88% 3.62 3,799 0.87 3.71 1.31 3.27 72 8.46 3,381 0.86 3.98 1.34 3.50 69 7.00 3,226 0.85 4.28 1.31 3.82 135 3.76 4,025 0.85 4.28 1.36 3.77 63 (1.17)% $ 9,791 1.37% 3.54% 1.89% 3.02% 88% 3.13 14,762 1.37 3.21 1.88 2.70 72 8.04 8,160 1.36 3.45 2.01 2.80 69 6.48 3,000 1.35 3.78 2.28 2.85 135 3.27 2,692 1.35 3.79 2.54 2.60 63 (0.90)% $ 81,160 0.67% 4.13% 0.77% 4.03% 19% 3.33 87,452 0.67 3.87 0.78 3.76 12 8.37 62,363 0.66 4.09 0.81 3.94 7 6.79 39,732 0.65 4.31 0.81 4.15 15 3.89 22,950 0.65 4.36 0.89 4.12 60 (1.26)% $ 2,458 0.87% 3.93% 1.40% 3.40% 19% 3.13 3,676 0.87 3.67 1.25 3.29 12 8.26 3,975 0.86 3.89 1.30 3.45 7 6.47 3,511 0.85 4.10 1.33 3.62 15 3.69 3,418 0.85 4.17 1.41 3.61 60 (1.59)% $ 8,827 1.37% 3.43% 1.95% 2.85% 19% 2.63 13,358 1.37 3.19 1.89 2.67 12 7.74 8,264 1.36 3.39 2.02 2.73 7 6.06 4,662 1.35 3.60 2.07 2.88 15 2.25 4,207 1.35 3.66 2.35 2.66 60 (0.13)% $ 3,075 1.40%* 6.57%* 2.83%* 5.14%* --% (10.84) 2,032 1.73 8.94 2.95 7.72 24 5.64 7,230 1.91 5.09 2.22 4.78 95 8.18 24,413 1.87 5.27 1.87 5.27 130 3.91 32,506 1.65 5.49 1.70 5.44 123 7.67 36,891 1.70 5.87 1.75 5.82 138 (1.76)% $ 998,596 0.77% 6.05% 0.84% 5.98% 202% 4.25 1,149,068 0.77 5.25 0.85 5.17 221 10.92 793,488 0.76 5.67 0.86 5.57 109 6.99 633,646 0.75 5.89 0.85 5.79 298 4.02 599,514 0.75 5.81 0.87 5.69 184 (2.17)% $ 22,553 1.17% 5.60% 1.37% 5.40% 202% 3.86 34,913 1.17 4.87 1.36 4.68 221 10.49 33,269 1.14 5.29 1.38 5.05 109 6.66 33,165 1.15 5.48 1.41 5.22 298 3.50 36,155 1.15 5.40 1.44 5.11 184 (2.63)% $ 20,056 1.66% 5.14% 1.99% 4.81% 202% 3.35 26,020 1.66 4.40 2.00 4.06 221 9.99 13,111 1.65 4.76 2.11 4.30 109 6.16 5,763 1.64 5.00 2.20 4.44 298 2.50 4,621 1.64 4.84 2.49 3.99 184 (A) On March 27, 2000, the ESC Strategic Income Fund exchanged all of its asset and certain liabilities for shares of the High Income Fund. The ESC Strategic Income Fund is the accounting survivor in this transaction, and as a result, it basis of accounting for assets and liabilities and its operating results for th periods prior to March 27, 2000 have been carried forward in these financia highlights. Subsequent to the merger, the High Income Fund changed its fisca year end to May 31. Amounts designated as "--" are either $0 or round to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
65 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS NET ASSET NET REALIZED AND DISTRIBUTIONS VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED VALUE END OF PERIOD INCOME ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD ----------- ----------- ---------------- ------------- ------------- ---------- Investment Grade Tax-Exempt Bond Fund Trust Shares 2000 $11.10 $ 0.43 $(0.29) $(0.43) $(0.14) $10.67 1999 11.40 0.43 0.10 (0.43) (0.40) 11.10 1998 11.22 0.44 0.50 (0.44) (0.32) 11.40 1997 11.10 0.44 0.33 (0.44) (0.21) 11.22 1996 11.28 0.45 0.19 (0.45) (0.37) 11.10 Investor Shares 2000 $11.12 $ 0.39 $(0.30) $(0.39) $(0.14) $10.68 1999 11.41 0.38 0.11 (0.38) (0.40) 11.12 1998 11.24 0.39 0.49 (0.39) (0.32) 11.41 1997 11.12 0.40 0.33 (0.40) (0.21) 11.24 1996 11.30 0.41 0.19 (0.41) (0.37) 11.12 Flex Shares 2000 $11.10 $ 0.34 $(0.29) $(0.34) $(0.14) $10.67 1999 11.40 0.33 0.10 (0.33) (0.40) 11.10 1998 11.23 0.33 0.49 (0.33) (0.32) 11.40 1997 11.11 0.35 0.33 (0.35) (0.21) 11.23 1996(1) 11.30 0.37 0.18 (0.37) (0.37) 11.11 Limited-Term Federal Mortgage Securities Fund Trust Shares 2000 $ 9.94 $ 0.55 $(0.32) $(0.55) $ -- $ 9.62 1999 10.12 0.54 (0.06) (0.54) (0.12) 9.94 1998 10.02 0.58 0.11 (0.58) (0.01) 10.12 1997 9.99 0.58 0.04 (0.58) (0.01) 10.02 1996 10.11 0.62 (0.14) (0.60) -- 9.99 Investor Shares 2000 $ 9.93 $ 0.52 $(0.33) $(0.52) $ -- $ 9.60 1999 10.11 0.51 (0.06) (0.51) (0.12) 9.93 1998 10.00 0.56 0.12 (0.56) (0.01) 10.11 1997 9.97 0.56 0.04 (0.56) (0.01) 10.00 1996 10.11 0.60 (0.14) (0.60) -- 9.97 Flex Shares 2000 $ 9.94 $ 0.49 $(0.32) $(0.49) $ -- $ 9.62 1999 10.12 0.48 (0.06) (0.48) (0.12) 9.94 1998 10.02 0.52 0.11 (0.52) (0.01) 10.12 1997 9.99 0.52 0.04 (0.52) (0.01) 10.02 1996(2) 10.14 0.55 (0.15) (0.55) -- 9.99 Maryland Municipal Bond Fund (A) Trust Shares 2000 $10.06 $ 0.42 $(0.60) $(0.42) $ -- $ 9.46 1999(3) 10.22 0.20 (0.15) (0.20) (0.01) 10.06 For the years ended November 30: 1998 9.95 0.42 0.27 (0.42) -- 10.22 1997 9.76 0.43 0.19 (0.43) -- 9.95 1996(4) 10.00 0.31 (0.24) (0.31) -- 9.76 Flex Shares 2000 $10.08 $ 0.33 $(0.60) $(0.33) $ -- $ 9.48 1999 10.24 0.15 (0.15) (0.15) (0.01) 10.08 For the years ended November 30: 1998 9.96 0.33 0.28 (0.33) -- 10.24 1997 9.76 0.34 0.20 (0.34) -- 9.96 1996(5) 9.53 0.20 0.23 (0.20) -- 9.76 Short-Term Bond Fund Trust Shares 2000 $ 9.91 $ 0.53 $(0.25) $(0.53) $(0.01) $ 9.65 1999 10.05 0.51 (0.10) (0.52) (0.03) 9.91 1998 9.90 0.55 0.16 (0.55) (0.01) 10.05 1997 9.86 0.53 0.07 (0.53) (0.03) 9.90 1996 9.98 0.54 (0.10) (0.54) (0.02) 9.86 Investor Shares 2000 $ 9.93 $ 0.51 $(0.25) $(0.51) $(0.01) $ 9.67 1999 10.07 0.49 (0.10) (0.50) (0.03) 9.93 1998 9.91 0.53 0.17 (0.53) (0.01) 10.07 1997 9.88 0.51 0.06 (0.51) (0.03) 9.91 1996 10.01 0.52 (0.10) (0.53) (0.02) 9.88 Flex Shares 2000 $ 9.93 $ 0.48 $(0.25) $(0.48) $(0.01) $ 9.67 1999 10.07 0.47 (0.11) (0.47) (0.03) 9.93 1998 9.91 0.50 0.17 (0.50) (0.01) 10.07 1997 9.88 0.48 0.06 (0.48) (0.03) 9.91 1996(6) 10.02 0.47 (0.12) (0.47) (0.02) 9.88 +Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (1)Commenced operations on June 1, 1995. All ratios for the period have been annualized. (2)Commended operations on June 7, 1995. All ratios for the period have been annualized. (3)For the six month period ended May 31, 1999. All ratios for the period have been annualized. (4)Commenced operations on March 1, 1996. All ratios for the period have been annualized. (5)Commenced operations on April 25, 1996. All ratios for the period have been annualized.
66 ----------------------------------------------------------------------------------------------------------------------- RATIO OF RATIO OF NET INVESTMENT RATIO OF RATIO OF EXPENSES TO INCOME TO NET ASSETS EXPENSES TO NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO TOTAL END OF AVERAGE INCOME TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER RETURN(+) PERIOD(000 NET ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE ---------- ----------- ------------ ------------------ ------------------- ------------------- --------- 1.41% $ 117,384 0.77% 3.98% 0.83% 3.92% 226% 4.67 154,123 0.77 3.75 0.87 3.65 224 8.57 146,606 0.76 3.83 0.88 3.71 378 7.13 139,144 0.75 3.96 0.86 3.85 489 5.82 124,507 0.75 4.01 0.89 3.87 514 0.90% $ 19,443 1.17% 3.59% 1.33% 3.43% 226% 4.35 25,195 1.17 3.36 1.32 3.21 224 8.05 28,159 1.16 3.43 1.43 3.16 378 6.69 31,857 1.15 3.56 1.38 3.33 489 5.40 37,427 1.15 3.61 1.42 3.34 514 0.52% $ 14,678 1.65% 3.11% 1.95% 2.81% 226% 3.78 16,518 1.65 2.86 2.03 2.48 224 7.50 8,399 1.64 2.95 2.10 2.49 378 6.19 4,681 1.63 3.08 2.15 2.56 489 4.91 5,536 1.63 3.12 2.25 2.50 514 2.33% $ 125,355 0.67% 5.60% 0.79% 5.48% 384% 4.75 135,256 0.67 5.28 0.77 5.18 379 7.12 137,488 0.66 5.75 0.77 5.64 163 6.43 123,903 0.65 5.81 0.78 5.68 133 4.84 73,370 0.65 6.04 0.84 5.85 83 1.93% $ 1,194 0.92% 5.31% 1.09% 5.14% 384% 4.47 2,214 0.92 5.03 1.52 4.43 379 6.95 2,705 0.91 5.50 1.51 4.90 163 6.17 2,426 0.90 5.55 1.48 4.97 133 4.59 2,512 0.90 5.75 2.25 4.40 83 1.71% $ 1,706 1.27% 4.97% 2.38% 3.86% 384% 4.14 2,119 1.27 4.69 2.42 3.54 379 6.49 1,543 1.26 5.16 2.72 3.70 163 5.80 1,409 1.25 5.20 2.66 3.79 133 4.10 1,349 1.25 5.38 3.59 3.04 83 (1.78)% $ 26,176 0.68% 4.24% 0.80% 4.12% 14% 0.48 29,658 0.70 3.83 1.37 3.16 19 7.03 19,115 0.62 4.11 1.15 3.58 12 6.50 11,461 0.63 4.38 1.16 3.85 5 1.07 5,808 0.71 4.30 1.36 3.65 9 (2.66)% $ 6,212 1.59% 3.34% 1.95% 2.98% 14% 0.05 7,723 1.59 2.94 1.98 2.55 19 6.17 3,246 1.57 3.16 1.96 2.77 12 5.64 561 1.54 3.43 2.00 2.97 5 7.67 113 1.55 3.42 2.20 2.77 9 2.87% $ 180,402 0.67% 5.40% 0.76% 5.31% 70% 4.06 209,904 0.67 5.12 0.77 5.02 108 7.31 120,422 0.66 5.47 0.79 5.34 87 6.30 89,701 0.65 5.37 0.78 5.24 118 4.45 91,156 0.65 5.39 0.81 5.23 163 2.67% $ 1,446 0.87% 5.20% 1.75% 4.32% 70% 3.88 1,825 0.87 4.92 1.59 4.20 108 7.19 1,949 0.86 5.27 1.71 4.42 87 5.97 2,182 0.85 5.16 1.58 4.43 118 4.23 2,700 0.85 5.20 1.72 4.33 163 2.31% $ 2,065 1.22% 4.85% 2.41% 3.66% 70% 3.50 2,341 1.22 4.55 2.33 3.44 108 6.84 2,110 1.21 4.93 2.85 3.29 87 5.62 1,073 1.20 4.82 3.02 3.00 118 3.73 966 1.20 4.77 4.06 1.91 163 (6) Commenced operations on June 20, 1995. All ratios for the period have been annualized. (A) On May 24, 1999, the CrestFund Maryland Municipal Bond Fund exchanged all of its assets and certain liabilities for shares of the Maryland Municipal Bond Fund. The CrestFund Maryland Municipal Bond Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. Amounts designated as "--" are either $0 or have been rounded to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 67 FINANCIAL HIGHLIGHTS ----------------------------------------------------------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE INDICATED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS NET ASSET NET REALIZED AND DISTRIBUTIONS VALUE NET UNREALIZED GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) INVESTMENT FROM REALIZED VALUE END OF PERIOD INCOME ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD ------------- ----------- --------------- ------------- -------------- ---------- Short-Term U.S. Treasury Securities Fund Trust Shares 2000 $ 9.95 $ 0.46 $(0.10) $(0.46) $ -- $ 9.85 1999 9.97 0.47 (0.02) (0.47) -- 9.95 1998 9.88 0.51 0.10 (0.52) -- 9.97 1997 9.84 0.51 0.04 (0.51) -- 9.88 1996 9.93 0.55 (0.09) (0.55) -- 9.84 Investor Shares 2000 $ 9.95 $ 0.45 $(0.10) $(0.45) $ -- $ 9.85 1999 9.96 0.46 (0.01) (0.46) -- 9.95 1998 9.88 0.49 0.09 (0.50) -- 9.96 1997 9.84 0.50 0.04 (0.50) -- 9.88 1996 9.94 0.54 (0.10) (0.54) -- 9.84 Flex Shares 2000 $ 9.93 $ 0.42 $(0.10) $(0.42) $ -- $ 9.83 1999 9.94 0.44 (0.02) (0.43) -- 9.93 1998 9.85 0.47 0.10 (0.48) -- 9.94 1997 9.82 0.47 0.03 (0.47) -- 9.85 1996(1) 9.96 0.48 (0.14) (0.48) -- 9.82 U.S. Government Securities Fund Trust Shares 2000 $10.28 $ 0.58 $(0.42) $(0.58) $ -- $ 9.86 1999 10.46 0.59 (0.18) (0.59) -- 10.28 1998 10.02 0.61 0.44 (0.61) -- 10.46 1997 9.91 0.62 0.11 (0.62) -- 10.02 1996 10.27 0.62 (0.33) (0.62) (0.03) 9.91 Investor Shares 2000 $10.28 $ 0.54 $(0.42) $(0.54) $ -- $ 9.86 1999 10.45 0.54 (0.17) (0.54) -- 10.28 1998 10.02 0.57 0.43 (0.57) -- 10.45 1997 9.90 0.58 0.12 (0.58) -- 10.02 1996 10.26 0.59 (0.33) (0.59) (0.03) 9.90 Flex Shares 2000 $10.28 $ 0.49 $(0.42) $(0.49) $ -- $ 9.86 1999 10.46 0.49 (0.18) (0.49) -- 10.28 1998 10.02 0.52 0.44 (0.52) -- 10.46 1997 9.91 0.53 0.11 (0.53) -- 10.02 1996(2) 10.31 0.52 (0.37) (0.52) (0.03) 9.91 Virginia Intermediate Municipal Bond Fund (A) Trust Shares 2000 $10.20 $ 0.43 $(0.57) $(0.43) $(0.05) $ 9.58 1999(3) 10.44 0.21 (0.17) (0.21) (0.07) 10.20 For years ended November 30: 1998 10.31 0.45 0.17 (0.45) (0.04) 10.44 1997 10.22 0.46 0.09 (0.46) -- 10.31 1996 10.24 0.42 (0.02) (0.42) -- 10.22 1995 9.21 0.43 1.03 (0.43) -- 10.24 Investor Shares 2000 $10.20 $ 0.42 $(0.56) $(0.42) $(0.05) $ 9.59 1999(3) 10.45 0.22 (0.18) (0.22) (0.07) 10.20 For years ended November 30: 1998 10.31 0.46 0.17 (0.45) (0.04) 10.45 1997 10.21 0.47 0.09 (0.46) -- 10.31 1996 10.23 0.42 (0.02) (0.42) -- 10.21 1995 9.20 0.43 1.03 (0.43) -- 10.23 Virginia Municipal Bond Fund (A) Trust Shares 2000 $10.43 $ 0.45 $(0.78) $(0.45) $(0.01) $ 9.64 1999(3) 10.68 0.22 (0.19) (0.22) (0.06) 10.43 For years ended November 30: 1998 10.44 0.47 0.27 (0.47) (0.03) 10.68 1997 10.28 0.48 0.17 (0.48) (0.01) 10.44 1996 10.40 0.47 (0.12) (0.47) -- 10.28 1995(4) 10.00 0.31 0.44 (0.31) (0.04) 10.40 Flex Shares 2000 $10.48 $ 0.36 $(0.79) $(0.36) $(0.01) $ 9.68 1999(3) 10.73 0.17 (0.18) (0.18) (0.06) 10.48 For years ended November 30: 1998 10.48 0.37 0.28 (0.37) (0.03) 10.73 1997 10.31 0.39 0.18 (0.39) (0.01) 10.48 1996 10.43 0.38 (0.12) (0.38) -- 10.31 1995(5) 10.06 0.24 0.41 (0.24) (0.04) 10.43 + Returns are for the period indicated and have not been annualized. Total return figures do not reflect applicable sales loads. (1) Commenced operations on June 22, 1995. All ratios for the period have been annualized. (2) Commenced operations on June 7, 1995. All ratios for the period have been annualized. (3) For the six month period ended May 31, 1999. All ratios for the period have been annualized. (4) Commenced operations on April 5, 1995. All ratios for the period have been annualized. (5) Commenced operations on April 17, 1995. All ratios for the period have been annualized. 68 ----------------------------------------------------------------------------------------------------------------------------------- RATIO OF RATIO OF NET INVESTMENT RATIO OF RATIO OF EXPENSES TO INCOME TO NET ASSETS EXPENSES TO NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO TOTAL END OF AVERAGE INCOME TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER RETURN(+) PERIOD(000 NET ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE ---------- ---------- ----------- ------------------ --------------------- ------------------- ---------- 3.75% $ 72,570 0.67% 4.70% 0.79% 4.58% 50% 4.59 56,027 0.67 4.69 0.78 4.58 57 6.30 46,920 0.66 5.19 0.84 5.01 39 5.76 21,988 0.65 5.23 0.92 4.96 93 4.73 10,149 0.65 5.56 1.00 5.21 94 3.58%$ 2,066 0.82% 4.50% 1.44% 3.88% 50% 4.54 2,799 0.82 4.54 1.34 4.02 57 6.04 3,277 0.81 5.07 1.33 4.55 39 5.59 3,921 0.80 5.05 1.35 4.50 93 4.52 4,192 0.80 5.43 1.32 4.91 94 3.34%$ 5,391 1.07% 4.26% 2.04% 3.29% 50% 4.32 4,931 1.07 4.22 2.25 3.04 57 5.90 1,413 1.06 4.81 2.87 3.00 39 5.19 1,091 1.05 4.75 2.51 3.29 93 3.72 2,423 1.05 5.03 2.97 3.11 94 1.63%$ 85,420 0.77% 5.77% 0.84% 5.70% 29% 3.90 102,167 0.77 5.58 0.88 5.47 19 10.76 34,899 0.76 5.93 0.92 5.77 14 7.54 19,471 0.75 6.19 1.02 5.92 21 2.77 10,277 0.75 6.05 1.25 5.55 83 1.19%$ 1,407 1.17% 5.34% 2.14% 4.37% 29% 3.56 2,534 1.17 5.17 1.60 4.74 19 10.23 3,225 1.16 5.53 1.76 4.93 14 7.21 2,243 1.15 5.76 1.79 5.12 21 2.47 2,396 1.15 5.68 2.50 4.33 83 0.70%$ 7,750 1.68% 4.85% 2.28% 4.25% 29% 2.99 11,520 1.68 4.66 2.08 4.26 19 9.78 4,022 1.67 5.02 2.32 4.37 14 6.57 2,801 1.66 5.26 2.42 4.50 21 1.42 2,826 1.66 5.18 2.86 3.98 83 (1.31)%$202,209 0.76% 4.35% 0.76% 4.35% 18% 0.42 240,083 0.84 4.12 1.18 3.78 19 6.10 243,606 0.79 4.33 0.97 4.15 24 5.55 237,096 0.78 4.57 0.93 4.42 30 4.01 243,137 0.78 4.35 0.93 4.20 25 16.09 43,373 0.72 4.34 0.94 4.12 28 (1.24)%$ 6,808 0.79% 4.33% 0.94% 4.18% 18% 0.35 7,706 0.79 4.17 0.93 4.03 19 6.19 7,899 0.79 4.33 0.94 4.18 24 5.65 7,826 0.79 4.56 0.94 4.41 30 4.01 8,185 0.79 4.12 0.94 3.97 25 16.10 8,649 0.73 4.33 0.95 4.11 28 (3.18)%$ 48,980 0.74% 4.53% 0.79% 4.48% 19% 0.27 31,939 0.76 4.20 1.30 3.66 7 7.19 29,252 0.69 4.41 1.10 4.00 28 6.46 20,044 0.69 4.65 1.09 4.25 39 3.48 15,911 0.71 4.61 1.11 4.21 24 7.67 6,247 0.71 4.61 1.11 4.21 35 (4.13)%$ 5,367 1.65% 3.61% 2.08% 3.18% 19% (0.16) 6,939 1.65 3.32 1.91 3.06 7 6.24 3,697 1.64 3.46 1.92 3.18 28 5.58 1,476 1.60 3.73 2.00 3.33 39 2.58 787 1.57 3.73 1.97 3.33 24 6.51 628 1.57 3.76 1.97 3.36 35 (A) On May 24, 1999, the CrestFund Virginia Intermediate Municipal Bond and the CrestFund Virginia Municipal Bond Funds exchanged all of their assets and certain liabilities for shares of the Virginia Intermediate Municipal Bond and the Virginia Municipal Bond Funds, respectively. The CrestFund Virginia Intermediate Municipal Bond and the CrestFund Virginia Municipal Bond Funds are the accounting survivors in this transaction, and as a result, their basis of accounting for assets and liabilities and their operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights. Amounts designated as "--" are either $0 or have been rounded to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 69 NOTES TO FINANCIAL STATEMENTS ------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 1. Organization: The STI Classic Funds (the "Trust") was organized as a Massachusetts business trust under a Declaration of Trust dated January 15, 1992. The Trust is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company with thirty-five funds as of May 31, 2000: the Balanced Fund, the Capital Appreciation Fund (formerly Capital Growth Fund), the Core Equity Fund, the E-Commerce Opportunity Fund, the Growth and Income Fund, the International Equity Fund, the International Equity Index Fund, the Life Vision Moderate Growth Fund (formerly Life Vision Balanced Portfolio), the Life Vision Growth and Income Fund (formerly Life Vision Growth and Income Portfolio), the Life Vision Aggressive Growth Fund (formerly Life Vision Maximum Growth Portfolio), the Mid-Cap Equity Fund, the Small Cap Value Equity Fund, the Small Cap Growth Stock Fund, the Tax Sensitive Growth Stock Fund, the Value Income Stock Fund, (collectively the "Equity Funds"), the Florida Tax-Exempt Bond Fund, the Georgia Tax-Exempt Bond Fund, the High Income Fund, the Investment Grade Bond Fund, the Investment Grade Tax-Exempt Bond Fund, the Limited-Term Federal Mortgage Securities Fund, the Maryland Municipal Bond Fund, the Short-Term Bond Fund, the Short-Term U.S. Treasury Securities Fund, the U.S. Government Securities Fund, the Virginia Intermediate Municipal Bond Fund, and the Virginia Municipal Bond Fund, (collectively the "Fixed Income Funds" or the "Funds"), the Prime Quality Money Market Fund, the Tax-Exempt Money Market Fund, the Tax-Free Money Market Fund, the U.S. Government Securities Money Market Fund, the U.S. Treasury Money Market Fund (collectively the "Retail Money Market Funds"), the Classic Institutional Cash Management Money Market Fund, the Classic Institutional U.S. Government Securities Money Market Fund and the Classic Institutional U.S. Treasury Securities Money Market Fund, (collectively the "Institutional Money Market Funds"). The assets of each Fund are segregated, and a shareholder's interest is limited to the fund in which shares are held. Each Fund's prospectus provides a description of the Fund's investment objectives, policies and strategies. The financial statements presented herein are those of the Fixed Income Funds. The financial statements of the Equity Funds, the Retail Money Market Funds and the Institutional Money Market Funds are not presented herein, but are presented separately. During February 1999, the Board of Trustees of the STI Classic Funds Inc. and Board of Directors of the CrestFunds Inc. ("CrestFunds") approved an Agreement and Plan of Reorganization (the "Reorganization Agreement") providing for the transfer of all assets and certain stated liabilities of the CrestFunds in exchange for the issuance of shares in the Funds in a tax-free reorganization (see Note 9). On February 15, 2000 and December 9, 1999, respectively, theBoard ofTrustees of the STIClassic Funds Inc. and Board of Directors of the ESCStrategic Funds Inc. approved an Agreement and Plan of Reorganization (the "Reorganization Agreement") providing for the transfer of all assets and liabilities of the ESCStrategic Income Fund in exchange for the issuance of shares in the STIClassic High Income Fund in a tax-free reorganization that took place at the close of business on March 27, 2000. The STI Classic High Income Fund had not commenced operations prior to this merger. Subsequent to March, 31, 2000, the High Income Fund's fiscal year end was changed to May 31, in order to be consistent with the year end of each of the other STI Classic Funds. 2. Significant Accounting Policies: The following is a summary of significant accounting policies followed by the Trust: BASIS OF PRESENTATION OF STATEMENTS -- As more fully described in Note 9, the STI Classic Funds acquired certain CrestFunds in a tax-free business combination. While each Fund now exists as a STI Classic Fund, three of the surviving funds for accounting purposes are CrestFunds. In accordance with generally accepted accounting principles, the financial statements presented herein represent those of accounting survivors. Accordingly, the Statements of Changes in Net Assets and Financial Highlights presented for periods prior to and ending on May 31, 1999 reflect activity beginning on the first day of the accounting survivor's fiscal year. As more fully described above, the STI Classic High Income Fund acquired the ESCStrategic Income Fund in a tax-free business combination. While this Fund now exists as a STIClassic Fund, the surviving fund for accounting purposes is the ESCStrategic Income Fund. In accordance with generally accepted accounting principles, the financial statements presented herein represent those of the accounting survivor. Accordingly, the Statements of Changes in Net Assets and Financial Highlights presented for the periods prior to and ending on May 31, 2000 reflect activity beginning on the first day of the accounting survivor's fiscal year. SECURITY VALUATION -- Investment securities held by the Funds that are listed on a securities exchange for which market quotations are available are valued at the last quoted sales price each business day. If there is no such reported sale, these securities and unlisted securities for which market quotations are readily available are valued at the most recently quoted bid price. Debt obligations with sixty days 70 ------------------------------------------------------------------------------- or less remaining until maturity may be valued at their amortized cost. Securities for which current market quotations are not readily available are valued at their fair value as determined in good faith by, or in accordance with procedures adopted by, the Board of Trustees. FEDERAL INCOME TAXES -- It is each Fund's intention to qualify as a regulated investment company for Federal income tax purposes and distribute all of its taxable income and net capital gains. Accordingly, no provisions for Federal income taxes are required. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are accounted for on the date the security is purchased or sold (trade date). Interest income is recognized on an accrual basis. Costs used in determining net realized gains and losses on the sales of investment securities are those of the specific securities sold adjusted for the accretion and amortization of purchase discounts and premiums during the respective holding period. Purchase discounts and premiums on securities held by the Funds are accreted and amortized to maturity using the scientific interest method, which approximates the effective interest method. REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase agreements are held by the custodian bank until the respective agreements mature. Provisions of the repurchase agreements ensure that the market value of the collateral, including accrued interest thereon, is sufficient in the event of default of the counterparty. If the counterparty defaults and the value of the collateral declines or if the counterparty enters into an insolvency proceeding, realization of the collateral by the funds may be delayed or limited. NET ASSET VALUE PER SHARE -- The net asset value per share of each fund is calculated each business day, by dividing the total value of each fund's assets, less liabilities, by the number of shares outstanding. The maximum offering price per share for Investor shares of the Florida Tax-Exempt Bond, the Georgia Tax-Exempt Bond, the Investment Grade Bond, the Investment Grade Tax-Exempt Bond, the U.S. Government Securities, and the Virginia Intermediate Municipal Bond Funds is equal to the net asset value per share plus a sales load of 3.75%. The maximum offering price per share for Investor shares of the Short-Term U.S. Treasury Securities Fund is equal to the net asset value per share plus a sales load of 1.00%. The maximum offering price per share for Investor shares of the Short-Term Bond Fund is equal to the net asset value per share plus a sales load of 2.00%. The maximum offering price per share for Investor shares of the Limited-Term Federal Mortgage Securities Fund is equal to the net asset value per share plus a sales load of 2.50%. Flex Shares of the Funds may be purchased at their net asset value. Shares redeemed within the first year after purchase will be subject to a contingent deferred sales charge ("CDSC") equal to 2.00% for either the net asset value of the shares at the time of purchase or the net asset value of the shares next calculated after the Fund receives the sale request, whichever is less. The CDSC will not apply to shares redeemed after such time. TBA PURCHASE COMMITMENTS -- The Funds may enter into "TBA" (To Be Announced) purchase commitments to purchase securities for a fixed price at a future date beyond customary settlement time. TBA purchase commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to settlement date, which risk is in addition to the risk of decline in the value of the funds' other assets. Unsettled TBA purchase commitments are valued at the current market value of the underlying securities, generally according to the procedures described under "Security Valuation." OTHER -- Expenses that are directly related to a specific fund are charged to that Fund. Class specific expenses are borne by that class. Other operating expenses of the Trust are pro-rated to the Funds on the basis of relative net assets. Fund expenses are pro-rated to the respective classes on the basis of relative net assets. DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income for each of the Fixed Income Funds are declared daily and paid monthly. Any net realized capital gains on sales of securities are distributed to shareholders at least annually. RECLASSIFICATION OF COMPONENTS OF NET ASSETS -- The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from generally accepted accounting principles.As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These book/tax differences may be temporary or permanent in nature. To the extent these differences are permanent, they are charged or credited to paid-in-capital or accumulated net realized gain, as appropriate, in the period that the differences arise. Accordingly, the following permanent differences, primarily attributable to the classification of short-term capital 71 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 gains and ordinary income for tax purposes related to the other funds, has been reclassified to/from the following accounts: ACCUMULATED UNDISTRIBUTED PAID-IN REALIZED NET INVESTMENT CAPITAL GAIN (LOSS) INCOME (LOSS) (000) (000) (000) ------- ----------- --------------- Georgia Tax-Exempt Bond Fund $-- $ 1 $(1) Investment Grade Tax-Exempt Bond Fund 8 (6) (2) Maryland Municipal Bond Fund (3) -- 3 Short-Term Bond Fund -- 2 (2) Short-Term U.S. Treasury Securities Fund -- (32) 32 These reclassifications have no effect on net assets or net asset values per share. USE OF ESTIMATES -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates. 3. Transactions with Affiliates: Certain officers of the Trust are also officers of SEI Investments Mutual Funds Services (the "Administrator") and/or SEI Investments Distribution Co. (the "Distributor"). Such officers are paid no fees by the Trust for serving as officers of the Trust. The Fund has entered into an agreement with the Distributor to manage the investments of repurchase agreements for the Funds. For its services the Distributor received $1,846,277 for the year ended May 31, 2000. 4. Administration, Transfer Agency Servicing and Distribution Agreements: The Trust and the Administrator are parties to an Administration Agreement dated May 29, 1995, as amended November 19, 1997 and March 1, 1999, under which the Administrator provides administrative services for an annual fee (expressed as a percentage of the combined average daily net assets of the Trust and STI Classic Variable Trust) of: .12% up to $1 billion, .09% on the next $4 billion, .07% on the next $3 billion, .065% on the next $2 billion and .06% for over $10 billion. Prior to May 1999, administrative and accounting services were provided to the CrestFunds by SEI Investments Mutual Funds Services who was entitled to receive a fee at an annual rate of .15% of the average daily net assets of the CrestFunds. The Administrator had voluntarily agreed to waive a portion of its fee for Government Bond Fund and Virginia Municipal Bond Fund in order to limit operating expenses. Prior to March 27, 2000, administrative and accounting services were provided to the ESC Strategic Income Fund by BISYS Fund Services Limited Partnership who was entitled to receive a fee at an annual rate of .15% of the average daily net assets of the ESC Strategic Income Fund. The Trust and Federated Services Company are parties to a Transfer Agency servicing agreement dated May 14, 1994 under which Federated Services Company provides transfer agency services to the Trust. Prior to March 27, 2000, transfer and dividend disbursing agent services were provided to the ESC Strategic Income Fund by BISYS Fund Services Inc. for which it received a fee of $15 per account per year subject to a minimum fee of $15,000. The Trust and the Distributor are parties to a Distribution Agreement dated May 29, 1995 regarding the Flex Shares and a Distribution Agreement dated November 21, 1995 with respect to the Trust and Investor shares. The Distributor will receive no fees for its distribution services under this agreement for the Trust Shares of any fund. With respect to the Investor Shares and Flex Shares, the Distributor receives amounts, pursuant to a Distribution Plan and (in the case of Flex Shares) a Distribution and Service Plan, as outlined in the table in footnote 5 under the column titled "Distribution Fee". Prior to May 1999, the Distributor, a wholly owned subsidiary of SEI Investments Co., served as distributor of each of the CrestFunds shares pursuant to an agreement with the CrestFunds. The Trust Class and Investors Class A shares of the CrestFunds had a separate distribution plan (the 12b-1 Plan) pursuant to Rule 12b-1 under the 1940 Act. As provided in the 12b-1 Plan, the Trust Class and Investors Class A shares of the CrestFunds paid the Distributor as compensation for its services .15% of the aggregate average daily net assets of such classes of the CrestFunds. The Distributor had voluntarily agreed to waive any fees payable pursuant to the 12b-1 Plan. Additionally, the Investors Class B Shares of the CrestFunds had a distribution plan (the B Shares Plan) pursuant to Rule 12b-1 under the 1940 Act. As provided in the B Shares Plan, the Investors Class B Shares of the CrestFunds paid the Distributor as compensation for its services .75% of the aggregate average daily net assets of such class of the CrestFunds. In addition, pursuant to the B Shares Plan, the Distributor was compensated at an annual rate of .25% of the B shares' average net assets for providing ongoing shareholder support services to investors in B shares. The Distributor had agreed to waive the portion of its fees pursuant to the B Shares Plan in order to limit distribution fees to .95% for each of the CrestFunds. 72 ------------------------------------------------------------------------------- Prior to May 1999, the CrestFunds had adopted a shareholder service plan (the "Plan") for Trust Class Shares of the Limited Term Bond Fund, Intermediate Bond Fund, Government Bond Fund, Maryland Municipal Bond Fund, Virginia Intermediate Municipal Bond Fund and Virginia Municipal Bond Fund. Under the Plan, the CrestFunds paid the Distributor a negotiated fee at a rate of up to .25% annually of the average daily net assets of such Fund attributable to the shares that are subject to the arrangement in return for provision of a broad range of shareholder and administrative services. The Distributor had agreed to waive a portion of its shareholder service plan for trust class shares in order to limit shareholder service fees to .05%. Prior to March 27, 2000, BISYS Fund Services served as distributor pursuant to an agreement with the ESC Strategic Income Fund. 5. Investment Advisory and Custodian Agreements: The Trust, Trusco Capital Management ("Trusco") and the SunTrust Bank, Atlanta have entered into advisory agreements dated May 29, 1992, June 15, 1993, and December 20, 1993 respectively. Under terms of the respective agreements, the Funds are charged the following annual fees based upon average daily net assets: MAXIMUM FLEX SHARE MAXIMUM DISTRI- MAXIMUM TRUST INVESTOR INVESTOR BUTION FLEX ANNUAL SHARE SHARE SHARE AND SHARE ADVISORY MAXIMUM DISTRI- MAXIMUM SERVICE MAXIMUM FEE EXPENSE BUTION FEE EXPENSE FEE EXPENSE ------ ------ ------ ------- ----------- -------- Trusco: Florida Tax-Exempt Bond Fund .65% .67% .18% .87% 1.00% 1.37% Georgia Tax-Exempt Bond Fund .65% .67% .18% .87% 1.00% 1.37% HighIncome Fund .80% -- -- -- 1.00% 1.40% Investment Grade Bond Fund .74% .77% .43% 1.17% 1.00% 1.66% Investment Grade Tax-Exempt Bond Fund .74% .77% .43% 1.17% 1.00% 1.65% Limited-Term Federal Mortgage Securities Fund .65% .67% .23% .92% 1.00% 1.27% Maryland Municipal Bond Fund .65% .68% -- -- 1.00% 1.59% Short-Term Bond Fund .65% .67% .23% .87% 1.00% 1.22% Short-Term U.S. Treasury Securities Fund .65% .67% .18% .82% 1.00% 1.07% U.S. Government Securities Fund .74% .77% .38% 1.17% 1.00% 1.68% Virginia Intermediate Municipal Bond Fund .65% .76% .15% .79% -- -- Virginia Municipal Bond Fund .65% .74% -- -- 1.00% 1.65% The investment advisers and the Distributor have voluntarily agreed to waive all or a portion of their fees (and to reimburse funds' expenses) in order to limit operating expenses to an amount as outlined in the table above. Fee waivers and expense reimbursements are voluntary and may be terminated at any time. Prior to May 1999, Crestar Asset Management Company ("CAMCO") provided Investment Advisory services to the CrestFunds. CAMCO was paid for advisory services at an annual rate of .50% of average daily net assets for the Limited Term Bond Fund and Virginia Intermediate Municipal Bond Fund, and .60% of average daily net assets for the Intermediate Bond Fund, Government Bond Fund, Maryland Municipal Bond Fund and Virginia Municipal Bond Fund. Prior to March 27, 2000 SunTrust Equitable Securities Corporation ("STES") provided investment advisory services to the ESC Strategic Income Fund. STES was paid for advisory services at an annual rate of 1.00% of average daily net assets of the Fund, and agreed to waive and reimburse their fee in order to limit operating expenses to a maximum of 2.00% of average daily net assets of the Class A shares, and 2.50% of the Class D shares. SunTrust Bank, Atlanta, an affiliate of the investment adviser, acts as custodian for all of the funds. Fees of the Custodian are paid on the basis of net assets of the Funds. The Custodian plays no role in determining the investment policies of the Trust or which securities are to be purchased or sold in the funds. 73 NOTES TO FINANCIAL STATEMENTS (continued) ----------------------------------------------------------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 6. Capital Share Transactions: Capital Share Transactions for the funds were as follows: (000) FLORIDA TAX-EXEMPT GEORGIA TAX-EXEMPT BOND FUND BOND FUND HIGH INCOME FUND -------------------- ------------------------ ------------------------------- 06/01/99- 06/01/98- 06/01/99- 06/01/98- 04/01/00- 04/01/99 04/01/98- 05/31/00 05/31/99 05/31/00 05/31/99 05/31/00 03/31/00 03/31/99 -------- ---------- ----------- --------- --------- -------- --------- Trust Shares: Shares Issued 2,797 4,807 2,757 3,562 -- -- -- Shares Issued in Connection with Crestar Merger -- -- -- -- -- -- Shares Issued in Lieu of Cash Distributions 87 154 140 116 -- -- -- Shares Redeemed (4,835) (2,530) (3,069) (1,128) -- -- -- ------ ----- ----- ----- --- ---- ------ Net Trust Share Transactions (1,951) 2,431 (172) 2,550 -- -- -- ------ ----- ----- ----- --- ---- ------ Investor Shares: Shares Issued 16 102 58 117 -- -- -- Shares Issued in Connection with Crestar Merger -- -- -- -- -- -- Shares Issued in Lieu of Cash Distributions 12 13 11 12 -- -- -- Shares Redeemed (101) (72) (177) (155) -- -- -- ------ ----- ----- ----- --- ---- ------ Net Investor Share Transactions (73) 43 (108) (26) -- -- -- ------ ----- ----- ----- --- ---- ------ Flex Shares: Shares Issued 287 1,102 196 586 147 99 94 Shares Issued in Connection with ESC Merger -- -- -- -- -- 44 -- Shares Issued in Lieu of Cash Distributions 42 40 42 30 2 50 90 Shares Redeemed (748) (512) (641) (102) (14) (678) (1,888) ------ ----- ----- ----- --- ---- ------ Net Flex Share Transactions (419) 630 (403) 514 135 (485) (1,704) ------ ----- ----- ----- --- ---- ------ Class D: Shares Issued -- -- -- -- -- 5 16 Shares Issued in Connection with Merger -- -- -- -- -- (44) -- Shares Issued in Lieu of Cash Distributions -- -- -- -- -- 4 4 Shares Redeemed -- -- -- -- -- (21) (46) ------ ----- ----- ----- --- ---- ------ Net Class D Transactions -- -- -- -- -- (56) (26) ------ ----- ----- ----- --- ---- ------ Net Change in Capital Shares (2,443) 3,104 (683) 3,038 135 (541) (1,730) ====== ===== ==== ===== === ==== ====== SHORT-TERM SHORT-TERM U.S. TREASURY BOND FUND SECURITIES FUND ---------------------------- ------------------------- 06/01/99- 06/01/98- 06/01/99- 06/01/98- 05/31/00 05/31/99 05/31/00 05/31/99 ---------- --------- --------- --------- Trust Shares: Shares Issued 5,302 5,746 3,158 1,750 Shares Issued in Connection with Crestar Merger -- 7,308 -- -- Shares Issued in Lieu of Cash Distributions 478 357 145 95 Shares Redeemed (8,249) (4,219) (1,567) (921) ------ ------ ------ ----- Net Trust Share Transactions (2,469) 9,192 1,736 924 ------ ------ ------ ----- Investor Shares: Shares Issued 41 58 75 138 Shares Issued in Lieu of Cash Distributions 9 9 13 13 Shares Redeemed (84) (77) (159) (198) ------ ------ ------ ----- Net Investor Share Transactions (34) (10) (71) (47) ------ ------ ------ ----- Flex Shares: Shares Issued 119 251 341 531 Shares Issued in Connection with Crestar Merger -- -- -- -- Shares Issued in Lieu of Cash Distributions 11 10 22 9 Shares Redeemed (152) (235) (311) (185) ------ ------ ------ ----- Net Flex Share Transactions (22) 26 52 355 ------ ------ ------ ----- Net Change in Capital Shares (2,525) 9,208 1,717 1,232 ====== ====== ====== =====
74 ----------------------------------------------------------------------------------------------------------------------------------- INVESTMENT GRADE INVESTMENT GRADE TAX- LIMITED-TERM FEDERAL MARYLAND MUNICIPAL BOND FUND EXEMPT BOND FUND MORTGAGE SECURITIES FUND BOND FUND -------------------- ----------------------- ------------------------ ------------------------------ 06/01/99- 06/01/98- 06/01/99- 06/01/98- 06/01/99- 06/01/98- 06/01/99- 12/01/98- 12/01/97 05/31/00 05/31/99 05/31/00 05/31/99 05/31/00 05/31/99 05/31/00 05/31/99 11/30/98 --------- --------- --------- ---------- --------- --------- --------- --------- -------- 25,331 28,937 2,710 5,150 5,423 5,379 1,921 1,556 1,292 -- 30,233 -- -- -- -- -- -- -- 3,675 3,979 254 479 492 620 21 2 1 (35,746) (26,711) (5,846) (4,614) (6,485) (5,979) (2,122) (479) (575 ------- ------- ------ ------ ------ ------ ------ ------ ------ (6,740) 36,438 (2,882) 1,015 (570) 20 (180) 1,079 718 ------- ------- ------ ------ ------ ------ ------ ------ ------ 331 758 63 190 31 84 -- -- -- -- 229 -- -- -- -- -- -- -- 167 191 91 143 10 15 -- -- -- (1,516) (931) (600) (535) (140) (144) -- -- -- ------- ------- ------ ------ ------ ------ ------ ------ ------ (1,018) 247 (446) (202) (99) (45) -- -- -- ------- ------- ------ ------ ------ ------ ------ ------ ------ 958 1,821 650 936 81 107 237 464 274 -- -- -- -- -- -- -- -- 123 93 62 49 10 10 23 7 4 (1,500) (634) (825) (234) (127) (56) (370) (22) (17) ------- ------- ------ ------ ------ ------ ------ ------ ------ (419) 1,280 (113) 751 (36) 61 (110) 449 261 ------- ------- ------ ------ ------ ------ ------ ------ ------ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ------- ------- ------ ------ ------ ------ ------ ------ ------ -- -- -- -- -- -- -- -- -- ------- ------- ------ ------ ------ ------ ------ ------ ------ (8,177) 37,965 (3,441) 1,564 (705) 36 (290) 1,528 979 ======= ======= ====== ====== ====== ====== ====== ====== ====== U. S. GOVERNMENT SECURITIES FUND VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND VIRGINIA MUNICIPAL BOND FUND --------------------- -------------------------------------------- ----------------------------- 06/01/99- 06/01/98- 06/01/99- 12/01/98- 12/01/97- 06/01/99- 12/01/98- 12/01/97- 05/31/00 05/31/99 05/31/00 05/31/99 11/30/98 05/31/00 05/31/99 11/30/98 --------- ---------- ---------- --------- ---------- --------- --------- --------- 2,790 2,197 2,693 2,543 3,557 3,311 688 1,302 -- 5,439 -- -- -- -- -- -- 127 49 98 4 61 26 3 6 (4,192) (1,087) (5,235) (2,327) (3,293) (1,318) (368) (488) ------ ------ ------ ------ ------ ------ ---- ----- (1,275) 6,598 (2,444) 220 325 2,019 323 820 ------ ------ ------ ------ ------ ------ ---- ----- 41 91 147 62 210 -- -- -- 11 15 29 16 28 -- -- -- (156) (167) (221) (79) (241) -- -- -- ------ ------ ------ ------ ------ ------ ---- ----- (104) (61) (45) (1) (3) -- -- -- ------ ------ ------ ------ ------ ------ ---- ----- 238 564 -- -- -- 161 359 233 -- 308 -- -- -- -- -- -- 44 19 -- -- -- 15 7 6 (616) (156) -- -- -- (284) (49) (35) ------ ------ ------ ------ ------ ------ ---- ----- (334) 735 -- -- -- (108) 317 204 ------ ------ ------ ------ ------ ------ ---- ----- (1,713) 7,272 (2,489) 219 322 1,911 640 1,024 ====== ===== ====== ====== ====== ====== ==== =====
75 NOTES TO FINANCIAL STATEMENTS (concluded) ------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 7. Investment Transactions: The cost of purchases and the proceeds from sales of securities, excluding short-term investments and U.S. Government Securities, for the period ended May 31, 2000, were as follows: PURCHASES SALES (000) (000) -------------------- Florida Tax-Exempt Bond Fund $ 98,307 $124,813 Georgia Tax-Exempt Bond Fund 17,157 23,587 High Income Fund 944 -- Investment Grade Bond Fund 1,048,744 931,682 Investment Grade Tax-Exempt Bond Fund 340,143 375,260 Limited-Term Federal Mortgage Securities Fund -- -- Maryland Municipal Bond Fund 9,607 3,570 Short-Term Bond Fund 92,425 58,221 Short-Term U.S. Treasury Securities Fund -- -- U.S. Government Securities Fund -- 29 Virginia Intermediate Municipal Bond Fund 38,212 76,328 Virginia Municipal Bond Fund 24,485 9,157 The cost of purchases and proceeds from sales of U.S. Government securities were: PURCHASES SALES (000) (000) -------------------- Florida Tax-Exempt Bond Fund $ -- $ -- Georgia Tax-Exempt Bond Fund -- -- High Income Fund -- -- Investment Grade Bond Fund 1,143,261 1,417,469 Investment Grade Tax-Exempt Bond Fund -- -- Limited-Term Federal Mortgage Securities Fund 507,100 531,796 Maryland Municipal Bond Fund -- -- Short-Term Bond Fund 35,838 84,195 Short-Term U.S. Treasury Securities Fund 32,856 23,767 U.S. Government Securities Fund 29,378 41,373 Virginia Intermediate Municipal Bond Fund -- -- Virginia Municipal Bond Fund -- -- At May 31, 2000, the total cost of securities and the net realized gains or losses on securities sold for Federal income tax purposes were not materially different from amounts reported for financial reporting purposes. The aggregate gross unrealized appreciation and depreciation for securities held by the funds at May 31, 2000, were as follows: AGGREGATE AGGREGATE NET GROSS GROSS UNREALIZED UNREALIZED UNREALIZED APPRECIATION/ APPRECIATION DEPRECIATION (DEPRECIATION) (000) (000) (000) ------------------------- -------------- Florida Tax-Exempt Bond Fund $ 257 $(2,723) $ (2,466) Georgia Tax-Exempt Bond Fund 93 (3,335) (3,242) High Income Fund -- (162) (162) Investment Grade Bond Fund 5,160 (62,099) (56,939) Investment Grade Tax-Exempt Bond Fund 602 (1,468) (866) Limited-Term Federal Mortgage Securities Fund 31 (2,637) (2,606) Maryland Municipal Bond Fund 40 (1,776) (1,736) Short-Term Bond Fund 24 (4,793) (4,769) Short-Term U.S. Treasury Securities Fund 9 (837) (828) U.S. Government Securities Fund 104 (4,045) (3,941) Virginia Intermediate Municipal Bond Fund 1,289 (7,671) (6,382) Virginia Municipal Bond Fund 108 (2,359) (2,251) Subsequent to October 31, 1999, the Funds recognized net capital losses for tax purposes that have been deferred to 2000 and can be used to offset future capital gains after May 31, 2000. The Funds also had capital loss carryforwards at May 31, 2000 as follows: POST 10/31 CARRYOVER EXPIRES EXPIRES EXPIRES EXPIRES EXPIRES EXPIRES EXPIRES DEFERRED 5/31/00 2002 2003 2004 2005 2006 2007 2008 LOSS (000) (000) (000 (000) (000) (000 (000) (000) (000) -------- -------- ------- -------- ------- ------- ------- ------- -------- Florida Tax-Exempt Bond Fund $ 1,224 $ -- $ -- $ -- $ -- $ -- $ -- $ 1,224 $1,039 Georgia Tax-Exempt Bond Fund 398 -- -- -- -- -- -- 398 438 High Income Fund 768 -- -- -- -- -- 61 707 -- Investment Grade Bond Fund 14,208 -- -- -- -- 3,029 -- 11,179 27,768 Investment Grade Tax-Exempt Bond Fund 2,622 -- -- -- -- -- -- 2,622 2,053 Limited-Term Federal Mortgage Securities Fund 2,189 -- -- -- -- -- -- 2,189 1,288 Maryland Municipal Bond Fund 22 -- -- -- -- -- 19 3 233 Short-Term Bond Fund 3,701 528 254 555 284 1,134 -- 946 1,178 Short-Term U.S. Treasury Securities Fund -- -- -- -- -- -- -- -- 15 U.S. Government Securities Fund 1,636 -- -- -- -- 792 -- 844 911 Virginia Intermediate Municipal Bond Fund -- -- -- -- -- -- -- -- 2,062 Virginia Municipal Bond Fund 53 -- -- -- -- -- -- 53 490
For tax purposes, the losses in the Funds can be carried forward for a maximum of eight years to offset any net realized capital gains. 8. Concentration of Credit Risk: The Investment Grade Bond Fund and the Short-Term Bond Fund invest primarily in investment grade obligations rated at least BBB or better by S&P or Baa or better by Moody's or, if not rated, are determined by the investment adviser to be of comparable quality. The Investment Grade Tax-Exempt Fund invests primarily in investment grade municipal securities. Municipal securities must be rated BBB or better by S&P or Baa or better by Moody's in the case of bonds; SP-1, SP-2 or MIG-1, MIG-2 in the case of notes; A-1, A-2 or P-1, P-2 in the case of commercial paper; and VMIG-1, VMIG-2 in the case of variable rate demand obligations. The Short-Term U.S. Treasury Securities Fund invests exclusively in obligations issued by the U.S. 76 ------------------------------------------------------------------------------- Treasury with a maximum remaining maturity of 3 years or less. The Florida Tax-Exempt Bond Fund, the Georgia Tax-Exempt Bond Fund, the Maryland Municipal Bond Fund, the Virginia Intermediate Municipal Bond Fund, and the Virginia Municipal Bond Fund invest primarily in municipal bonds concentrated in each of their respective states. Municipal securities must be rated BBB or better by S&P or Baa or better by Moody's in the case of bonds; A-1, A-2 or P-1, P-2 in the case of tax-exempt commercial paper; and VMIG-1, VMIG-2 in the case of variable rate demand obligations. The U.S. Government Securities Fund invests primarily in obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, including mortgage backed securities. The Limited-Term Federal Mortgage Securities Fund invests in mortgage related securities issued or guaranteed by U.S. Government agencies. Up to 35% of the U.S. Government Securities Fund and the Limited-Term Federal Mortgage Securities Fund may be invested in corporate, or government bonds that carry a rating of BBB or better by S&P or Baa or better by Moody's. The ability of the issuers of the securities held by the funds to meet their obligations may be affected by economic developments in a specific industry, state or region, or by changing business conditions. The High Income Fund that invests in high yield instruments is subject to certain credit and market risks. The yields of high debt obligations reflect, among other things, perceived credit risk. The Funds' investment in securities rated below investment grade typically involves risks not associated with higher rated securities including, among others, greater risks of timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary marketing trading. 9. CrestFunds Merger The Board of Directors and shareholders of the CrestFunds approved a reorganization of the CrestFunds into STI Classic Funds which took place during May 1999. The following table summarizes certain relevant information of the Funds prior to and immediately after the business combinations in May 1999 and is unaudited: OUTSTANDING UNREALIZED ON MERGER APPRECIATION CRESTFUNDS DATE (DEPRECIATION) ------------------------------------ ---------- ------------ Intermediate Bond Trust Shares 32,817,534$ (3,403,150) Investor Class A 248,950 (67,865) Investor Class B -- -- Limited Term Bond Trust Shares 7,494,047 31,650 Investor Class A -- -- Investor Class B -- -- Government Bond Trust Shares 5,608,897 (698,071) Investor Class A -- -- Investor Class B 315,993 61,930 Maryland Municipal Bond (1) Trust Shares 2,941,190 305,068 Investor Class B 764,740 (31,446) Virginia Intermediate Municipal Bond (1) Trust Shares 23,538,137 5,880,351 Investor Class A 753,539 76,972 Virginia Municipal Bond (1) Trust Shares 3,019,996 511,586 Investor Class B 647,089 (13,152) SHARES ISSUED NET ASSETS NAV IN BUSINESS AFTER PER STI CLASSIC FUNDS COMBINATION COMBINATION SHARE ------------------------- -------------- ---------- ------ Investment Grade Bond (1) Trust Shares 30,232,924 $1,152,435,532 $10.40 Investor Shares 229,458 35,442,645 10.40 Flex Shares -- 25,684,095 10.41 Short-Term Bond (1) Trust Shares 7,307,720 209,577,527 9.96 Investor Shares -- 1,817,569 9.97 Flex Shares -- 2,447,180 9.98 U.S. Government Securities (1) Trust Shares 5,438,788 101,799,419 10.32 Investor Shares -- 2,563,370 10.31 Flex Shares 307,517 11,288,553 10.32 Maryland Municipal Bond Trust Shares 2,941,190 29,603,005 10.06 Flex Shares 764,740 7,712,932 10.09 Virginia Intermediate Municipal Bond Trust Shares 23,538,137 240,886,726 10.23 Investor Shares 753,539 7,715,363 10.24 Virginia Municipal Bond Trust Shares 3,019,996 31,617,660 10.47 Flex Shares 647,089 6,805,221 10.52 (1) Represents the accounting survivor in this business combination. 10. ESC Strategic Funds Merger The Board of Directors and shareholders of the ESC Strategic Funds approved a reorganization of the ESC Strategic Income Fund into STI Classic High Income Fund which took place during March 2000. The following table summarizes certain relevant information of the Funds prior to and immediately after the business combinations in March 2000 and is unaudited: OUTSTANDING UNREALIZED ON MERGER APPRECIATION ESC STRATEGIC FUNDS DATE (DEPRECIATION) ----------------------- ------------ ------------ ESC Strategic Income Class D 213,037 $(133,549) SHARES ISSUE NET ASSETS NAV IN BUSINESS AFTER PER STI CLASSIC FUNDS COMBINATION COMBINATION SHARE ------------------ ------------- ----------- ------ High Income Flex Shares 213,037 $1,697,825 $7.97 11. Subsequent Event Effective June 30, 2000, SunTrustBanks, Inc. reorganized all of the investment management functions of its three institutional money management units, including SunTrust Bank, into Trusco Capital Management, Inc. 77 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 To the Shareholders and Board of Trustees of STI Classic Funds: We have audited the accompanying statements of net assets of the Florida Tax-Exempt Bond, Georgia Tax-Exempt Bond, High Income, Investment Grade Bond, Limited-Term Federal Mortgage Securities, Maryland Municipal Bond, Short-Term Bond, Short-Term U.S. Treasury Securities, U.S. Government Securities, Virginia Intermediate Municipal Bond, and Virginia Municipal Bond Funds and the statement of assets and liabilities, including the schedule of investments, of the Investment Grade Tax-Exempt Bond Fund of STI Classic Funds (the "Trust") as of May 31, 2000, and the related statements of operations, changes in net assets, and financial highlights for the periods presented, excluding the periods indicated below. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The statements of changes for the year ended November 30, 1998, and financial highlights for the periods prior to May 31, 1999, for the Maryland Municipal Bond, Virginia Intermediate Municipal Bond, and Virginia Municipal Bond Funds were audited by other auditors whose report dated January 15, 1999, expressed an unqualified opinion on this information. The statement of changes for the year ended March 31, 1999, and financial highlights for the periods prior to March 31, 2000, for the High Income Fund, were audited by other auditors whose report dated May 14, 1999, expressed an unqualified opinion on this information. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of May 31, 2000, by correspondence with the custodian and the application of alternative auditing procedures with respect to unsettled securities transactions. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights audited by us present fairly, in all material respects, the financial position of the Florida Tax-Exempt Bond, Georgia Tax-Exempt Bond, High Income, Investment Grade Bond, Investment Grade Tax-Exempt Bond, Limited-Term Federal Mortgage Securities, Maryland Municipal Bond, Short-Term Bond, Short-Term U.S. Treasury Securities, U.S. Government Securities, Virginia Intermediate Municipal Bond, and Virginia Municipal Bond Funds, of STI Classic Funds as of May 31, 2000, the results of their operations, changes in their net assets, and financial highlights for each of the periods described in the first paragraph above, in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Philadelphia, Pennsylvania July 18, 2000 78 NOTICE TO SHAREHOLDERS -------------------------------------------------------------------------------- STI CLASSIC FIXED INCOME FUNDS MAY 31, 2000 UNAUDITED For shareholders that do not have a May 31, 2000 tax year end, this notice is for informational purposes only. For shareholders with a May 31, 2000, please consult your tax adviser as to the pertinence of this notice. For the fiscal year ended May 31, 2000, each portfolio is designating the following items with regard to distributions paid during the year: LONG TERM (20% RATE) ORDINARY CAPITAL GAIN INCOME TAX-EXEMPT TOTAL QUALIFYING FUND DISTRIBUTION DISTRIBUTIONS INTEREST INTEREST DIVIDENDS (1) -------------------------------------------- ------------- ------------- ----------- -------- ------------- Florida Tax-Exempt Bond Fund 8.30% 2.93% 88.77% 100.00% 0.00% Georgia Tax-Exempt Bond Fund 7.06% 1.56% 91.38% 100.00% 0.00% High Income Fund 0.00% 100.00% 0.00% 100.00% 0.00% Investment Grade Bond Fund 0.00% 100.00% 0.00% 100.00% 0.00% Investment Grade Tax-Exempt Bond Fund 10.08% 21.54% 68.38% 100.00% 0.00% Limited-Term Federal Mortgage Securities Fund 0.00% 100.00% 0.00% 100.00% 0.00% Maryland Municipal Bond Fund 0.00% 0.59% 99.41% 100.00% 0.00% Short-Term Bond Fund 1.29% 98.71% 0.00% 100.00% 0.00% Short-Term U.S. Treasury Securities Fund 0.25% 99.75% 0.00% 100.00% 0.00% U.S. Government Securities 0.00% 100.00% 0.00% 100.00% 0.00% Virginia Intermediate Municipal Bond Fund 10.95% 0.92% 88.13% 100.00% 0.00% Virginia Municipal Bond Fund 1.00% 0.75% 98.25% 100.00% 0.00% (1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE DIVIDENDS RECEIVED DEDUCTION AND IS REFLECTED AS A PERCENTAGE OF "ORDINARY INCOME DISTRIBUTIONS".
79 INVESTMENT ADVISER Trusco Capital Management, Inc. STI Classic Funds are not deposits, are not insured or guaranteed by the FDIC or any other government agency, and are not endorsed by and do not constitute obligations of SunTrust Banks, Inc. or any other of its affiliates. Investment in the Funds involves risk, including the possible loss of principal. There is no guarantee that any STI Classic Fund will achieve its investment objective. The STI Classic Funds are advised by affiliates of SunTrust Banks, Inc. DISTRIBUTOR SEI Investments Distribution Co. This information must be preceded or accompanied by a current prospectus for each Fund described. STATEMENT OF NET ASSETS ------------------------------------------------------------------------------ STI CLASSIC FUNDS MAY 31, 2000 PRIME QUALITY MONEY MARKET FUND ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- COMMERCIAL PAPER (30.4%) AEROSPACE/DEFENSE EQUIPMENT (0.2%) United Technologies 6.350%, 06/01/00 $ 10,000 $ 10,000 --------- ELECTRIC PRODUCTS (0.6%) Emerson Electric 6.770%, 06/01/00 27,000 27,000 --------- FINANCIAL SERVICES (16.3%) American Express 6.750%, 06/02/00 9,222 9,220 Associates First Capital 6.770%, 06/01/00 170,000 170,000 Bell Atlantic Funding 6.400%, 06/13/00 11,300 11,276 Bell Atlantic Net Funding 6.400%, 06/14/00 30,000 29,931 6.440%, 06/20/00 21,500 21,427 BellSouth Capital 6.800%, 06/01/00 12,000 12,000 Cargill Global 6.790%, 06/01/00 36,610 36,610 KFW International Finance 6.750%, 06/02/00 2,550 2,550 Paccar Financial 6.390%, 06/02/00 4,140 4,139 Progress Capital 6.520%, 06/05/00 13,400 13,390 6.550%, 06/08/00 29,300 29,263 6.550%, 06/08/00 6,400 6,392 6.530%, 06/15/00 12,800 12,768 6.570%, 06/22/00 16,600 16,536 Prudential Funding 6.790%, 06/01/00 175,000 175,000 Teco Finance 6.370%, 06/12/00 60,000 59,883 6.490%, 06/21/00 18,750 18,682 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- FINANCIAL SERVICES--CONTINUED UBS Finance 6.790%, 06/01/00 $125,000 $ 125,000 --------- 754,067 --------- HOUSEHOLD PRODUCTS (0.1%) Procter & Gamble 6.400%, 06/01/00 4,000 4,000 6.400%, 06/02/00 2,000 2,000 --------- 6,000 --------- INSURANCE (0.8%) Allstate 6.770%, 06/01/00 35,000 35,000 --------- INVESTMENT BANKERS/BROKER DEALERS (3.9%) Deutsche Bank 6.350%, 06/01/00 1,500 1,500 6.370%, 06/07/00 10,486 10,475 6.500%, 06/09/00 20,000 19,971 Merrill Lynch 6.520%, 06/13/00 4,000 3,991 Morgan Stanley Dean Witter 6.780%, 06/01/00 70,000 70,000 6.880%, 08/24/00 (C) 75,000 75,000 --------- 180,937 --------- LEASING EQUIPMENT (0.5%) Pitney Bowes 6.750%, 06/01/00 24,700 24,700 --------- RETAIL (3.9%) Albertson's 6.500%, 06/05/00 19,000 18,986 American Greetings 6.340%, 06/06/00 20,000 19,982 Eastman Kodak 6.350%, 06/05/00 2,627 2,625 6 -------------------------------------------------------------------------------- FACE AMOUNT (000 VALUE (000) ------------------------------------------------------------------------------- RETAIL--CONTINUED Fortune Brands 6.770%, 06/01/00 $ 22,800 $ 22,800 6.400%, 06/08/00 42,000 41,948 Gap 6.550%, 06/26/00 3,100 3,086 Wal-Mart 6.450%, 06/05/00 70,000 69,950 --------- 179,377 --------- TELEPHONE & TELECOMMUNICATIONS (0.2%) BellSouth Telecomm 6.340%, 06/01/00 7,100 7,100 SBC Communications 6.420%, 06/14/00 400 399 --------- 7,499 --------- UTILITIES (3.9%) Consolidated Edison 6.780%, 06/01/00 27,000 27,000 Edison International 6.520%, 06/16/00 29,000 28,921 6.520%, 06/22/00 17,000 16,935 Georgia Power 6.400%, 06/05/00 17,646 17,633 Kansas City P&L 6.420%, 06/12/00 10,700 10,679 Pacific Gas & Electric 6.550%, 06/07/00 2,780 2,777 South Carolina Electric & Gas 6.530%, 06/21/00 12,450 12,405 Southern California Edison 6.520%, 06/22/00 12,000 11,954 Tampa Electric 6.760%, 06/01/00 51,400 51,400 --------- 179,704 --------- Total Commercial Paper (Cost $1,404,284) 1,404,284 --------- ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- CORPORATE OBLIGATIONS (47.5%) BANKS (15.6%) Amsouth Bank (C) 6.659%, 06/22/00 $ 50,000 $ 49,995 6.900%, 07/25/00 50,000 49,990 Bank One, MTN (C) 6.200%, 06/13/00 40,000 39,995 6.241%, 06/23/00 33,945 33,944 6.781%, 08/18/00 500 500 Bankers Trust, MTN (C) 6.240%, 06/16/00 2,400 2,401 Beneficial, MTN (C) 6.181%, 06/01/00 40,000 40,000 Branch Banking & Trust (C) 6.830%, 06/09/00 50,000 49,981 7.030%, 06/15/00 25,000 24,994 6.880%, 08/01/00 65,000 64,978 Comerica Bank (C) 6.563%, 08/30/00 121,000 121,000 Fleet Boston, MTN (C) 6.445%, 07/28/00 40,000 39,999 Fleet National Bank (C) 7.010%, 07/28/00 5,000 5,004 Huntington National Bank (C) 6.360%, 07/21/00 80,000 80,003 Key Bank (C) 7.010%, 07/26/00 20,000 20,016 Keycorp, Ser C, MTN (C) 6.641%, 06/23/00 5,000 5,001 Keycorp, MTN (C) 6.833%, 08/07/00 2,000 2,001 PNC Bank (C) 6.445%, 06/12/00 90,000 89,989 Wachovia Bank (C) 6.255%, 06/28/00 1,500 1,500 --------- 721,291 --------- 7 STATEMENT OF NET ASSETS ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 PRIME QUALITY MONEY MARKET FUND--CONTINUED ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- ENTERTAINMENT (1.4%) Walt Disney 6.375%, 03/30/01 $ 17,325 $ 17,266 Walt Disney (A) 4.200%, 03/15/01 50,000 49,050 --------- 66,316 --------- FINANCE (16.4%) American Express Centurion (C) 6.730%, 06/19/00 1,000 1,000 6.720%, 06/08/00 35,000 35,000 American General Financial, MTN 5.840%, 01/29/01 6,000 5,961 Associates (A) 6.450%, 09/15/00 5,290 5,288 AT&T Capital, MTN 6.875%, 01/16/01 3,700 3,700 AT&T Capital, MTN (C) 7.594%, 06/14/00 50,000 50,025 6.971%, 07/07/00 30,000 30,103 Bell Atlantic Network Funding 6.550%, 06/27/00 45,000 45,000 Beta Finance (C) 6.430%, 07/25/00 50,000 49,998 Beta Finance, MTN (C) 6.418%, 07/05/00 25,000 25,000 Beta Finance, MTN (A) 6.800%, 02/15/01 25,000 25,000 Caterpillar Finance, MTN (C) 6.680%, 06/26/00 25,000 24,997 6.818%, 07/10/00 18,000 18,000 Caterpillar Financial Services, MTN (C) 6.281%, 07/17/00 2,000 2,000 Chrysler Financial 5.875%, 02/07/01 1,000 994 Chrysler Financial, MTN 6.080%, 03/09/01 5,000 4,959 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- FINANCE--CONTINUED Diageo Capital PLC 6.815%, 08/24/00 $ 80,000 $ 80,001 Ford Motor Credit 5.750%, 01/25/01 1,500 1,489 Ford Motor Credit, MTN (C) 6.870%, 08/07/00 5,000 5,000 GMAC, MTN 7.500%, 06/09/00 1,650 1,651 GMAC, MTN (C) 6.390%, 07/24/00 3,000 3,002 GMAC, MTN 6.800%, 05/22/01 3,250 3,240 GMAC, MTN (C) 6.960%, 08/23/00 2,000 2,002 6.375%, 07/31/00 2,500 2,500 GTE California 5.625%, 02/01/01 13,000 12,881 Household Finance, MTN (C) 7.050%, 06/14/00 50,000 49,991 Paccar Financial, MTN (C) 6.219%, 06/05/00 20,000 20,010 Sigma Finance, MTN (A) (C) 6.440%, 08/01/00 50,000 50,000 Sigma Finance, MTN 6.970%, 04/03/01 50,000 50,000 Toyota Motor Credit, MTN (C) 6.460%, 07/25/00 50,000 50,028 6.523%, 08/30/00 100,000 100,000 --------- 758,820 --------- FOOD, BEVERAGE & TOBACCO (2.4%) Sara Lee 6.180%, 06/01/00 11,000 11,000 6.420%, 06/08/00 50,000 50,000 6.550%, 06/19/00 50,000 50,000 --------- 111,000 --------- REGIONAL GOVERNMENT AGENCY (0.0%) Quebec Providence, MTN (C) 8.690%, 02/22/01 1,000 1,012 --------- 8 ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- INVESTMENT BANKERS/BROKER DEALERS (7.4%) Bear Stearns (C) 6.710%, 06/26/00 $ 15,000 $ 14,996 Bear Stearns, Euro MTN, (C) 6.765%, 06/30/00 21,600 21,621 Bear Stearns, MTN, (C) 6.275%, 06/07/00 2,500 2,502 6.714%, 06/19/00 13,000 13,005 Bear Stearns, MTN, (C) 6.398%, 06/02/00 12,450 12,465 Bear Stearns, Ser B, MTN (C) 6.331%, 07/10/00 5,450 5,448 6.380%, 06/15/00 5,000 5,001 7.223%, 07/05/00 50,000 50,000 Credit Suisse First Boston Guernsey, MTN (C) 6.980%, 07/03/00 40,000 40,006 Goldman Sachs Group, MTN (C) 7.060%, 08/23/00 50,000 50,000 JP Morgan, MTN (C) 6.530%, 03/16/01 50,000 50,000 Merrill Lynch 6.500%, 04/01/01 3,438 3,426 Merrill Lynch, MTN (C) 5.920%, 06/07/00 50,000 49,996 Morgan Stanley Dean Witter, MTN 6.890%, 06/16/00 (C) 5,000 5,000 5.625%, 02/28/01 20,000 19,821 --------- 343,287 --------- LEASING EQUIPMENT (2.2%) International Lease Finance 6.520%, 06/02/00 56,500 56,500 5.875%, 01/15/01 23,000 22,836 ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- LEASING EQUIPMENT--CONTINUED Xerox, MTN (C) 6.633%, 08/08/00 $ 20,000 $ 19,996 --------- 99,332 --------- TELEPHONE & TELECOMMUNICATIONS (2.1%) AT&T (C) 6.683%, 08/07/00 71,000 71,000 AT&T, MTN (C) 6.900%, 06/21/00 26,875 26,982 --------- 97,982 --------- Total Corporate Obligations (Cost $2,199,040) 2,199,040 --------- ASSET BACKED SECURITIES (0.6%) Navistar Financial Owner Trust, Ser 2000-A, Cl A1 (C) 6.080%, 03/15/01 3,427 3,426 Nissan Auto Receivables Owner Trust, Ser 2000-A, Cl A1 6.125%, 02/15/01 19,905 19,904 Union Acceptance, Ser 2000-A, Cl A1 5.993%, 02/08/01 2,809 2,809 --------- Total Asset Backed Securities (Cost $26,139) 26,139 --------- BANK NOTES (1.0%) Fleet National Bank (C) 6.318%, 07/26/00 40,000 39,994 Key Bank (C) 6.331%, 07/17/00 8,000 8,001 --------- Total Bank Notes (Cost $47,995) 47,995 --------- CERTIFICATES OF DEPOSIT (1.3%) Bank of America (C) 6.100%, 06/12/00 8,000 8,000 9 STATEMENT OF NET ASSETS ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 PRIME QUALITY MONEY MARKET FUND--CONCLUDED ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- CERTIFICATES OF DEPOSIT--CONTINUED Citicorp (C) 6.510%, 08/10/00 $ 11,585 $ 11,589 Regions Bank 6.700%, 02/02/01 40,000 39,987 --------- Total Certificates of Deposit (Cost $59,576) 59,576 --------- CERTIFICATES OF DEPOSIT -- YANKEE (13.3%) Bayerische Landesbank NY (C) 6.543%, 08/30/00 120,000 120,000 Canadian Imperial Bank NY 7.090%, 05/04/01 50,000 49,991 Commerzbank AG NY 6.860%, 04/04/01 25,000 24,994 Deutsche Bank NY 6.660%, 08/30/00 47,000 47,000 6.695%, 02/05/01 50,000 49,894 Landesbank Hessen-Thueringen 7.143%, 05/08/01 75,000 74,995 National Westminster Bank NY 7.260%, 05/09/01 47,000 46,996 Rabobank NY 7.160%, 05/10/01 25,000 24,998 Societe Generale NY (C) 6.573%, 08/29/00 125,000 125,000 UBS AG Stamford 6.850%, 03/28/01 50,000 49,984 --------- Total Certificates of Deposit -- Yankee (Cost $613,852) 613,852 --------- U.S. GOVERNMENT AGENCY OBLIGATIONS (2.9%) SLMA, MTN (C) 6.343%, 08/01/00 130,000 130,056 SLMA, Ser 1996-3, Cl A1 (C) 6.383%, 07/25/00 1,717 1,708 SLMA, Ser 1996-4, Cl A1 (C) 6.373%, 07/25/00 600 599 --------- ------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- Total U.S. Government Agency Obligations (Cost $132,363) $ 132,363 --------- CASH EQUIVALENT (0.5%) AIM Liquid Assets Portfolio 25,000,000 25,000 --------- Total Cash Equivalent (Cost $25,000) 25,000 --------- REPURCHASE AGREEMENTS (2.4%) ABN-Amro 6.450%, dated 05/31/00, matures 06/01/00, repurchase price $16,636,510 (collateralized by FHLMC obligations: total market value $35,326,201) (B) $ 16,634 16,634 Barclays 6.450%, dated 05/31/00, matures 06/01/00, repurchase price $15,020,276 (collateralized by FHLMC obligations: total market value $15,318,468) (B) 15,018 15,018 Deutsche Bank 6.450%, dated 05/31/00, matures 06/01/00, repurchase price $14,005,913 (collateralized by FNMA obligations: total market value $14,283,472) (B) 14,003 14,003 JP Morgan 6.450%, dated 05/31/00, matures 06/01/00, repurchase price $4,597,567 (collateralized by GNMA: total market value $4,688,678) (B) 4,597 4,597 10 ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- REPURCHASE AGREEMENTS--CONTINUED Merrill Lynch 6.450%, dated 05/31/00, matures 06/01/00, repurchase price $48,484,327 (collateralized by various FNMA obligations: total market value $49,449,162) (B) $ 48,476 $ 48,476 Morgan Stanley Dean Witter 6.450%, dated 05/31/00, matures 06/01/00, repurchase price $5,004,469 (collateralized by FHLMC obligations: total market value $5,211,226) (B) 5,004 5,004 Warburg Dillion 6.450%, dated 05/31/00, matures 06/01/00, repurchase price $8,565,644 (collateralized by a U.S. Treasury Note: total market value $8,736,468) (B) 8,564 8,564 --------- Total Repurchase Agreements (Cost $112,296) 112,296 --------- Total Investments (99.9%) (Cost $4,620,545) 4,620,545 --------- OTHER ASSETS AND LIABILITIES, NET (0.1%) 6,782 --------- ------------------------------------------------------------------------------- VALUE (000) ------------------------------------------------------------------------------- NET ASSETS: Fund shares of the Trust Shares (unlimited authorization -- no par value) based on 3,311,671,156 outstanding shares of beneficial interest $3,311,595 Fund shares of the Investor Shares (unlimited authorization -- no par value) based on 1,312,667,868 outstanding shares of beneficial interest 1,312,668 Fund shares of the Flex Shares (unlimited authorization -- no par value) based on 3,445,570 outstanding shares of beneficial interest 3,445 Undistributed net investment income 1 Accumulated net realized loss on investments (382) ---------- Total Net Assets (100.0%) $4,627,327 ========== Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $1.00 ========== Net Asset Value, Offering and Redemption Price Per Share -- Investor Shares $1.00 ========== Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares $1.00 ========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 33. 11 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 TAX-EXEMPT MONEY MARKET FUND -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- MUNICIPAL BONDS (98.0%) ALABAMA (2.3%) Alabama, Special Care Facilities Financing Authority, Depreciable Assets, RB, FGIC (C) (D) 3.950%, 06/07/00 $ 985 $ 985 Alabama State, Public School & College Authority, Putters, Ser 101, RB (C) (D) 5.000%, 06/01/00 9,975 9,975 Cherokee, Industrial Development Board, BOC Group Project, RB (C) (D) (E) 4.350%, 06/01/00 3,500 3,500 Lauderdale County, Health Care Authority, Coffee Health Group, Ser A, RB, MBIA 3.700%, 07/01/00 1,265 1,265 Mobile, Industrial Development, Board Dock & Wharf Holnam Project, Ser A, RB (C) (D) (E) 4.050%, 06/07/00 4,900 4,900 --------- 20,625 --------- ARIZONA (1.3%) Arizona State, Educational Loan Marketing, Ser A, RB, AMT (C) (D) (E) 4.150%, 06/07/00 2,500 2,500 Arizona State, Transportation Board Excise, Maricopa County Regional Area, Ser A, RB 4.500%, 07/01/00 1,000 1,000 ------------------------------------------------------------------------------- FACE AMOUNT (000 VALUE (000) ------------------------------------------------------------------------------- ARIZONA--CONTINUED Salt River Project, Agricultural Improvement & Power District, Electric System, Ser SG-10, RB (C) (D) 4.380%, 06/01/00 $ 7,570 $ 7,570 --------- 11,070 --------- CALIFORNIA (0.6%) California, Higher Education Authority, Senior Lien, Ser A-4, RB, AMT (C) (D) 4.350%, 04/01/01 5,000 5,000 --------- COLORADO (1.0%) Cherry Creek, South Metropolitan District Number 1, GO (C) (D) (E) 4.400%, 06/01/00 1,250 1,250 Colorado State, Multi-Family Housing Finance Authority, St. Moritz Project, Ser H, RB, FNMA (C) (D) 4.300%, 06/07/00 5,915 5,915 Lowry, Economic Redevelopment Authority, Ser B, RB (C) (D) (E) 4.100%, 06/07/00 2,000 2,000 --------- 9,165 --------- DELAWARE (0.2%) Delaware State, Educational Development Authority, RB (C) (D) (E) 4.725%, 06/01/00 1,875 1,875 --------- DISTRICT OF COLUMBIA (1.7%) District of Columbia, George Washington University, Ser C, RB, MBIA (C) (D) 4.300%, 06/07/00 7,500 7,500 12 ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- DISTRICT OF COLUMBIA--CONTINUED District of Columbia, Planned Parenthood, RB (C) (D) (E) 4.400%, 06/01/00 $ 7,250 $ 7,250 ---------- 14,750 ---------- FLORIDA (7.6%) Dade County, Water & Sewer System, RB, FGIC (C) (D) 4.050%, 06/07/00 10,700 10,700 Florida State, Board of Education Capital Outlay, Ser 223, GO (C) (D) 4.420%, 06/01/00 5,000 5,000 Florida State, Board of Education, Eagle Trust, RB Prerefunded @ 100 (C) (D) (F) 4.400%, 06/01/00 13,315 13,315 Florida State, Board of Education, Eagle Trust, Ser 94901, RB (C) (D) 4.400%, 06/01/00 16,900 16,900 Jacksonville, Health Facilities, Taxable Charity OB Group, Ser C, RB, MBIA (C) (D) 4.100%, 06/07/00 7,000 7,000 St. Lucie County, Pollution Control Authority, Power and Light, RB (C) (D) 4.000%, 07/18/00 1,500 1,500 University of North Florida, Parking System, RB (C) (D) (E) 4.400%, 06/01/00 6,000 6,000 University South Florida, Research Foundation, University Technology Center, RB (C) (D) (E) 4.450%, 06/01/00 7,000 7,000 ---------- 67,415 ---------- ------------------------------------------------------------------------------- FACE AMOUNT (000 VALUE (000) ------------------------------------------------------------------------------- GEORGIA (5.0%) Atlanta, Airport Authority, Ser 313, RB (C) (D) 4.450%, 06/01/00 $ 3,335 $ 3,335 Atlanta, Ser SG-123, GO (C) (D) 4.380%, 06/01/00 9,845 9,845 Cobb County, Development Authority, Educational Facilities, Kennesaw State University Project, RB, AMBAC (C) (D) 4.350%, 06/01/00 6,290 6,290 Fulton County, Development Authority, American National Red Cross Project, RB (C) (D) (E) 4.350%, 06/01/00 1,100 1,100 Fulton County, Development Authority, Metropolitan YMCA Project, RB (C) (D) (E) 4.300%, 06/01/00 8,500 8,500 Gordon County, Development Authority, Sara Lee Project, RB (C) (D) 4.400%, 06/01/00 1,400 1,400 Gwinnett County, Solid Waste Disposal Facilities, Lucent Technology Project, RB, AMT (C) (D) 4.250%, 06/07/00 3,000 3,000 Lafayette, Industrial Development, Blue-Bird Project, RB (C) (D) 4.350%, 06/01/00 1,000 1,000 Mitchell County, Industrial Development Authority, City of Camille Project, RB (C) (D) (E) 4.350%, 06/01/00 3,600 3,600 13 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 TAX-EXEMPT MONEY MARKET FUND--CONTINUED -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- GEORGIA--CONTINUED Municipal Electric Authority, Project One, Sub-Ser E, RB (C) (D) (E) 4.250%, 06/07/00 $ 4,000 $ 4,000 Summerville, Development Authority, Exempt Facility, Image Industries, RB, AMT (C) (D) (E) 4.500%, 07/06/00 2,000 2,000 --------- 44,070 --------- HAWAII (2.2%) Hawaii State, Highway Authority, Ser PT 1058, RB (C) (D) 4.380%, 06/01/00 19,790 19,790 --------- IDAHO (0.6%) Idaho, Housing and Finance Association, Ser PA-115, RB (C) (D) 4.430%, 06/01/00 5,401 5,401 --------- ILLINOIS (8.8%) Bloomington, Airport Authority, GO (C) (D) 4.350%, 06/07/00 1,200 1,200 Chicago, Airport Special Facilities, Centerpoint O'Hare, RB, AMT (C) (D) (E) 4.350%, 06/07/00 3,500 3,500 Chicago, O'Hare International Airport, 2nd Lien, Ser A, RB (C) (D) (E) 3.950%, 06/07/00 2,300 2,300 Chicago, O'Hare International Airport, 2nd Lien, Ser B, RB (C) (D) (E) 3.950%, 07/01/00 1,790 1,790 Illinois State, Development Authority, Pollution Control, Aces-Illinois Power Company, Ser C, RB, AMT (C) (D) (E) 4.500%, 06/06/00 3,000 3,000 ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- ILLINOIS--CONTINUED Illinois State, Development Finance Authority, Derby Industrial Project, RB, AMT (C) (D) (E) 4.450%, 06/07/00 $ 800 $ 800 Illinois State, Development Finance Authority, Pollution Control, Power Project, Ser A, RB (C) (D) (E) 4.050%, 06/07/00 5,000 5,000 Illinois State, Development Finance Authority, Pollution Control, Power Project, Ser C, RB (C) (D) (E) 4.050%, 06/22/00 8,000 8,000 Illinois State, Development Finance Authority, PT 321, RB (C) (D) 4.500%, 06/01/00 10,000 10,000 Illinois State, Educational Facilities Authority, Chicago Childrens Museum, RB (C) (D) (E) 4.300%, 06/07/00 1,600 1,600 Illinois State, Educational Facilities Authority, Museum of Science & Industry, RB (C) (D) (E) 4.250%, 06/07/00 5,400 5,400 Illinois State, Health Facilities Authority, Advocate Health Care, Ser B, RB (C) (D) 4.250%, 06/07/00 2,900 2,900 Illinois State, Health Facilities Authority, Proctor Hospital, RB (C) (D) (E) 4.300%, 06/07/00 5,100 5,100 Illinois State, Health Facilities Authority, The Streeterville Project, RB (C) (D) (E) 4.300%, 06/07/00 2,000 2,000 14 ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- ILLINOIS--CONTINUED Illinois State, Housing Development Authority, Center Apartments, RB (C) (D) (E) 3.800%, 06/07/00 $10,600 $ 10,600 Illinois State, Pollution Control Finance Authority, Public Service, Ser C-1, RB 4.150%, 06/07/00 5,000 5,000 Illinois State, GO 4.250%, 06/01/00 2,500 2,500 Lockport, Industrial Development Authority, Panduit Project, RB, AMT (C) (D) (E) 4.350%, 06/07/00 2,000 2,000 Savanna, Industrial Development Authority, Metform Project, Ser A, RB, AMT (C) (D) (E) 4.350%, 06/07/00 500 500 Savanna, Industrial Development Authority, Metform Project, Ser B, RB, AMT (C) (D) (E) 4.350%, 06/07/00 1,400 1,400 Wheeling, Industrial Development Authority, Circuit Service Project, RB, AMT (C) (D) (E) 4.450%, 06/01/00 2,600 2,600 --------- 77,190 --------- INDIANA (3.7%) Elkhart, Industrial Economic Development Authority, Godfrey Conveyor Project, RB, AMT (C) (D) (E) 4.450%, 06/07/00 1,800 1,800 Elkhart, Industrial Economic Development Authority, Holly Park, RB, AMT (C) (D) (E) 4.450%, 06/07/00 2,000 2,000 ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- INDIANA--CONTINUED Development Authority, Tech Project, RB, AMT (C) (D) 4.350%, 06/07/00 $ 1,000 $ 1,000 Indianapolis, Industrial Economic Development Authority, Allied Signal Project, RB (C) (D) 4.400%, 06/07/00 3,500 3,500 Indianapolis, Local Public Improvements, Ser B, RB, MBIA 3.350%, 06/01/00 1,550 1,550 Indiana State, Development Finance Authority, Educational Facility, Indiana Historical Society, RB (C) (D) (E) 4.300%, 06/07/00 1,200 1,200 Indiana State, Educational Facilities Authority, Educational Facility, Indiana Wesleyan Project, Ser B, RB (C) (D) (E) 4.350%, 06/07/00 2,500 2,500 Indiana State, Health Facility Financing Authority, Clarian Health Partners, Ser B, RB (C) (D) 4.100%, 06/07/00 2,000 2,000 Indiana State, Transportation Financing Authority Highway, Ser PT-1159, RB (C) (D) 4.300%, 02/22/01 9,710 9,710 Jasper, Industrial Economic Development Authority, Wabash Valley Produce Project, RB, AMT (C) (D) (E) 4.450%, 06/01/00 2,000 2,000 La Porte County, Economic Development Authority, Pedcor Investments-Woodland, RB, AMT (C) (D) (E) 4.420%, 06/01/00 2,000 2,000 15 STATEMENT OF NET ASSETS ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 TAX-EXEMPT MONEY MARKET FUND--CONTINUED -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- INDIANA--CONTINUED Michigan City, Economic Development Authority, Performance Packaging, RB, AMT (C) (D) (E) 4.500%, 06/07/00 $ 700 $ 700 Muncie, Industrial Development Authority, Diamond Plastics Project, RB (C) (D) (E) 4.550%, 06/01/00 1,900 1,900 Munster, School Building, Ser 269, RB, FSA (C) (D) 4.550%, 06/01/00 1,000 1,000 --------- 32,860 --------- IOWA (0.7%) Sac County, Industrial Authority, Evapco Project, RB, AMT (C) (D) (E) 4.550%, 06/01/00 3,500 3,500 West Des Moines, Commercial Development, Greyhound Lines Project, RB (C) (D) (E) 4.050%, 06/07/00 2,500 2,500 --------- 6,000 --------- KANSAS (1.0%) Sedgewick & Shawnee Counties, Ser PT 227, RB (C) (D) (E) 4.500%, 06/01/00 9,000 9,000 --------- KENTUCKY (1.2%) Jefferson County, Industrial Building, Fisher-Klosterman Project, RB, AMT (C) (D) (E) 4.450%, 06/01/00 2,005 2,005 Pulaski County, Solid Waste Disposal, National Rural Utility-East Kentucky Power, Ser B, RB, AMT (C) (D) 4.050%, 08/15/00 3,700 3,700 ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- KENTUCKY--CONTINUED Kentucky State, Economic Development Finance Authority, Health Alliance Project, Ser C, RB, MBIA (C) (D) 3.950%, 06/07/00 $ 5,000 $ 5,000 --------- 10,705 --------- LOUISIANA (1.8%) Calcasieu Parish, Industrial Development Board, Hydroserve Westlake, RB, AMT (C) (D) (E) 4.250%, 06/07/00 5,000 5,000 Louisiana State, Public Facilites Authority, Pollution Control, Ciba-Geigy Project, RB (C) (D) (E) 4.050%, 06/07/00 2,400 2,400 Loiusiana State, Eagle Trust, Ser 94180, RB (C) (D) 4.400%, 06/01/00 8,000 8,000 --------- 15,400 --------- MAINE (0.6%) Maine, Housing Authority Mortgage, Ser 295, RB, AMT (C) (D) 4.650%, 06/01/00 4,893 4,892 --------- MARYLAND (1.9%) Baltimore County, Industrial Development Authority, Allied Signal Project, RB (C) (D) 4.350%, 06/07/00 1,000 1,000 Maryland State, Community Development Administration, Ser PA 629R, RB (C) (D) 4.430%, 06/01/00 4,800 4,800 16 ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- MARYLAND--CONTINUED Maryland State, Community Development Administration, Ser 170, RB (C) (D) 4.380%, 06/01/00 $ 6,000 $ 6,000 Maryland State, Community Development Administration, Ser PT-256, RB, AMT, FHA (C) (D) (E) 4.430%, 06/01/00 4,590 4,590 --------- 16,390 --------- MICHIGAN (2.2%) Michigan State, Hospital Finance Authority, Ser A, RB (C) (D) (E) 4.000%, 06/07/00 9,400 9,400 Michigan State, Housing Development Authority, Woodland Meadows Project, RB, AMT (C) (D) (E) 4.150%, 06/07/00 1,000 1,000 Michigan State, Strategic Fund, Industrial Development Authority, Norcor Manufacturing Project, RB (C) (D) (E) 4.250%, 06/06/00 3,000 3,000 Michigan State, Strategic Fund, Consolidated Industrial Project, RB, AMT (C) (D) (E) 4.450%, 06/07/00 2,400 2,400 Oakland County, Economic Development Authority, Moody Family Limited Project, RB, AMT (C) (D) (E) 4.450%, 06/07/00 900 900 Okemos, Public School District, Ser I, GO Prerefunded @ 102 (F) 6.900%, 05/01/01 3,000 3,126 --------- 19,826 --------- -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- MINNESOTA (0.3%) Bloomington, Independent School District, Ser B, GO 5.000%, 02/01/01 $ 2,490 $ 2,502 --------- MISSISSIPPI (0.3%) Mississippi State, Business Finance Authority, Choctaw Generation, RB, AMT (C) (D) (E) 4.150%, 06/07/00 3,000 3,000 --------- MISSOURI (2.0%) Carthage, Industrial Development Authority, Schrieber Project, RB, AMT (C) (D) (E) 4.350%, 06/07/00 3,100 3,100 Saint Charles County, Industrial Development Authority, Casalon Apartment Project, RB (C) (D) (E) 4.250%, 06/01/00 5,670 5,670 Saint Charles County, Industrial Development Authority, Remington Apartments Project, RB (C) (D) (E) 4.250%, 06/01/00 4,800 4,800 Missouri State, Environmental Improvement & Energy Resource Authority, Utilicorp United Project, RB, AMT (C) (D) (E) 4.350%, 06/07/00 700 700 Missouri State, Health & Educational Facilities, Christian Health, Ser A, RB, FGIC Prerefunded @ 102 (F) 6.875%, 02/15/01 3,400 3,527 --------- 17,797 --------- 17 STATEMENT OF NET ASSETS ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 TAX-EXEMPT MONEY MARKET FUND--CONTINUED -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- NEVADA (2.1%) Clark County, Airport Improvement Authority, Sub-Lien Ser A-2, RB, AMT (C) (D) (E) 4.100%, 06/07/00 $ 4,955 $ 4,955 Clark County, School District, GO (C) (D) 4.400%, 06/01/00 8,345 8,345 Nevada State, Ser SG-114, RB (C) (D) 4.380%, 06/01/00 5,000 5,000 --------- 18,300 --------- NEW HAMPSHIRE (1.2%) New Hampshire State, Housing Finance Authority, Multi-Family Housing, Fairways Project, Ser 1, RB, AMT (C) (D) (E) 4.100%, 06/07/00 5,000 5,000 New Hampshire State, Housing Finance Authority, Ser PT-348, RB (C) (D) (E) 4.430%, 06/01/00 5,195 5,195 --------- 10,195 --------- NEW YORK (3.8%) New York City, Municipal Water Financing Authority, Ser SGB-27, RB, FSA 4.370%, 06/01/00 9,000 9,000 New York City, Sub-Ser A-7, GO (C) (D) (E) 4.300%, 06/01/00 9,600 9,600 New York City, Sub-Ser E5, GO (C) (D) (E) 4.300%, 06/01/00 7,600 7,600 New York State, Dormitory Authority, Ser PA-541, RB (C) (D) 4.350%, 06/01/00 4,000 4,000 ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- NEW YORK--CONTINUED Southeast New York, Industrial Development Agency, Unilock New York Project, RB, AMT (C) (D) (E) 4.350%, 06/07/00 $ 2,200 $ 2,200 Syracuse, Ser 207, RB, AMT, FGIC (C) (D) 4.420%, 06/01/00 1,425 1,425 --------- 33,825 --------- NORTH CAROLINA (6.5%) Charlotte, Airport Authority, Ser A, RB, AMT, MBIA (C) (D) 4.150%, 06/07/00 1,000 1,000 Cleveland County, Family YMCA, RB (C) (D) (E) 4.400%, 06/01/00 2,840 2,840 Johnston County, Industrial Development Authority, Pollution Control, Mebane Parking Project, RB (C) (D) (E) 4.500%, 06/01/00 2,175 2,175 Mecklenburg County, Industrial Facilities & Pollution Control, Sterigenics International Project, RB, AMT (C) (D) (E) 4.300%, 06/07/00 1,700 1,700 Mecklenburg County, Public Improvement, Ser C, GO (C) (D) (E) 4.100%, 06/07/00 5,000 5,000 Mecklenburg County, Ser C, GO (C) (D) 4.300%, 06/01/00 8,850 8,850 North Carolina State, Educational Facilities Finance Agency, Charlotte Latin, RB (C) (D) (E) 4.300%, 06/01/00 5,000 5,000 18 ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- NORTH CAROLINA--CONTINUED North Carolina State, Educational Facilities Finance Agency, Guilford College, RB, MBIA (C) (D) 4.300%, 06/07/00 $ 2,200 $ 2,200 North Carolina State, Educational Facilities Finance Agency, Johnson Smith University, RB (C) (D) (E) 4.300%, 06/01/00 5,100 5,100 North Carolina State, Medical Care Community Hospital, Angel Medical Center, RB (C) (D) (E) 4.300%, 06/01/00 3,900 3,900 North Carolina State, Medical Care Community Hospital, Carolina Medicorp Project, RB Prerefunded @ 100 (F) 6.000%, 05/01/01 6,000 6,089 North Carolina State, Medical Care Community Hospital, Lutheran Services For The Aging Project, RB (C) (D) (E) 4.200%, 06/07/00 8,135 8,135 North Carolina State, Ser PA 342, RB (C) (D) 4.380%, 06/01/00 5,340 5,340 --------- 57,329 --------- OHIO (4.8%) Cuyahoga County, Hospital Facilities Authority, Cleveland Clinic Foundation, Ser A, RB (C) (D) 4.150%, 06/07/00 6,000 6,000 ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- OHIO--CONTINUED Hamilton County, Hospital Faciltity, Health Alliance, Ser A, RB, MBIA (C) (D) 3.900%, 06/07/00 $ 7,600 $ 7,600 Ohio State, Air Quality Development Authority, Cincinnati Gas & Electric Project, Ser B, RB (C) (D) (E) 4.300%, 06/01/00 4,400 4,400 Ohio State, Air Quality Development Authority, JMG Limited Partnership, Ser A, RB, AMT (C) (D) (E) 4.000%, 06/07/00 3,000 3,000 Ohio State, Environmental Improvement Authority, Newark Group Industries Project, RB, AMT (C) (D) (E) 4.400%, 06/01/00 4,600 4,600 Ohio State, Higher Education Facility Commission, Pooled Financing, RB (C) (D) (E) 4.350%, 06/01/00 4,835 4,835 Ohio State, Public Facilities Commission, Higher Education Capital Facilities, Ser II-A, RB 4.500%, 12/01/00 2,405 2,409 Warrren County, Health Care Improvement, Otterbein Project, Ser A, RB (C) (D) (E) 4.350%, 06/01/00 9,340 9,340 --------- 42,184 --------- OREGON (0.2%) Oregon State, Housing & Community Services, Single-Family Mortgage Project, Ser H, RB, AMT (C) (D) 3.480%, 06/29/00 1,895 1,895 --------- 19 STATEMENT OF NET ASSETS ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 TAX-EXEMPT MONEY MARKET FUND--CONTINUED ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- PENNSYLVANIA (4.5%) Bethlehem, Area School District, GO, FGIC Prerefunded @ 100 (F) 5.600%, 03/01/01 $ 9,065 $ 9,154 Delaware County, Hospital Authority, Crozer-Chester Medical Center, RB, MBIA Prerefunded @ 102 (F) 7.150%, 12/15/00 2,550 2,639 Delaware Valley, Regional Finance Authority, Ser B, RB (C) (D) (E) 4.100%, 06/07/00 8,100 8,100 Pennsylvania State, Higher Educational Facilities Authority, Temple University Project, RB, ETM (C) (D) (E) 4.300%, 06/01/00 4,700 4,700 Pennsylvania State, Intergovern- mental Cooperation Authority, Special Tax Revenue, Ser SG-67, RB (C) (D) 4.350%, 06/01/00 9,630 9,630 Philadelphia, Ser A, TRAN 4.250%, 06/30/00 5,000 5,003 --------- 39,226 --------- RHODE ISLAND (1.0%) Rhode Island State, Health & Educational Board, Women & Infants Hospital, RB, FSA (C) (D) 3.850%, 09/01/00 3,365 3,365 Rhode Island State, Multi-Modal, GO (C) (D) 4.100%, 06/07/00 5,400 5,400 --------- 8,765 --------- ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- SOUTH CAROLINA (1.1%) South Carolina State, Jobs Economic Development Authority, Anderson Area YMCA Project, RB (C) (D) (E) 4.450%, 06/01/00 $ 7,100 $ 7,100 South Carolina State, Economic Development Authority, Kiswire Project, RB, AMT (C) (D) (E) 4.550%, 06/01/00 3,000 3,000 --------- 10,100 --------- TENNESSEE (4.2%) Covington, Industrial Development Board, Charms Project, RB, AMT (C) (D) (E) 4.350%, 06/07/00 3,000 3,000 Memphis-Shelby County, Industrial Development Board, Ponderosa Fibres American Project, RB, AMT (C) (D) (E) 4.500%, 06/01/00 1,000 1,000 Metropolitan Government Nashville & Davidson County, Eagle Trust, GO (C) (D) 4.400%, 06/01/00 10,000 10,000 Metropolitan Government Nashville & Davidson County, Health & Education Facilities Board, Vanderbilt University, Ser B, RB (C) (D) 4.300%, 06/01/00 4,000 4,000 Metropolitan Government Nashville & Davidson County, Multi-Family Chimneytop II Project, RB (C) (D) (E) 4.300%, 06/07/00 1,325 1,325 20 ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- TENNESSEE--CONTINUED Metropolitan Government Nashville & Davidson County, Ser 251, GO (C) (D) 4.550%, 06/01/00 $ 3,400 $ 3,400 Rutherford County, Industrial Development Authority, Farmers Cooperative Project, RB, AMT (C) (D) (E) 4.500%, 06/01/00 4,500 4,500 Tennessee State, Housing Development Agency, Ser 281, RB, AMT (C) (D) 4.650%, 06/01/00 2,553 2,552 Tennessee State, Ser 108, GO (C) (D) 5.000%, 06/01/00 2,495 2,495 Sumner County, Health & Educational Authority, Hospital Alliance Pooled, Ser PG-A, RB (C) (D) 4.425%, 06/01/00 5,000 5,000 --------- 37,272 --------- TEXAS (9.2%) Dallas-Fort Worth, International Airport, RB, MBIA 4.700%, 11/01/00 4,025 4,035 Georgetown, Higher Education Finance Authority, Southwestern University Project, RB (C) (D) (E) 4.100%, 06/07/00 2,000 2,000 Harris County, Industrial Development Authority, Lubrizol Project, RB (C) (D) 4.050%, 06/07/00 1,600 1,600 Hockley County, Industrial Development Authority, Amoco Project, RB (C) (D) 4.300%, 11/01/00 2,500 2,500 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- TEXAS--CONTINUED Houston, Water & Sewer System Authority, Ser SG-78, RB (C) (D) 4.380%, 06/01/00 $ 8,835 $ 8,835 Pearland, Independent School District, Ser SG-106, RB (C) (D) 4.380%, 06/01/00 6,245 6,245 Texas State, Public Facilities, Eagle Trust, RB (C) (D) 4.400%, 06/01/00 7,180 7,180 4.100%, 06/01/00, TECP 10,000 10,000 Texas State, Eagle Trust, Ser 991301, GO (C) (D) 4.400%, 06/01/00 9,900 9,900 Texas State, Ser A, TRAN 4.500%, 08/31/00 20,000 20,038 Trinity, River Authority, Pollution Control, General Motors Project, RB (C) (D) 4.300%, 06/06/00 8,400 8,400 --------- 80,733 --------- UTAH (1.5%) Morgan County, Solid Waste Disposal, Holman Project, RB, AMT (C) (D) (E) 4.150%, 06/01/00 2,200 2,200 Utah State, Housing Finance Agency, Ser PT-209, RB (C) (D) 4.430%, 06/01/00 10,750 10,750 --------- 12,950 --------- VIRGINIA (0.8%) Front Royal & Warren County, Industrial Development Authority, Pen Tab Industries Project, RB, AMT (C) (D) (E) 4.500%, 06/01/00 2,600 2,600 21 STATEMENT OF NET ASSETS ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 TAX-EXEMPT MONEY MARKET FUND--CONCLUDED ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- VIRGINIA--CONTINUED Virginia State, Housing Development Authority, Ser 301, RB (C) (D) 4.550%, 06/01/00 $ 4,360 $ 4,360 --------- 6,960 --------- WASHINGTON (4.5%) Port Seattle Passenger Facility, Ser 299, RB, AMT, AMBAC (C) (D) 4.650%, 06/01/00 2,358 2,357 Port Seattle, GO (C) (D) 3.950%, 06/07/00 1,000 1,000 Seattle, Water Systems Authority, RB (C) (D) (E) 3.950%, 06/07/00 4,200 4,200 Washington State, Health Care Facilities, Sunnyside Community Hospital, RB (C) (D) (E) 4.300%, 06/07/00 3,200 3,200 Washington State, Public Power Supply System, Nuclear Project No. 1, Ser 1A-1, RB (C) (D) (E) 3.950%, 06/07/00 4,535 4,535 Washington State, Public Power Supply System, Nuclear Project No. 1, Ser 1A-3, RB (C) (D) (E) 3.950%, 06/07/00 3,200 3,200 Washington State, Public Power Supply System, Nuclear Project No. 2, Ser 2A-1, RB, MBIA (C) (D) 4.050%, 06/07/00 5,200 5,200 Washington State, Public Power Supply System, Nuclear Project No. 3, Ser 3A-3, RB (C) (D) (E) 4.050%, 06/07/00 11,720 11,720 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- WASHINGTON--CONTINUED Washington State, Ser B, GO Prerefunded @ 100 (F) 6.700%, 06/01/01 $ 4,000 $ 4,077 --------- 39,489 --------- WEST VIRGINIA (2.1%) Braxton County, Solid Waste Disposal, Weyerhaeuser Project, RB, AMT (C) (D) 4.350%, 06/07/00 7,650 7,650 Marshall County, Pollution Control Authority, AlliedSignal Project, RB (C) (D) 4.400%, 06/07/00 8,630 8,630 Marshall County, Pollution Control Authority, PPG Industries Project, RB (C) (D) 4.600%, 06/01/00 2,000 2,000 --------- 18,280 --------- WISCONSIN (2.2%) Appleton, Industrial Development Authority, Pro Lable Project, RB, AMT (C) (D) (E) 4.550%, 06/01/00 870 870 Germantown, Industrial Development Authority, Speaker Project, RB, AMT (C) (D) (E) 4.550%, 06/01/00 855 855 Holland, Industrial Development Authority, White Clover Dairy Project, RB, AMT (C) (D) (E) 4.450%, 06/01/00 1,500 1,500 Milwaukee, GO 5.000%, 02/01/01 2,000 2,010 Milwaukee, Metropolitan Sewer District, Ser 288, GO (C) (D) 4.600%, 06/01/00 1,763 1,763 22 -------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- WISCONSIN--CONTINUED Oconomowoc, Industrial Development Authority, Quest Technologies Project, RB, AMT (C) (D) (E) 4.450%, 06/01/00 $ 1,495 $ 1,495 Wisconsin State, Health Facilities Authorities, Franciscan Health Care, Ser A-1, RB (C) (D) (E) 3.950%, 06/07/00 6,105 6,105 Wisconsin State, Ser PT 1137, RB (C) (D) 4.300%, 02/15/01 4,515 4,515 --------- 19,113 --------- WYOMING (0.5%) Sweetwater County, Pollution Control, Pacificorp Project, Ser A, RB (C) (D) (E) 4.050%, 06/07/00 4,600 4,600 --------- MULTI-STATE (0.8%) Tax-Exempt Grantor Trust, IBM, Ser 1999-A, RB (C) (D) 4.550%, 06/01/00 7,200 7,200 --------- Total Municipal Bonds (Cost $863,139) 863,139 --------- CASH EQUIVALENTS (1.5%) Financial Square Tax Free Portfolio 3,537,267 3,537 SEI Institutional Tax Free Fund 9,904,203 9,904 --------- ------------------------------------------------------------------------------- VALUE (000) ------------------------------------------------------------------------------- Total Cash Equivalents (Cost $13,441) $ 13,441 --------- Total Investments (99.5%) (Cost $876,580) 876,580 --------- OTHER ASSETS AND LIABILITIES, NET (0.5%) 4,778 --------- NET ASSETS: Fund shares of the Trust Shares (unlimited authorization -- no par value) based on 755,887,410 outstanding shares of beneficial interest 755,887 Fund shares of the Investor Shares (unlimited authorization -- no par value) based on 125,512,381 outstanding shares of beneficial interest 125,512 Distributions in excess of net investment income (6) Accumulated net realized loss on investments (35) --------- Total Net Assets (100.0%) $881,358 ========= Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $1.00 ========= Net Asset Value, Offering and Redemption Price Per Share -- Investor Shares $1.00 ========= THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 33. 23 STATEMENT OF NET ASSETS ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 TAX-FREE MONEY MARKET FUND ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- MUNICIPAL BONDS (98.5%) FLORIDA (2.3%) Dade County, Water & Sewer Systems Project, RB (C) (D) 4.380%, 06/07/00 $ 7,000 $ 7,000 --------- ILLINOIS (3.3%) Illinois State, Health Facility Authority, Swedish Covenant Hospital Project, RB, AMBAC (C) (D) 3.900%, 06/07/00 10,170 10,170 --------- LOUISIANA (3.6%) Ascension Parish, Pollution Control Authority, Borden Project, RB (C) (D) (E) 3.950%, 06/05/00 11,200 11,200 --------- VIRGINIA (88.2%) Albemarle County, Industrial Development Authority, University of Virginia Health Services Project, RB (C) (D) (E) 4.150%, 06/07/00 4,400 4,400 Alexandria, Industrial Development Authority, American Red Cross Project, RB (C) (D) (E) 4.150%, 06/07/00 4,100 4,100 Alexandria, Industrial Development Authority, Pooled Loan Program, Ser A, RB (C) (D) (E) 4.400%, 06/01/00 6,900 6,900 Alexandria, Industrial Development Authority, Pooled Loan Program, Sub-Ser A, RB (C) (D) (E) 4.400%, 06/01/00 3,500 3,500 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- VIRGINIA--CONTINUED Alexandria, Industrial Development Authority, Resource Recovery Project, RB, AMT (C) (D) (E) 4.550%, 06/01/00 $11,400 $ 11,400 Amelia County, Industrial Development Authority, Chambers Waste Systems Project, RB, AMT (C) (D) (E) 4.250%, 06/07/00 750 750 Arlington County, Industrial Development Authority, Multi-Family Housing Authority, Arna Valley View Apartments Project, RB (C) (D) (E) 4.400%, 06/01/00 1,350 1,350 Arlington County, Ballston Public Parking Project, RB (C) (D) (E) 4.250%, 06/06/00 8,100 8,100 Ashland, Industrial Development Authority, Interflex Group Project, RB, AMT (C) (D) (E) 4.500%, 06/01/00 7,000 7,000 Chesapeake Bay, Bridge & Tunnel Community District Authority, General Resolution Project, RB, MBIA (C) (D) 4.400%, 06/01/00 6,755 6,755 Chesterfield County, Industrial Development Authority, AlliedSignal Project, RB (C) (D) 4.400%, 06/07/00 3,000 3,000 Chesterfield County, GO 5.500%, 01/15/01 1,905 1,922 Culpeper, Industrial Development Authority, Baptist Homes Project, RB (C) (D) (E) 4.400%, 06/01/00 1,495 1,495 24 ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- VIRGINIA--CONTINUED Fairfax County, Economic Development Authority, Flint Hill School Project, RB (C) (D) (E) 4.150%, 06/07/00 $ 4,340 $ 4,340 Fairfax County, Industrial Development Authority, Fairfax Hospital Project, Ser A, RB (C) (D) 3.900%, 06/07/00 1,660 1,660 Fairfax County, Industrial Development Authority, Fairfax Hospital Project, Ser B, RB (C) (D) 3.900%, 06/07/00 9,600 9,600 Fairfax County, Industrial Development Authority, Fairfax Hospital Project, Ser D, RB (C) (D) 3.900%, 06/07/00 3,700 3,700 Fairfax County, Ser C, GO 4.600%, 05/01/01 2,800 2,809 Fairfax County, Ser PA 149, RB (C) (D) 4.350%, 06/01/00 9,890 9,890 Hampton, Redevelopment & Multi-Family Housing Authority, Avalon at Hampton Project, Ser I-A, RB (C) (D) (E) 3.950%, 06/07/00 6,360 6,360 Hampton, Redevelopment & Multi-Family Housing Authority, Avalon Pointe Project, Ser I-A, RB, AMT (C) (D) (E) 4.000%, 06/07/00 5,037 5,037 Hanover County, Industiral Development Authority, Covenent Woods Project, RB (C) (D) (E) 4.450%, 06/01/00 15,000 15,000 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- VIRGINIA--CONTINUED King George County, Industrial Development Authority, Birchwood Power Partners Project, Ser A, RB, AMT (C) (D) (E) 4.550%, 06/01/00 $1,500 $ 1,500 Louisa County, Industrial Development Authority, Pooled Financing, RB (C) (D) (E) 4.400%, 06/01/00 2,975 2,975 Norfolk, Industrial Development Authority, Children's Hospital Facilities Project, RB (C) (D) (E) 4.400%, 06/01/00 15,300 15,300 Norfolk, Redevelopment & Housing Authority, East Ocean View Property Project, RB (C) (D) (E) 4.400%, 06/01/00 3,890 3,890 Norfolk, Water Authority, RB FSA 4.000%, 11/01/00 785 785 Peninsula Port Authority, Dominion Terminal Project, Ser C, RB (C) (D) (E) 4.350%, 06/01/00 1,450 1,450 Portsmouth, Industrial Development Authority, Fairwood Homes Project, Ser A, RB (C) (D) (E) 4.150%, 06/01/00 1,605 1,605 Prince George County, Industrial Development Authority, Metropolitian Span Project, RB, AMT (C) (D) (E) 4.450%, 06/01/00 4,800 4,800 Prince William County, Public Improvements, Ser B, GO 5.000%, 08/01/00 1,000 1,002 25 STATEMENT OF NET ASSETS -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 TAX-FREE MONEY MARKET FUND--CONTINUED -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- VIRGINIA--CONTINUED Pulaski County, Industrial Development Authority, Pulaski Furniture Project, RB (C) (D) (E) 4.400%, 06/01/00 $ 1,800 $ 1,800 Richmond, Public Utility Authority, Ser A, RB (C) (D) 4.450%, 06/01/00 3,500 3,500 Richmond, Redevelopment & Multi-Family Housing Authority, Ser PT-1022, RB (C) (D) 4.450%, 06/01/00 14,490 14,490 Richmond, Redevelopment & Multi-Family Housing Authority, Stony Point Project, RB (C) (D) (E) 4.400%, 06/01/00 1,660 1,660 Richmond, Public Improvement, Ser A, GO Prerefunded @ 102 (F) 6.250%, 01/15/01 9,110 9,408 Roanoke, Industrial Development Authority, Hollins University Project, RB (C) (D) (E) 4.150%, 06/07/00 4,500 4,500 Roanoke, Industrial Development Authority, Carilion Health System Project, Ser B, RB (C) (D) 4.450%, 06/01/00 1,000 1,000 Roanoke, Industrial Development Authority, Roanoke Memorial Hospital Project, Ser C, RB (C) (D) 4.300%, 06/01/00 1,935 1,935 Roanoke, Industrial Development Authority, Roanoke Memorial Hospital Project, RB, MBIA Prerefunded @100 (F) 6.500%, 07/01/00 5,000 5,012 ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- VIRGINIA--CONTINUED Roanoke Public Improvements, GO 4.000%, 08/01/00 $ 2,165 $ 2,165 Roanoke Public Improvements, Ser B, GO 5.800%, 08/01/00 1,000 1,003 Roanoke, Redevelopment & Multi-Family Housing Authority, Stepping Stone Apartments Project, RB (C) (D) 4.625%, 06/25/00 2,000 2,000 Virginia State, Transportation Authority, Eagle Trust, Ser 994601, RB (C) (D) 4.400%, 06/01/00 5,000 5,000 Virginia State Port Authority, Ser SG 111, RB (C) (D) 4.400%, 06/01/00 10,100 10,100 Virginia State, Public School Authority, School Financing, Ser B, GO 5.000%, 08/01/00 4,665 4,674 Virginia State, Public School Authority, Ser C, RB 5.000%, 08/01/00 4,335 4,346 Virginia State, GO 5.000%, 06/01/00 2,000 2,000 Staunton, Industrial Development Authority, Diebold-Staunton Project, RB (C) (D) (E) 4.450%, 06/01/00 530 530 Suffolk, Redevelopment & Multi- Family Housing Authority, Windsor Potomac Project, RB (C) (D) 4.700%, 06/07/00 410 410 Suffolk, Redevelopment & Multi- Family Housing Authority, Windsor Fieldstone Project, RB (C) (D) 4.700%, 06/07/00 4,718 4,718 26 ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- VIRGINIA--CONTINUED Virginia Beach, Industrial Development Authority, Ocean Ranch Project, RB (C) (D) (E) 4.400%, 06/01/00 $ 626 $ 626 Virginia Beach, Industrial Development Authority, LA Quinta Inns Project, RB (C) (D) (E) 4.450%, 06/01/00 1,125 1,125 Virginia Beach, Development & Multi-Family Authority, Ser PT 1213, RB (C) (D) 4.580%, 06/01/00 1,000 1,000 Virginia Beach, Development Authority, Westminster- Canterbury Project, Ser B, RB (C) (D) (E) 4.350%, 06/07/00 3,000 3,000 Virginia Beach, Public Improvement, GO 5.000%, 03/01/01 3,805 3,828 Virginia College, Building Authority, 21st Century College Program, RB 4.125%, 02/01/01 8,185 8,185 Virginia College, Building Authority, Equipment Leasing Program, RB 4.250%, 02/01/01 750 750 Virginia State, Housing Development Authority, Commonwealth Mortgage Project, Sub-Ser A, RB 4.150%, 09/12/00 2,500 2,500 Virginia State, Housing Development Authority, Commonwealth Mortgage Project, Sub-Ser A, RB 4.150%, 10/19/00 8,000 8,000 ------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- VIRGINIA--CONTINUED Virginia State, Housing Devolopment Authority, Commonwealth Merlots Project, Ser CC, RB (C) (D) (E) 4.350%, 06/07/00 $ 4,500 $ 4,500 Virginia State, Public School Authority, Ser B, RB 4.700%, 01/01/01 5,000 5,021 Williamsburg, Industrial Development Authority, Colonial Williamsburg Museum Foundation Project, RB (C) (D) (E 4.700%, 06/07/00 600 600 --------- 271,761 --------- PUERTO RICO (1.1%) Puerto Rico, Commonwealth Highway & Transportation Authority, Ser PA 472, RB (C) (D) 3.900%, 06/01/00 3,260 3,260 --------- Total Municipal Bonds (Cost $303,391) 303,391 --------- CASH EQUIVALENTS (1.0%) Financial Square Tax Free Portfolio 2,129,301 2,129 SEI Institutional Tax Free Fund 1,000,000 1,000 --------- Total Cash Equivalents (Cost $3,129) 3,129 --------- Total Investments (99.5%) (Cost $306,520) 306,520 --------- 27 STATEMENT OF NET ASSETS ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 TAX-FREE MONEY MARKET FUND--CONCLUDED ------------------------------------------------------------------------------- VALUE (000) ------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES, NET (0.5%) $ 1,601 --------- NET ASSETS: Fund shares of the Trust Shares (unlimited authorization -- no par value) based on 245,305,124 outstanding shares of beneficial interest 245,281 Fund shares of the Investor Shares (unlimited authorization -- no par value) based on 62,877,446 outstanding shares of beneficial interest 62,878 Distributions in excess of net investment income (11) Accumulated net realized loss on investments (27) --------- Total Net Assets (100.0%) $ 308,121 ========= Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $1.00 ========= Net Asset Value, Offering and Redemption Price Per Share -- Investor Shares $1.00 ========= THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 33. 28 ------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES MONEY MARKET FUND ------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS (17.9%) U.S. Treasury Bill 5.605%, 10/12/00 $80,000 $ 78,345 U.S. Treasury Note 5.000%, 02/28/01 20,000 19,803 -------- Total U.S. Treasury Obligations (Cost $98,148) 98,148 -------- CASH EQUIVALENT (4.6%) AIM Institutional Treasury Portfolio 25,000,000 25,000 -------- Total Cash Equivalent (Cost $25,000) 25,000 -------- REPURCHASE AGREEMENTS (77.8%) ABN-Amro 6.390%, dated 05/31/00, matures 06/01/00, repurchse price $22,345,614 (collateralized by a U.S. Treasury Note: total market value $22,788,927) (B) 22,342 22,342 Barclays 6.390%, dated 05/31/00, matures 06/01/00, repurchase price $21,003,728 (collateralized by various U.S. Treasury obligations: total market value $21,420,900) (B) 21,000 21,000 Deutsche Bank 6.390%, dated 05/31/00, matures 06/01/00, repurchase price $21,003,728 (collateralized by a U.S. Treasury Note: total market value $21,420,214) (B) 21,000 21,000 ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- REPURCHASE AGREEMENTS--CONTINUED Greenwich Capital 6.390%, dated 05/31/00, matures 06/01/00, repurchase price $21,377,648 (collateralized by a U.S. Treasury Note: total market value $21,803,293) (B) $ 21,374 $ 21,374 JP Morgan 6.390%, dated 05/31/00, matures 06/01/00, repurchase price $149,287,464 (collateralized by various GNMA and U.S. Treasury obligations: total market value $152,247,104) (B) 149,261 149,261 Merrill Lynch 6.390%, dated 05/31/00, matures 06/01/00, repurchase price $21,119,076.35 (collateralized by various GNMA obligations: total market value $21,539,555) (B) 21,115 21,115 Morgan Stanley Dean Witter 6.390%, dated 05/31/00, matures 06/01/00, repurchase price $127,208,619 (collateralized by various GNMA obligations: total market value $131,883,074) (B) 127,186 127,186 29 STI CLASSIC FUNDS MAY 31, 2000 ------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES MONEY MARKET FUND--CONCLUDED ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- REPURCHASE AGREEMENTS--CONTINUED Salomon Smith Barney 6.390%, dated 05/31/00, matures 06/01/00, repurchase price $22,015,463 (collateralized by various U.S. Treasury obligations: total market value $22,548,567) (B) $ 22,012 $ 22,012 Warburg Dillion 6.390%, dated 05/31/00, matures 06/01/00, repurchase price $21,258,309 (collateralized by a U.S. Treasury Note: total market value $21,682,944) (B) 21,254 21,254 -------- Total Repurchase Agreements (Cost $426,544) 426,544 -------- Total Investments (100.3%) (Cost $549,692) 549,692 -------- OTHER ASSETS AND LIABILITIES, NET (-0.3%) (1,813) -------- ------------------------------------------------------------------------------- VALUE (000) ------------------------------------------------------------------------------- NET ASSETS: Fund shares of the Trust Shares (unlimited authorization -- no par value) based on 468,324,485 outstanding shares of beneficial interest $468,325 Fund shares of the Investor Shares (unlimited authorization -- no par value) based on 79,281,537 outstanding shares of beneficial interest 79,281 Undistributed net investment income 301 Accumulated net realized loss on investments (28) -------- Total Net Assets (100.0%) $547,879 ======== Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $1.00 ======== Net Asset Value, Offering and Redemption Price Per Share -- Investor Shares $1.00 ======== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 33. 30 U.S. TREASURY MONEY MARKET FUND ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS (22.7%) U.S. Treasury Bill 5.840%, 02/01/01 $15,000 $ 14,404 U.S. Treasury Notes 5.875%, 06/30/00 30,000 30,027 5.375%, 07/31/00 15,000 14,999 5.125%, 08/31/00 15,000 14,990 5.625%, 11/30/00 25,000 24,952 5.250%, 01/31/01 30,000 29,832 5.625%, 02/28/01 15,000 14,917 6.500%, 05/31/01 20,000 19,960 -------- Total U.S. Treasury Obligations (Cost $164,081) 164,081 -------- REPURCHASE AGREEMENTS (77.5%) ABN-Amro 6.310%, dated 05/31/00, matures 06/01/00, repurchase price $32,875,013 (collateralized by various U.S. Treasury obligations: total market value $33,527,298) (B) 32,869 32,869 Barclays 6.310%, dated 05/31/00, matures 06/01/00, repurchase price $31,873,466 (collateralized by a U.S. Treasury Note: total market value $32,506,103) (B) 31,868 31,868 Deutsche Bank 6.310%, dated 05/31/00, matures 06/01/00, repurchase price $25,165,255 (collateralized by a U.S. Treasury Bond: total market value $25,664,368) (B) 25,161 25,161 ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- REPURCHASE AGREEMENTS--CONTINUED Greenwich Capital 6.310%, dated 05/31/00, matures 06/01/00, repurchase price $176,109,211 (collateralized by U.S. Treasury obligations: total market value $179,602,834) (B) $176,078 $176,078 JP Morgan 6.310%, dated 05/31/00, matures 06/01/00, repurchase price $24,001,317 (collateralized by U.S. Treasury Note: total market value $24,477,482) (B) 23,997 23,997 Merrill Lynch 6.310%, dated 05/31/00, matures 06/01/00, repurchase price $31,643,624 (collateralized by U.S. Treasury Notes: total market value $32,272,994) (B) 31,638 31,638 Morgan Stanley Dean Witter 6.310%, dated 05/31/00, matures 06/01/00, repurchase price $31,498,071 (collateralized by a U.S. Treasury Bond: total market value $32,209,876) (B) 31,493 31,493 Salomon Smith Barney 6.310%, dated 05/31/00, matures 06/01/00, repurchase price $31,832,560 (collateralized by a U.S. Treasury Note: total market value $32,934,696) (B) 31,827 31,827 Warburg Dillion 6.310%, dated 05/31/00, matures 06/01/00, repurchase price $176,047,517 (collateralized by a U.S. Treasury Note: total market value $179,541,003) (B) 176,017 176,017 -------- 31 STATEMENTS OF NET ASSETS ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 U.S. TREASURY MONEY MARKET FUND--CONCLUDED ------------------------------------------------------------------------------- VALUE (000) ------------------------------------------------------------------------------- Total Repurchase Agreements (Cost $560,948) $560,948 -------- Total Investments (100.2%) (Cost $725,029) 725,029 -------- OTHER ASSETS AND LIABILITIES, NET (-0.2%) (1,752) -------- NET ASSETS: Fund shares of the Trust Shares (unlimited authorization -- no par value) based on 723,365,117 outstanding shares of beneficial interest 723,280 Distributions in excess of net investment income (3) -------- Total Net Assets (100.0%) $723,277 ======== Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $1.00 ======== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 33. 32 KEY TO ABBREVIATIONS USED IN THE STATEMENT OF NET ASSETS AMBAC Security insured by the American Municipal Bond Assurance Corporation AMT Alternative Minimum Tax Cl Class ETM Escrowed to Maturity FGIC Security insured by the Financial Guaranty Insurance Company FHA Federal Housing Authority FHLMC Federal Home Loan Mortgage Corporation FNMA Federal National Mortgage Association FSA Security insured by Financial Securities Assurance GNMA Government National Mortgage Association GO General Obligation MBIA Security insured by the Municipal Bond Insurance Association MTN Medium Term Note RB Revenue Bond Ser Series SLMA Student Loan Marketing Association TECP Tax Exempt Commercial Paper TRAN Tax and Revenue Anticipation Note (A) Private Placement Security (B) Tri-Party Repurchase Agreement (C) Adjustable Rate Security. The rate reported on the Statement of Net Assets is the rate in effect on May 31, 2000. The date shown is the next scheduled reset date. (D) Put and demand features exist requiring the issuer to repurchase the instrument prior to maturity. (E) Securities are held in connection with a letter of credit issued a major bank. (F) Prerefunded Security. The maturity date shown is the prerefunded date. 33 This page left intentionally blank. STATEMENTS OF OPERATIONS (000) ------------------------------------------------------------------------------------------------------------------------------------ STI CLASSIC FUNDS FOR THE PERIOD ENDED MAY 31, 2000 TAX-EXEMPT TAX-FREE U.S. GOVERNMENT PRIME QUALITY MONEY MONEY SECURITIES U.S. TREASURY MONEY MARKET MARKET MARKET MONEY MARKET MONEY FUND FUND FUND FUND MARKET FUND ------------- ---------- ---------- ------------- -------------- 06/01/99- 06/01/99- 06/01/99- 06/01/99- 06/01/99- 05/31/00 05/31/00 05/31/00 05/31/00 05/31/00 ---------- -------- -------- -------- --------- Interest Income $241,262 $27,734 $10,990 $25,872 $41,783 -------- ------- ------- ------- ------- Expenses: Investment Advisory Fees 27,672 4,158 1,188 3,101 5,091 Less: Investment Advisory Fees Waived (6,310) (1,060) (4) (537) (855) Administrator Fees 3,012 535 212 337 579 Transfer Agent Fees-- Trust Shares 20 15 5 16 15 Transfer Agent Fees-- Investor Shares 31 7 10 14 -- Transfer Agent Fees-- Flex Shares 9 -- -- -- -- Transfer Agent Out of Pocket Expenses 160 52 17 3 30 Printing Expenses 278 46 18 4 53 Custody Fees 213 41 16 16 1 Professional Fees 277 49 32 27 14 Trustee Fees 56 5 1 4 1 Registration Fees 146 74 8 28 8 Distribution Fees-- Investor Shares 1,973 194 51 108 -- Less: Distribution Fees Waived-- Investor Shares (320) (49) (25) (31) -- Distribution Fees-- Flex Shares 14 -- -- -- -- Less: Distribution Fees Waived-- Flex Shares (6) -- -- -- -- Insurance and Other Fees 10 15 7 6 -- -------- ------- ------- ------- ------- Total Expenses 27,235 4,082 1,536 3,096 4,937 -------- ------- ------- ------- ------- Net Investment Income 214,027 23,652 9,454 22,776 36,846 -------- ------- ------- ------- ------- Net Realized Loss on Securities Sold (34) (30) (20) (28) -- -------- ------- ------- ------- ------- Net Increase in Net Assets from Operations $213,993 $23,622 $ 9,434 $22,748 $36,846 ======== ======= ======= ======= =======
Amounts designated as "--" are either $0 or round to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 35 STATEMENTS OF CHANGES IN NET ASSETS (000) ------------------------------------------------------------------------------------------------------------------------------------ STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31, AND NOVEMBER 30, U.S. GOVERNMENT PRIME QUALITY TAX-EXEMPT TAX-FREE SECURITIES MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND ------------------- --------------------- ---------------------------------- ----------------- 06/01/99 06/01/98- 06/01/99- 06/01/98- 06/01/99- 12/01/98 12/01/97- 06/01/99- 06/01/98- 05/31/00 05/31/99 05/31/00 05/31/99 05/31/00 05/31/99 11/30/98 05/31/00 05/31/99 -------- -------- -------- -------- -------- -------- --------- -------- -------- Operations: Net Investment Income .$ 214,027 $ 125,543 $ 23,652 $ 20,454 $ 9,454 $ 3,806 $ 7,024 $ 22,776 $ 20,487 Net Realized Gain (Loss) on Investments (34) (19) (30) (1) (20) 2 (9) (28) 191 ---------- ---------- --------- ---------- --------- -------- --------- -------- -------- Increase in Net Assets from Operations 213,993 125,524 23,622 20,453 9,434 3,808 7,015 22,748 20,678 ---------- ---------- --------- ---------- --------- -------- --------- -------- --------- Trust Shares ......... (165,267) (99,427) (19,775 (16,665) (9,064 (3,739) (6,778 (19,825) (17,844) Investor Shares ........(48,632) (26,132) (3,883) (3,788) (400) (91) (239) (2,927) (2,641) Flex Shares............... (84) -- -- -- -- -- -- -- ---------- ---------- --------- ---------- --------- -------- --------- -------- -------- Total Distributions ..(213,983) (125,559) (23,658) (20,453) (9,464) (3,830) (7,017) (22,752) (20,485) ---------- ---------- --------- ---------- --------- -------- --------- -------- -------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued 6,299,753 4,698,805 1,113,796 984,432 460,442 246,896 369,536 905,352 739,766 Shares Issued in Connection with Crestar Merger .. -- 1,179,761 -- -- -- -- -- -- -- Reinvestment of Cash Distributions 9,263 4,306 -- -- -- -- -- 3,025 1,170 Cost of Shares Redeemed .. (6,901,000)(3,859,828) (999,548) (790,815) (485,600)(247,343) (325,471) (844,261) (714,135) ---------- ---------- --------- ---------- --------- -------- --------- -------- -------- Increase (Decrease) in Net Assets From Trust Share Transactions (591,984) 2,023,044 114,248 193,617 (25,158) (447) 44,065 64,116 26,801 --------- ---------- --------- ---------- --------- -------- --------- -------- -------- Investor Shares: Proceeds from Shares Issued 1,401,995 1,199,739 334,145 356,214 97,834 5,749 22,060 290,823 294,871 Shares Issued in Connection with Crestar Merger .. -- 187,089 -- -- -- -- -- -- -- Reinvestment of Cash Distributions 51,455 24,846 4,155 3,497 415 110 237 3,062 2,578 Cost of Shares Redeemed .. (1,058,926) (905,401) (341,648) (365,395) (41,326) (8,754) (21,081) (276,049) (294,755) --------- ---------- --------- ---------- --------- -------- --------- -------- -------- Increase (Decrease) in Net Assets From Investor Share Transactions 394,524 506,273 (3,348) (5,684) 56,923 (2,895) 1,216 17,836 2,694 --------- ---------- --------- ---------- --------- -------- --------- -------- -------- Flex Shares: Proceeds from Shares Is 6,126 -- -- -- -- -- -- -- -- Reinvestment of Cash Distributions 70 -- -- -- -- -- -- -- -- Cost of Shares Redeemed ..(2,751) -- -- -- -- -- -- -- -- ---------- ---------- --------- ---------- --------- -------- --------- -------- -------- Increase in Net Assets From Flex Share Transactions 3,445 -- -- -- -- -- -- -- -- ---------- ---------- --------- ---------- --------- -------- --------- -------- --------- Increase (Decrease) in Net Assets From Share Transactions (194,015) 2,529,317 110,900 187,933 31,765 (3,342) 45,281 81,952 29,495 ---------- ---------- --------- ---------- --------- -------- --------- -------- -------- Total Increase (Decrease) in Net Assets........ (194,005 2,529,282 110,864 187,933 31,735 (3,364) 45,279 81,948 29,688 ---------- ---------- --------- ---------- --------- -------- --------- -------- -------- Net Assets: Beginning of Period ....4,821,332 2,292,050 770,494 582,561 276,386 279,750 234,471 465,931 436,243 ---------- ---------- --------- ---------- --------- -------- --------- -------- -------- End of Period .........$4,627,327 $4,821,332 $ 881,358 $ 770,494 $ 308,121 $276,386 $ 279,750 $547,879 $465,931 ========== ========== ========= ========== ========= ======== ========= ======== ========
STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31, AND NOVEMBER 30,
U.S. TREASURY MONEY MARKET FUND ------------------------------------ 06/01/99- 12/01/98- 12/01/97- 05/31/00 05/31/99 11/30/98 --------- --------- --------- Operations: Net Investment Income . $ 36,846 $ 15,437 $ 29,481 Net Realized Gain (Loss) on Investments -- -- -- ---------- -------- -------- Increase in Net Assets from Operations 36,846 15,437 29,481 ---------- -------- -------- Trust Shares ........ (36,849) (15,522) (29,476) Investor Shares ..... -- -- -- Flex Shares.......... -- -- -- ---------- --------- ---------- Total Distributions (36,849) (15,522) (29,476) ---------- --------- --------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued 1,480,905 681,589 1,131,937 Shares Issued in Connection with Crestar Merger . -- -- -- Reinvestment of Cash Distributions 23 1 4 Cost of Shares Redeemed .. (1,518,481) (620,595) (1,064,404) ---------- --------- ---------- Increase (Decrease) in Net Assets From Trust Share Transactions (37,553) 60,995 67,537 ---------- --------- ---------- Investor Shares: Proceeds from Shares Issued -- -- -- Shares Issued in Connection with Crestar Merger .. -- -- -- Reinvestment of Cash Distributions -- -- -- Cost of Shares Redeemed .. -- -- -- ---------- --------- ---------- Increase (Decrease) in Net Assets From Investor Share Transactions -- -- -- ---------- --------- ---------- Flex Shares: Proceeds from Shares I -- -- -- Reinvestment of Cash Distributions -- -- -- Cost of Shares Redeemde -- -- -- ---------- --------- ---------- Increase in Net Assets From Flex Share Transactions -- -- -- ---------- --------- ---------- Increase (Decrease) in Net Assets From Share Transactions (37,553) 60,995 67,537 ---------- --------- ---------- Total Increase (Decrease) in Net Assets........ (37,556 60,910 67,542 ---------- --------- ---------- Net Assets: Beginning of Period ... 760,833 699,923 632,381 ---------- --------- ---------- End of Period ......... $ 723,277 $ 760,833 $ 699,923 ========== ========= ==========
Amounts designated as "--" are either $0 or round to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 36 STATEMENTS OF CHANGES IN NET ASSETS (000) --------------------------------------------------------------------------------
U.S. GOVERNMENT PRIME QUALITY TAX-EXEMPT TAX-FREE SECURITIES MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND ------------------- --------------------- ---------------------------------- ------------------- 06/01/99 06/01/98- 06/01/99- 06/01/98- 06/01/99- 12/01/98 12/01/97- 06/01/99- 06/01/98 05/31/00 05/31/99 05/31/00 05/31/99 05/31/00 05/31/99 11/30/98 05/31/00 05/31/99 -------- -------- -------- --------- -------- -------- --------- -------- ------- (1) Shares Issued and Redeemed: Trust Shares: Shares Issued ............ 6,299,749 4,698,805 1,113,795 984,432 460,442 246,896 369,536 905,352 739,766 Shares Issued in Connection with Crestar Merger .. -- 1,179,840 -- -- -- -- -- -- -- Shares Issued in Lieu of Cash Distributions 9,263 4,306 -- -- -- -- -- 3,024 1,170 Shares Redeemed ..........(6,901,000)(3,859,828) (999,547) (790,815) (485,599) (247,343) (325,471) (844,261) (714,135) --------- ----------- -------- -------- -------- -------- -------- -------- -------- Net Trust Share Transactions (591,988) 2,023,123 114,248 193,617 (25,157) (447) 44,065 64,115 26,801 --------- ----------- -------- -------- -------- -------- -------- -------- -------- Investor Shares: Shares Issued ........... 1,401,995 1,199,740 334,146 356,214 97,834 5,749 22,060 290,823 294,871 Shares Issued in Connection with Crestar Merger .. -- 187,089 -- -- -- -- -- -- -- Shares Issued in Lieu of Cash Distributions 51,455 24,846 4,155 3,497 415 110 237 3,063 2,578 Shares Redeemed ..........(1,058,894) (905,433 (341,648) (365,395) (41,327) (8,754) (21,081) (276,049) (294,755) ---------- ---------- -------- -------- -------- -------- -------- -------- -------- Net Investor Share Transactions 394,556 506,242 (3,347 (5,684) 56,922 (2,895) 1,216 17,837 2,694 ---------- ---------- -------- -------- -------- -------- -------- -------- -------- Flex Shares Shares Issued........... 6,126 -- -- -- -- -- -- -- -- Shares Issued in Lieu of Cash Distributions 71 -- -- -- -- -- -- -- -- Shares Redeemed......... (2,751) -- -- -- -- -- -- -- -- ---------- ---------- -------- -------- -------- -------- -------- -------- -------- Net Flex Share Transactions 3,446 -- -- -- -- -- -- -- -- ---------- ---------- -------- -------- -------- -------- -------- -------- -------- Net Change in Capital Shares (193,986) 2,529,365 110,901 187,933 31,765 (3,342) 45,281 81,952 29,495 ---------- ---------- -------- -------- -------- -------- -------- -------- --------
STATEMENTS OF CHANGES IN NET ASSETS (000) -------------------------------------------------------------------------------- U.S. TRESAURY MONEY MARKET FUND ------------------------------- 06/01/99- 12/01/98 12/01/97- 05/31/00 05/31/99 11/30/98 ---------- -------- --------- (1) Shares Issued and Redeeme Trust Shares: Shares Issued ........... 1,480,906 681,589 1,131,937 Shares Issued in Connection with Crestar Merger .. -- -- -- Shares Issued in Lieu of Cash Distributions 23 1 4 Shares Redeemed ......... (1,518,481) (620,595) (1,064,404) ---------- -------- ---------- Net Trust Share Transactions (37,552) 60,995 65,537 ---------- -------- --------- Investor Shares: Shares Issued ........... -- -- -- Shares Issued in Connection with Crestar Merger .. -- -- -- Shares Issued in Lieu of Cash Distribution -- -- -- Shares Redeemed ......... -- -- -- ---------- -------- --------- Net Investor Share Transactions -- -- -- ---------- -------- --------- Flex Shares: Shares Issued........... -- -- -- Shares Issued in Lieu of Cash Distributions -- -- -- Shares Redeemed......... -- -- -- ---------- -------- --------- Net Flex Share Transactions -- -- -- ---------- -------- --------- Net Change in Capital Shares (37,552) 60,995 67,537 ---------- -------- --------- Amounts designated as "--" are either $0 or round to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 37
FINANCIAL HIGHLIGHTS ------------------------------------------------------------------------------------------------------------------------------------ STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE NOTED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS NET NET ASSET NET ASSET VALUE INVESTMENT DISTRIBUTIONS FROM VALUE END BEGINNING OF PERIOD INCOME NET INVESTMENT INCOME OF PERIOD ------------------- ---------- --------------------- --------- PRIME QUALITY MONEY MARKET FUND Trust Shares 2000 $1.00 $ 0.05 $(0.05) $1.00 1999 1.00 0.05 (0.05) 1.00 1998 1.00 0.05 (0.05) 1.00 1997 1.00 0.05 (0.05) 1.00 1996 1.00 0.05 (0.05) 1.00 Investor Shares 2000 $1.00 $ 0.05 $(0.05) $1.00 1999 1.00 0.05 (0.05) 1.00 1998 1.00 0.05 (0.05) 1.00 1997 1.00 0.05 (0.05) 1.00 1996 1.00 0.05 (0.05) 1.00 Flex Shares 2000 (A) $1.00 $ 0.03 $(0.03) $1.00 TAX-EXEMPT MONEY MARKET FUND Trust Shares 2000 $1.00 $ 0.03 $(0.03) $1.00 1999 1.00 0.03 (0.03) 1.00 1998 1.00 0.03 (0.03) 1.00 1997 1.00 0.03 (0.03) 1.00 1996 1.00 0.03 (0.03) 1.00 Investor Shares 2000 $1.00 $ 0.03 $(0.03) $1.00 1999 1.00 0.03 (0.03) 1.00 1998 1.00 0.03 (0.03) 1.00 1997 1.00 0.03 (0.03) 1.00 1996 1.00 0.03 (0.03) 1.00 TAX-FREE MONEY MARKET FUND (B) Trust Shares 2000 $1.00 $ 0.03 $(0.03) $1.00 1999** 1.00 0.01 (0.01) 1.00 For the Year Ended November 30: 1998 1.00 0.03 (0.03) 1.00 1997 1.00 0.03 (0.03) 1.00 1996 1.00 0.03 (0.03) 1.00 1995 1.00 0.03 (0.03) 1.00 Investor Shares 2000 $1.00 $ 0.03 $(0.03) $1.00 1999** 1.00 0.01 (0.01) 1.00 For the Year Ended November 30: 1998 1.00 0.03 (0.03) 1.00 1997 1.00 0.03 (0.03) 1.00 1996 1.00 0.03 (0.03) 1.00 1995 1.00 0.03 (0.03) 1.00 (DAGGER)Total return is for the period indicated and has not been annualized. * Annualized ** For the period December 1, 1998 to May 31, 1999. All ratios for the period have been annualized. (A) Commenced operations on October 4, 1999. (B) On May 24, 1999, the CrestFund Tax-Free Money Fund exchanged all of its assets and certain liabilities for shares of the Tax-Free Money Market Fund. The CrestFund Tax-Free Money Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights.
38
------------------------------------------------------------------------------------------------------------------------------------ RATIO OF RATIO OF NET INVESTMENT RATIO OF EXPENSES TO INCOME TO NET ASSETS RATIO OF NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS TOTAL END OF EXPENSES TO INCOME TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS RETURN PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) -------- ----------- ------------------- ------------------ ------------------- ------------------- 5.20% $3,311,229 0.60% 5.06% 0.75% 4.91% 4.83 3,903,232 0.60 4.69 0.77 4.52 5.22 1,880,229 0.59 5.10 0.77 4.92 5.01 1,086,555 0.58 4.90 0.76 4.72 5.25 1,050,800 0.58 5.11 0.78 4.91 5.02% $1,312,653 0.77% 4.94% 0.95% 4.76% 4.66 918,100 0.77 4.52 0.97 4.32 5.04 411,821 0.76 4.93 0.98 4.71 4.84 283,544 0.75 4.74 0.97 4.52 5.08 215,696 0.75 4.94 1.00 4.69 2.93% $ 3,445 1.50%* 4.46%* 1.99%* 3.97%* 3.19% $ 755,858 0.52% 3.16% 0.66% 3.02% 2.81 641,640 0.52 2.75 0.66 2.61 3.21 448,023 0.51 3.14 0.67 2.98 3.09 333,006 0.50 3.04 0.66 2.88 3.28 273,613 0.50 3.23 0.68 3.05 3.07% $ 125,500 0.64% 3.01% 0.82% 2.83% 2.69 128,854 0.64 2.66 0.82 2.48 3.09 134,538 0.62 3.04 0.83 2.83 2.97 102,013 0.62 2.92 0.83 2.71 3.16 95,223 0.62 3.10 0.85 2.87 3.23% $ 245,243 0.51% 3.19% 0.51% 3.19% 1.27 270,431 0.67 2.51 0.82 2.36 2.97 270,899 0.66 2.92 0.81 2.77 3.06 226,837 0.66 3.02 0.81 2.87 3.14 182,320 0.66 2.88 0.81 2.73 3.26 202,333 0.66 3.19 0.81 3.04 3.07% $ 62,878 0.67% 3.17% 0.73% 3.11% 1.27 5,955 0.67 2.52 1.06 2.13 2.96 8,851 0.67 2.92 1.07 2.52 3.05 7,634 0.68 3.42 1.08 3.02 3.13 2,994 0.67 2.86 1.07 2.46 3.25 1,627 0.67 3.16 1.07 2.76
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 39
FINANCIAL HIGHLIGHTS (concluded) ------------------------------------------------------------------------------------------------------------------------------------ STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE NOTED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD NET NET ASSET NET ASSET VALUE INVESTMENT DISTRIBUTIONS FROM VALUE END BEGINNING OF PERIOD INCOME NET INVESTMENT INCOME OF PERIOD ------------------- ---------- --------------------- --------- U.S. GOVERNMENT SECURITIES MONEY MARKET FUND Trust Shares 2000 $1.00 $ 0.05 $(0.05) $1.00 1999 1.00 0.04 (0.04) 1.00 1998 1.00 0.05 (0.05) 1.00 1997 1.00 0.05 (0.05) 1.00 1996 1.00 0.05 (0.05) 1.00 Investor Shares 2000 $1.00 $ 0.05 $(0.05) $1.00 1999 1.00 0.04 (0.04) 1.00 1998 1.00 0.05 (0.05) 1.00 1997 1.00 0.05 (0.05) 1.00 1996 1.00 0.05 (0.05) 1.00 U.S. TREASURY MONEY MARKET FUND (A) Trust Shares 2000 $1.00 $ 0.05 $(0.05) $1.00 1999* 1.00 0.02 (0.02) 1.00 For the Year Ended November 30: 1998 1.00 0.05 (0.05) 1.00 1997 1.00 0.05 (0.05) 1.00 1996 1.00 0.05 (0.05) 1.00 1995 1.00 0.05 (0.05) 1.00 * For the period December 1, 1998 to May 31, 1999. All ratios for the period have been annualized. (DAGGER)Total return is for the period indicated and has not been annualized. (A) On May 24, 1999, the Crestar Tax-Free Money Fund exchanged all of its assets and certain liabilities for shares of the U.S. Treasury Money Market Fund. The Crestar U.S. Treasury Money Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights.
40
------------------------------------------------------------------------------------------------------------------------------------ RATIO OF RATIO OF NET INVESTMENT RATIO OF EXPENSES TO INCOME TO NET ASSETS RATIO OF NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS TOTAL END OF EXPENSES TO INCOME TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS RETURN PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) -------- ----------- ------------------- ------------------ ------------------- ------------------- 4.86% $ 468,568 0.63% 4.80% 0.74% 4.69% 4.57 404,459 0.63 4.47 0.76 4.34 5.04 377,490 0.62 4.92 0.78 4.76 4.83 344,350 0.61 4.73 0.76 4.58 5.14 325,493 0.61 5.02 0.78 4.85 4.71% $ 79,311 0.77% 4.62% 0.93% 4.46% 4.41 61,472 0.77 4.32 0.98 4.11 4.90 58,753 0.76 4.79 0.96 4.59 4.69 63,178 0.75 4.59 0.96 4.38 4.99 58,608 0.75 4.88 0.99 4.64 4.81% $ 723,277 0.63% 4.71% 0.74% 4.60% 2.08 760,833 0.68 4.10 0.83 3.95 4.89 699,923 0.66 4.77 0.81 4.62 4.91 632,381 0.65 4.82 0.80 4.67 4.80 389,051 0.66 4.69 0.81 4.54 5.29 370,454 0.66 5.16 0.81 5.01
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 41 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 1. Organization: The STI Classic Funds (the "Trust") was organized as a Massachusetts business trust under a Declaration of Trust dated January 15, 1992. The Trust is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company with thirty-five funds as of May 31, 2000: the Balanced Fund, the Capital Appreciation Fund (formerly Capital Growth Fund), the Core Equity Fund, the E-Commerce Opportunity Fund, the Growth and Income Fund, the International Equity Fund, the International Equity Index Fund, the Life Vision Moderate Growth Fund (formerly Life Vision Balanced Portfolio), the Life Vision Growth and Income Fund (formerly Life Vision Growth and Income Portfolio), the Life Vision Aggressive Growth Fund (formerly Life Vision Maximum Growth Portfolio), the Mid-Cap Equity Fund, the Small Cap Value Equity Fund (formerly Small Cap Equity Fund), the Small Cap Growth Stock Fund, the Tax Sensitive Growth Stock Fund, the Value Income Stock Fund, (collectively the "Equity Funds"), the Florida Tax-Exempt Bond Fund, the Georgia Tax-Exempt Bond Fund, the High Income Fund, the Investment Grade Bond Fund, the Investment Grade Tax-Exempt Bond Fund, the Limited-Term Federal Mortgage Securities Fund, the Maryland Municipal Bond Fund, the Short-Term Bond Fund, the Short-Term U.S. Treasury Securities Fund, the U.S. Government Securities Fund, the Virginia Intermediate Municipal Bond Fund, the Virginia Municipal Bond Fund, (collectively the "Fixed Income Funds"), the Prime Quality Money Market Fund, the Tax-Exempt Money Market Fund, the Tax-Free Money Market Fund, the U.S. Government Securities Money Market Fund, the U.S. Treasury Money Market Fund (collectively the "Retail Money Market Funds" or the "Funds"), the Classic Institutional Cash Management Money Market Fund, the Classic Institutional U.S. Government Securities Money Market Fund and the Classic Institutional U.S. Treasury Securities Money Market Fund, (collectively the "Institutional Money Market Funds"). The assets of each Fund are segregated, and a shareholder's interest is limited to the fund in which shares are held. Each Fund's prospectus provides a description of the Fund's investment objectives, policies and strategies. The financial statements presented herein are those of the Retail Money Market Funds. The financial statements of the Equity Funds, the Fixed Income Funds and the Institutional Money Market Funds are not presented herein, but are presented separately. Effective May 1999, the Board of Trustees of the STI Classic Funds and Board of Directors of the CrestFunds Inc. ("CrestFunds") approved an Agreement and Plan of Reorganization (the "Reorganization Agreement") providing for the transfer of all assets and certain stated liabilities of the CrestFunds in exchange for the issuance of shares in the Trust in a tax-free reorganization (see Note 7). 2. Significant Accounting Policies: The following is a summary of significant accounting policies followed by the Trust: BASIS OF PRESENTATION OF STATEMENTS -- As more fully described in Note 7, the STI Classic Funds acquired certain CrestFunds in a tax-free business combination. While each Fund now exists as a STI Classic Fund, two of the surviving funds for accounting purposes are CrestFunds. In accordance with generally accepted accounting principles, the financial statements presented herein represent those of accounting survivors. Accordingly, the Statements of Changes in Net Assets and Financial Highlights presented for the periods prior to and ending on May 31, 1999 reflect activity beginning on the first day of the accounting survivor's fiscal year. 42 -------------------------------------------------------------------------------- SECURITY VALUATION -- Investment securities held by the Funds are stated at amortized cost, which approximates market value. FEDERAL INCOME TAXES -- It is each Fund's intention to qualify as a regulated investment company for Federal income tax purposes and distribute all of its taxable income and net capital gains. Accordingly, no provisions for Federal income taxes are required. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are accounted for on the date the security is purchased or sold (trade date). Interest income is recognized on an accrual basis. Costs used in determining net realized gains and losses on the sales of investment securities are those of the specific securities sold adjusted for the accretion and amortization of purchase discounts and premiums during the respective holding period. Purchase discounts and premiums on securities held by the Funds are accreted and amortized ratably to maturity and are included in interest income. REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase agreements are held by the custodian bank until the respective agreements mature. Provisions of the repurchase agreements ensure that the market value of the collateral, including accrued interest thereon, is sufficient in the event of default of the counterparty. If the counterparty defaults and the value of the collateral declines or if the counterparty enters into an insolvency proceeding, realization of the collateral by the Funds may be delayed or limited. NET ASSET VALUE PER SHARE -- The net asset value per share of each Fund is calculated each business day, by dividing the total value of each Fund's assets, less liabilities, by the number of shares outstanding. OTHER -- Expenses that are directly related to a specific Fund are charged to that Fund. Class specific expenses are borne by that class. Other operating expenses of the Trust are pro-rated to the Funds on the basis of relative net assets. Fund expenses are pro-rated to the respective classes on the basis of relative net assets. DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income of each of the Funds are declared on each business day and paid to shareholders on a monthly basis. Any net realized capital gains on sales of securities are distributed to shareholders at least annually. RECLASSIFICATION OF COMPONENTS OF NET ASSETS -- The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from generally accepted accounting principles. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These book/tax differences may be temporary or permanent in nature. To the extent these differences are permanent, they are charged or credited to paid-in-capital, or accumulated net realized gain, as appropriate, in the period that the differences arise. Accordingly, the following permanent differences, primarily attributable to net operating losses and the classification of short-term capital gains and ordinary income for tax purposes have been reclassified to/from the following accounts: ACCUMULATED UNDISTRIBUTED REALIZED NET INVESTMENT GAIN (LOSS) INCOME (LOSS) (000) (000) ------------ -------------- U.S. Government Securities Money Market Fund ......... (191) 191 This reclassification has no effect on net assets or net asset values per share. 43 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 USE OF ESTIMATES -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates. 3. Transactions with Affiliates: Certain officers of the Trust are also officers of SEI Investments Mutual Funds Services (the "Administrator"), and/or SEI Investments Distribution Co. (the "Distributor"). Such officers are paid no fees by the Trust for serving as officers of the Trust. The Fund has entered into an agreement with the Distributor to manage the investments of repurchase agreements for the Funds. For its services the Distributor received $1,846,277 for the year ended May 31, 2000. The Trust and the Distributor are parties to a Distribution Agreement dated November 21, 1995. The Distributor does not receive any fees for its distribution services provided under this agreement. 4. Administration and Transfer Agency Servicing Agreements: The Trust and the Administrator are parties to an Administration Agreement dated May 29, 1995, as amended November 19, 1997 and March 1, 1999, under which the Administrator provides administrative services for an annual fee (expressed as a percentage of the combined average daily net assets of the Trust and STI Classic Variable Trust) of: .12% up to $1 billion, .09% on the next $4 billion, .07% on the next $3 billion, .065% on the next $2 billion and .06% for over $10 billion. Prior to May 1999, administrative and accounting services were provided to the CrestFunds by SEI Investments Mutual Funds Services who was entitled to receive a fee at an annual rate of .15% of the average daily net assets of the CrestFunds. The Trust and Federated Services Company are parties to a Transfer Agency servicing agreement dated May 14, 1994 under which Federated Services Company provides transfer agency services to the Trust. 5. Investment Advisory and Custodian Agreements: The Trust and Trusco Capital Management, Inc. (the "Investment Adviser"), a subsidiary of SunTrust Bank, have entered into an advisory agreement dated July 15, 1993. Under terms of the agreements, the Funds are charged the following annual fees based upon average daily net assets: MAXIMUM MAXIMUM MAXIMUM TRUST INVESTOR INVESTOR FLEX FLEX ANNUAL SHARE SHARE SHARE SHARE SHARE ADVISORY MAXIMUM DISTRIBUTION MAXIMUM DISTRIBUTION MAXIMUM FEE EXPENSE FEE EXPENSE FEE EXPENSE -------- -------- ------------ ---------- ------------ ------- Prime Quality Money Market Fund .65% .60% .20% .77% .75% 1.50% Tax-Exempt Money Market Fund .55 .52 .15 .64 -- -- Tax-Free Money Market Fund .40 .51 .40 .67 -- -- U.S. Government Securities Money Market Fund .65 .63 .17 .77 -- -- U.S. Treasury Money Market Fund .65 .63 -- -- -- -- 44 -------------------------------------------------------------------------------- The Investment Adviser has voluntarily agreed to waive all or a portion of their fees (and to reimburse Funds' expenses) in order to limit operating expenses to an amount as outlined in the table above. Fee waivers and expense reimbursements are voluntary and may be terminated at any time. Prior to May 1999, Crestar Asset Management Company ("CAMCO") provided investment advisory services to the CrestFunds. CAMCO was paid for advisory services to each CrestFund money market fund at an annual rate of .40% of each CrestFund money market fund's average daily net assets for the first $500 million of net assets, .35% of each Fund's average daily net assets on the next $500 million of net assets, .30% of each money market fund's average daily net assets on all remaining net assets. SunTrust Bank, Atlanta, acts as custodian for the Funds. Fees of the Custodian are paid on the basis of the net assets of the Funds. The Custodian plays no role in determining the investment policies of the Trust or which securities are to be purchased or sold in the Funds. 6. Investment Transactions: Subsequent to October 31, 1999, the Funds recognized net capital losses for tax purposes that have been deferred to 2000 and can be used to offset future capital gains after May 31, 2000. The Funds had capital loss carryforwards at May 31, 2000 as follows:
POST 10/31 CARRYOVER EXPIRES EXPIRES EXPIRES EXPIRES EXPIRES EXPIRES DEFERRED 05/31/00 2003 2004 2005 2006 2007 2008 LOSS (000) (000) (000) (000) (000) (000) (000) (000) ---------- -------- -------- -------- -------- -------- -------- ---------- Prime Quality Money Market Fund $367 $110 $14 $223 $-- $-- $20 $15 Tax-Exempt Money Market Fund 32 -- 4 -- -- -- 28 3 Tax-Free Money Market Fund -- -- -- -- -- -- -- 20 U.S. Government Securities Money Market Fund -- -- -- -- -- -- -- 27
45 NOTES TO FINANCIAL STATEMENTS (concluded) -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 7. CrestFunds Merger: The Board of Directors and shareholders of the CrestFunds approved a reorganization of the CrestFunds into the STI Classic Funds which took place during May 1999. The following table summarizes certain relevant information of the Funds prior to and immediately after the business combination in May 1999 and is unaudited:
SHARES OUTSTANDING SHARES ISSUED NET ASSETS NAV ON MERGER IN BUSINESS AFTER PER CRESTFUND DATE STICLASSIC FUND COMBINATION COMBINATION SHARE ------------ ----------- --------------- ------------ ----------- ----- Cash Reserve Prime Quality Money Market (2) Trust Shares 1,179,840,320 Trust Shares 1,179,992,513 $3,898,000,842 $1.00 Investor Class A 187,019,982 Investor Shares 187,134,402 897,327,829 1.00 Investor Class B (1) 68,609 Flex Shares n/a n/a n/a U.S. Treasury Money Fund (2) U.S. Treasury Money Market Trust Shares 278,919,943 Trust Shares 278,919,943 278,898,164 1.00 Investor Class A 5,967,857 Investor Shares 5,967,857 5,968,442 1.00 Tax Free Money Fund (2) Tax-Free Money Market Trust Shares 732,825,211 Trust Shares 732,825,211 732,779,926 1.00 (1) Investor Class B Shares of the CrestFunds Cash Reserve Fund were exchanged for Investor Shares of the STI Classic Prime Quality Money Market Fund. (2) Represents the accounting survivor in this business combination.
8. Concentration of Credit Risk: The Prime Quality Money Market Fund invests primarily in high quality money market instruments rated in the highest short-term rating category by Standard & Poor's Ratings Group ("S&P") or Moody's Investors Services, Inc. (Moody's) or, if not rated, are determined by the Investment Adviser to be of comparable quality. The Tax-Exempt Money Market and Tax-Free Money Market Funds invest in high quality, U.S. dollar denominated municipal securities rated in one of the two highest short-term rating categories or, if not rated, are determined by the Investment Adviser to be of comparable quality. The U.S. Government Securities Money Market and U.S. Treasury Money Market Funds invest exclusively in U.S. Treasury obligations, U.S. Government subsidiary corporation securities which are backed by the full faith and credit of the U.S. Government and repurchase agreements with approved dealers collateralized by U.S. Treasury securities and U.S. Government subsidiary corporation securities. 9. Subsequent Events: Effective June 30, 2000, SunTrustBanks, Inc. reorganized all of the investment management functions of its three institutional money management units, including SunTrust Bank, into Trusco Capital Management, Inc. On May 16, 2000, the Board of Trustees of the STI Classic Funds approved the name change of the Tax-Free Money Market Fund to the Virginia Tax-Free Money Market Fund. 46 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 To the Shareholders and Board of Trustees of STI Classic Funds: We have audited the accompanying statements of net assets of the Prime Quality Money Market, Tax-Exempt Money Market, Tax-Free Money Market, U.S. Government Securities Money Market, and U.S. Treasury Money Market Funds of STI Classic Funds (the "Trust") as of May 31, 2000, and the related statements of operations, changes in net assets, and financial highlights for the periods presented, excluding the periods indicated below. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The statements of changes for the year ended November 30, 1998 and financial highlights for the periods presented prior to May 31, 1999, for the Tax-Free Money Market and U.S. Treasury Money Market Funds, were audited by other auditors whose report, dated January 15, 1999, expressed an unqualified opinion on this information. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of May 31, 2000, by correspondence with the custodian and the application of alternative auditing procedures with respect to unsettled securities transactions. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights audited by us present fairly, in all material respects, the financial position of the Prime Quality Money Market, Tax-Exempt Money Market, Tax-Free Money Market, U.S. Government Securities Money Market, and U.S. Treasury Money Market Funds, of STI Classic Funds as of May 31, 2000, the results of their operations, changes in their net assets, and financial highlights for each of the periods described in the first paragraph above, in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Philadelphia, Pennsylvania July 18, 2000 47 NOTICE TO SHAREHOLDERS -------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 UNAUDITED For shareholders that do not have a May 31, 2000 tax year end, this notice is for informational purposes only. For shareholders with a May 31, 2000, please consult your tax adviser as to the pertinence of this notice. For the fiscal year ended May 31, 2000, each portfolio is designating the following items with regard to distributions paid during the year:
LONG TERM (20% RATE) ORDINARY CAPITAL GAIN INCOME TAX-EXEMPT TOTAL QUALIFYING FUND DISTRIBUTION DISTRIBUTIONS INTEREST DISTRIBUTIONS DIVIDENDS (1) ---------------- ------------ ------------- ---------- ------------- ------------- Prime Quality Money Market Fund 0.00% 100.00% 0.00% 100.00% 0.00% Tax-Exempt Money Market Fund 0.00% 0.04% 99.96% 100.00% 0.00% Tax Free Fund 0.00% 0.00% 100.00% 100.00% 0.00% U.S. Government Securities Money Market Fund 0.00% 100.00% 0.00% 100.00% 0.00% U.S. Treasury Money Market Fund 0.00% 100.00% 0.00% 100.00% 0.00% ----------------- (1) Qualifying dividends represent dividends which qualify for the corporate dividends received deduction and is reflected as a percentage of "Ordinary Income Distributions".
48 INVESTMENT ADVISER Trusco Capital Management, Inc. STI Classic Funds are not deposits, are not insured or guaranteed by the FDIC or any other government agency, and are not endorsed by and do not constitute obligations of SunTrust Banks, Inc. or any other of its affiliates. Investment in the Funds involves risk, including the possible loss of principal. There is no guarantee that any STI Classic Fund will achieve its investment objective. The STI Classic Funds are advised by affiliates of SunTrust Banks, Inc. DISTRIBUTOR SEI Investments Distribution Co. This information must be preceded or accompanied by a current prospectus for each Fund described. STI CLASSIC FUNDS CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND INSTITUTIONAL SHARES INVESTMENT ADVISER: TRUSCO CAPITAL MANAGEMENT, INC. This Statement of Additional Information is not a prospectus. It is intended to provide additional information regarding the activities and operations of the Classic Institutional Money Market Funds of the STI Classic Funds (the "Trust") and should be read in conjunction with the prospectus dated October 1, 2000 for the Institutional Shares of the Trust's Classic Institutional Cash Management, Classic Institutional U.S. Government Securities, and Classic Institutional U.S. Treasury Securities Money Market Funds and the prospectus dated October 1, 2000 for the Corporate Trust Shares of the Classic Institutional U.S. Treasury Securities Money Market Fund. The prospectus may be obtained from the Trust's distributor, SEI Investments Distribution Co., Oaks, Pennsylvania 19456. TABLE OF CONTENTS PAGE THE TRUST...................................................................B-2 ADDITIONAL INFORMATION ABOUT EACH FUND......................................B-2 DESCRIPTION OF PERMITTED INVESTMENTS........................................B-3 INVESTMENT POLICIES........................................................B-12 PROPOSED FUNDAMENTAL INVESTMENT POLICIES...................................B-14 INVESTMENT ADVISER.........................................................B-15 THE ADMINISTRATOR..........................................................B-16 THE DISTRIBUTOR............................................................B-17 THE TRANSFER AGENT.........................................................B-17 THE CUSTODIAN..............................................................B-17 CODES OF ETHICS............................................................B-17 INDEPENDENT PUBLIC ACCOUNTANTS.............................................B-17 LEGAL COUNSEL..............................................................B-18 TRUSTEES AND OFFICERS OF THE TRUST.........................................B-18 PERFORMANCE INFORMATION....................................................B-20 COMPUTATION OF YIELD.......................................................B-21 CALCULATION OF TOTAL RETURN................................................B-21 ADVERTISING................................................................B-22 PURCHASING SHARES..........................................................B-22 REDEEMING SHARES...........................................................B-22 DETERMINATION OF NET ASSET VALUE...........................................B-23 TAXES......................................................................B-23 FUND TRANSACTIONS..........................................................B-24 TRADING PRACTICES AND BROKERAGE............................................B-25 DESCRIPTION OF SHARES......................................................B-27 SHAREHOLDER LIABILITY......................................................B-27 LIMITATION OF TRUSTEES' LIABILITY..........................................B-28 5% AND 25% SHAREHOLDERS....................................................B-28 EXPERTS....................................................................B-29 APPENDIX....................................................................A-1 FINANCIAL STATEMENTS........................................................F-1 B-1 THE TRUST STI Classic Funds (the "Trust") is a diversified, open-end management investment company established under Massachusetts law as a Massachusetts business trust under a Declaration of Trust dated January 15, 1992. The Declaration of Trust permits the Trust to offer separate series ("Funds") of units of beneficial interest ("shares") and different classes of shares of each Fund. Each share of each Fund represents an equal proportionate interest in that portfolio. See "Description of Shares." This Statement of Additional Information relates to shares of the Classic Institutional U.S. Treasury Money Market Fund which are offered through two separate classes (Institutional Shares and Corporate Trust Shares) and shares of the Classic Institutional Cash Management Money Market Fund and the Classic Institutional U.S. Government Securities Money Market Fund which are offered through a single class (Institutional Shares). ADDITIONAL INFORMATION ABOUT EACH FUND Each Classic Institutional Money Market Fund (each a "Fund," collectively, the "Funds") intends to comply with federal regulations applicable to money market funds using the amortized cost method for calculating net asset value, which require each Fund to invest only in U.S. dollar denominated obligations, to maintain an average maturity on a dollar-weighted basis of 90 days or less and to acquire eligible securities that present minimal credit risk and have a maturity of 397 days or less. The Classic Institutional U.S. Treasury Securities Money Market Fund seeks to manage its investments in a manner consistent with the criteria for obtaining an Aaa rating by Moody's Investors Service ("Moody's") and/or an AAA rating by Standard & Poor's Corporation ("S&P"). These requirements will also limit the Classic Institutional U.S. Treasury Securities Money Market Fund's ability to generate high current income. For a further discussion of these rules, see "Description of Permitted Investments." CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND The Classic Institutional Cash Management Money Market Fund will invest in money market instruments denominated in U.S. dollars consisting of: (i) U.S. Treasury obligations; (ii) receipts; (iii) obligations issued or guaranteed as to principal and interest by agencies and instrumentalities of the U.S. government; (iv) commercial paper issued by domestic and foreign issuers rated in the highest short-term rating category by one or more nationally recognized statistical rating organizations (an "NRSRO") (as described in the "Appendix") or, if not rated, determined by the Adviser to be of comparable quality; (v) high quality obligations (including certificates of deposit, time deposits, bankers' acceptances, Eurodollar and Yankee bank obligations) of U.S. commercial banks (including foreign branches of such banks), and U.S. and London branches of foreign banks or savings and loan and thrift institutions that are members of the Federal Reserve System, the Federal Deposit Insurance Corporation, or savings and loan associations; (vi) high quality short-term corporate obligations issued by companies with commercial paper meeting the ratings indicated in (iv) above, or, if not rated, determined by the Adviser to be of comparable quality; (vii) repurchase agreements involving such obligations; (viii) high quality obligations of supranational entities satisfying the credit ratings described in (iv) above, or, if not rated, determined by the Adviser to be of comparable quality; (ix) high quality medium term notes; (x) municipal securities; (xi) mortgage-backed securities; and (xii) asset-backed securities. The Fund may not invest more than 25% of its total assets in obligations issued by foreign branches of U.S. banks and London branches of foreign banks. The Fund may purchase securities subject to standby commitments. The Fund may also purchase restricted securities. As a money market fund, the Fund is subject to limitations on the percentage of its assets that may be invested in any one issuer and on the percentage that may be invested in securities carrying the second highest rating assigned by the requisite NRSROs. CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND The Classic Institutional U.S. Government Securities Money Market Fund will invest solely in (i) U.S. Treasury obligations; (ii) obligations issued or guaranteed as to principal and interest by agencies or instrumentalities of the U.S. government; (iii) repurchase agreements involving and of the foregoing obligations; and (iv) shares of registered money market funds that invest in the foregoing. B-2 CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND The Classic U.S. Treasury Securities Money Market Fund will invest exclusively in U.S. Treasury obligations and any repurchase agreements with dealers will be selected pursuant to guidelines adopted by the Trust's Board of Trustees and collateralized by U.S. Treasury obligations. The Fund, however, seeks to invest exclusively in securities that would qualify to be rated in the highest ratings category of an NRSRO, such as S&P or Moody's. As a result, the Fund's ability to maintain an average dollar-weighted portfolio maturity to the maximum extent permitted by Rule 2a-7 under the Investment Company Act of 1940 (the "1940") will be limited, and the Fund's performance may be affected adversely. DESCRIPTION OF PERMITTED INVESTMENTS ASSET-BACKED SECURITIES Asset-backed securities are securities backed by non-mortgage assets such as company receivables, truck and auto loans, leases and credit card receivables. Other asset-backed securities may be created in the future. These securities may be traded over-the-counter and typically have a short-intermediate maturity structure depending on the pay-down characteristics of the underlying financial assets which are passed through to the security holder. These securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in the underlying pool of assets. Asset-backed securities may also be debt obligations, which are known as collateralized obligations and are generally issued as the debt of a special purpose entity, such as a trust, organized solely for the purpose of owning these assets and issuing debt obligations. Asset-backed securities are not issued or guaranteed by the U.S. government, its agencies or instrumentalities; however, the payment of principal and interest on such obligations may be guaranteed up to certain amounts and, for a certain period, by a letter of credit issued by a financial institution (such as a bank or insurance company) unaffiliated with the issuers of such securities. The purchase of asset-backed securities raises risk considerations peculiar to the financing of the instruments underlying such securities. For example, there is a risk that another party could acquire an interest in the obligations superior to that of the holders of the asset-backed securities. There is also the possibility that recoveries on repossessed collateral may not, in some cases, be available to support payments on those securities. Asset-backed securities entail pre-payment risk, which may vary depending on the type of asset, but is generally less than the pre-payment risk associated with mortgage-backed securities. In addition, credit card receivables are unsecured obligations of the card holder. The market for asset-backed securities is at a relatively early stage of development. Accordingly, there may be a limited secondary market for such securities. BANK INVESTMENT CONTRACTS ("BICs") BICs are contracts issued by U.S. banks and savings and loans institutions. Pursuant to such contracts, the Institutional Cash Management Money Market Fund makes cash contributions to a deposit fund of the general account of the bank or savings and loan institution. The bank or savings and loan institution then credits to the Fund on a monthly basis guaranteed interest at either a fixed, variable or floating rate. A BIC provides that this guaranteed interest will not be less than a certain minimum rate. A BIC is a general obligation of the issuing bank or savings and loan institution and not a separate account. The purchase price paid for a BIC becomes part of the general assets of the issuer, and the contract is paid at maturity from the general assets of the issuer. BICs are generally not assignable or transferable without the permission of the issuing bank or savings and loan institution. For this reason, an active secondary market in BICs currently does not exist. Therefore, BICs are B-3 considered to be illiquid investments. The Fund may invest up to an aggregate amount of 5% of its total assets in BICs. BANKERS' ACCEPTANCES Bankers' acceptances are bills of exchange or time drafts drawn on and accepted by a commercial bank. Bankers' acceptances are used by corporations to finance the shipment and storage of goods. Maturities are generally six months or less. CERTIFICATES OF DEPOSIT Certificates of deposit are interest bearing instruments with a specific maturity. They are issued by banks and savings and loan institutions in exchange for the deposit of funds and normally can be traded in the secondary market prior the maturity. Certificates of deposit with penalties for early withdrawal will be considered liquid. COMMERCIAL PAPER Commercial paper is a term used to describe unsecured short-term promissory notes issued by banks, municipalities, corporations and other entities. Maturities on these issues vary from a few to 270 days. FOREIGN SECURITIES Foreign securities may include U.S. dollar denominated obligations or securities of foreign issuers. Possible investments include equity securities of foreign entities, obligations of foreign branches of U.S. banks and of foreign banks, including, without limitation, European Certificates of Deposit, European Time Deposits, European Bankers' Acceptances, Canadian Time Deposits and Yankee Certificates of Deposit, and investments in Canadian Commercial Paper, Europaper and foreign securities. These instruments may subject the Fund to investment risks that differ in some respects from those related to investments in obligations of U.S. domestic issuers. Such risks include future adverse political and economic developments, the possible imposition of withholding taxes on interest or other income, possible seizure, nationalization, or expropriation of foreign deposits, the possible establishment of exchange controls or taxation at the source, greater fluctuations in value due to changes in exchange rates, or the adoption of other foreign governmental restrictions which might adversely affect the payment of principal and interest on such obligations. Such investments may also entail higher custodial fees and sales commissions than domestic investments. Foreign issuers of securities or obligations are often subject to accounting treatment and engage in business practices different from those respecting domestic issuers of similar securities or obligations. Foreign branches of U.S. banks and foreign banks may be subject to less stringent reserve requirements than those applicable to domestic branches of U.S. banks. In making investment decisions for the Fund, the Adviser evaluates the risks associated with investing Fund assets in a particular country, including risks stemming from a country's financial infrastructure and settlement practices; the likelihood of expropriation, nationalization or confiscation of invested assets; prevailing or developing custodial practices in the country; the country's laws and regulations regarding the safekeeping, maintenance and recovery of invested assets, the likelihood of government-imposed exchange control restrictions which could impair the liquidity of Fund assets maintained with custodians in that country, as well as risks from political acts of foreign governments ("country risks"). Of course, the Adviser cannot assure that the Fund will not suffer losses resulting from investing in foreign countries. Holding Fund assets in foreign countries through specific foreign custodians presents additional risks, including but not limited to the risks that a particular foreign custodian or depository will not exercise proper care with respect to Fund assets or will not have the financial strength or adequate practices and procedures to properly safeguard Fund assets. B-4 GUARANTEED INVESTMENT CONTRACTS ("GICs") GICs are contracts issued by U.S. insurance companies. Pursuant to such contracts, the Institutional Cash Management Money Market Fund makes cash contributions to a deposit fund of the insurance company's general account. The insurance company then credits to the Fund on a monthly basis guaranteed interest at either a fixed, variable or floating rate. A GIC provides that this guaranteed interest will not be less than a certain minimum rate. A GIC is a general obligation of the issuing insurance company and not a separate account. The purchase price paid for a GIC becomes part of the general assets of the issuer, and the contract is paid at maturity from the general assets of the issuer. Generally, GICs are not assignable or transferable without the permission of the issuing insurance company. For this reason, an active secondary market in GICs does not currently exist and GICs are generally considered to be illiquid investments. However, the Fund will treat GICs with seven-day unconditional demand features as liquid investments. ILLIQUID SECURITIES Illiquid securities are securities that cannot be disposed of within seven days at approximately the price at which they are being carried on a Fund's books. Rule 144A securities and Section 4(2) commercial paper that meet the criteria established by the Board of Trustees of the Trust may be considered liquid. See "Restricted Securities". INVESTMENT COMPANY SHARES Investment companies typically incur fees that are separate from those fees incurred directly by the Funds. A Fund's purchase of such investment company securities results in the layering of expenses, such that Shareholders would indirectly bear a proportionate share of the operating expenses of such investment companies, including advisory fees. MEDIUM NOTES Medium term notes are periodically or continuously offered corporate or agency debt that differs from traditionally underwritten corporate bonds only in the process by which they are issued. MORTGAGE-BACKED SECURITIES Mortgage-backed securities are instruments that entitle the holder to a share of all interest and principal payments from mortgages underlying the security. The mortgages backing these securities include conventional thirty-year fixed rate mortgages, graduated payment mortgages, adjustable rate mortgages, and floating mortgages. GOVERNMENT PASS-THROUGH SECURITIES These are securities that are issued or guaranteed by a U.S. government agency representing an interest in a pool of mortgage loans. The primary issuers or guarantors of these mortgage-backed securities are the Government National Mortgage Association ("GNMA"), Fannie Mae, and the Federal Home Loan Mortgage Corporation ("FHLMC"). Fannie Mae and FHLMC obligations are not backed by the full faith and credit of the U.S. government as GNMA certificates are, but Fannie Mae and FHLMC securities are supported by the instrumentalities' right to borrow from the U.S. Treasury. GNMA, Fannie Mae, and FHLMC each guarantees timely distributions of interest to certificate holders. GNMA and Fannie Mae also guarantee timely distributions of scheduled principal. In the past, FHLMC has only guaranteed the ultimate collection of principal of the underlying mortgage loan; however, FHLMC now issues mortgage-backed securities (FHLMC Gold PCS) which also guarantee timely payment of monthly principal reductions. Government and private guarantees do not extend to the securities' value, which is likely to vary inversely with fluctuations in interest rates. B-5 Obligations of GNMA are backed by the full faith and credit of the U.S. government. Obligations of Fannie Mae and FHLMC are not backed by the full faith and credit of the U.S. government but are considered to be of high quality since they are considered to be instrumentalities of the United States. The market value and interest yield of these mortgage-backed securities can vary due to market interest rate fluctuations and early pre-payments of underlying mortgages. These securities represent ownership in a pool of federally insured mortgage loans with a maximum maturity of 30 years. However, due to scheduled and unscheduled principal payments on the underlying loans, these securities have a shorter average maturity and, therefore, less principal volatility than a comparable 30-year bond. Since pre-payment rates vary widely, it is not possible to accurately predict the average maturity of a particular mortgage-backed security. The scheduled monthly interest and principal payments relating to mortgages in the pool will be "passed through" to investors. Government mortgage-backed securities differ from conventional bonds in that principal is paid back to the certificate holders over the life of the loan rather than at maturity. As a result, there will be monthly scheduled payments of principal and interest. In addition, there may be unscheduled principal payments representing pre-payments on the underlying mortgages. Although these securities may offer yields higher than those available from other types of U.S. government securities, mortgage-backed securities may be less effective than other types of securities as a means of "locking in" attractive long-term rates because of the pre-payment feature. For instance, when interest rates decline, the value of these securities likely will not rise as much as comparable debt securities due to the pre-payment feature. In addition, these pre-payments can cause the price of a mortgage-backed security originally purchased at a premium to decline in price to its par value, which may result in a loss. PRIVATE PASS-THROUGH SECURITIES Private pass-through securities are mortgage-backed securities issued by a non-governmental agency, such as a trust. While they are generally structured with one or more types of credit enhancement, private pass-through securities generally lack a guarantee by an entity having the credit status of a governmental agency or instrumentality. The two principal types of private mortgage-backed securities are collateralized mortgage obligations ("CMOs") and real estate mortgage investment conduits ("REMICs"). CMOs CMOs are securities collateralized by mortgages, mortgage pass-throughs, mortgage pay-through bonds (bonds representing an interest in a pool of mortgages where the cash flow generated from the mortgage collateral pool is dedicated to bond repayment), and mortgage-backed bonds (general obligations of the issuers payable out of the issuers' general funds and additionally secured by a first lien on a pool of single family detached properties). CMOs are rated in one of the two highest categories by S&P or Moody's. Many CMOs are issued with a number of classes or series which have different expected maturities. Investors purchasing such CMOs are credited with their portion of the scheduled payments of interest and principal on the underlying mortgages plus all unscheduled pre-payments of principal based on a predetermined priority schedule. Accordingly, the CMOs in the longer maturity series are less likely than other mortgage pass-throughs to be prepaid prior to their stated maturity. Although some of the mortgages underlying CMOs may be supported by various types of insurance, and some CMOs may be backed by GNMA certificates or other mortgage pass-throughs issued or guaranteed by U.S. government agencies or instrumentalities, the CMOs themselves are not generally guaranteed. REMICs REMICs are private entities formed for the purpose of holding a fixed pool of mortgages secured by an interest in real property. REMICs are similar to CMOs in that they issue multiple classes of securities and are rated in one of the two highest categories by S&P or Moody's. Investors may purchase beneficial interests in REMICs, which are known as "regular" interests, or "residual" interests. Guaranteed REMIC pass-through certificates ("REMIC Certificates") issued by Fannie Mae or FHLMC represent beneficial ownership interests in a REMIC trust consisting principally of mortgage loans or Fannie Mae, FHLMC or GNMA-guaranteed mortgage pass-through certificates. For FHLMC REMIC Certificates, FHLMC B-6 guarantees the timely payment of interest. GNMA REMIC Certificates are backed by the full faith and credit of the U.S. government. STRIPPED MORTGAGE-BACKED SECURITIES Stripped mortgage-backed securities are securities that are created when a U.S. government agency or a financial institution separates the interest and principal components of a mortgage-backed security and sells them as individual securities. The holder of the "principal-only" security (PO) receives the Principal payments made by the underlying mortgage-backed security, while the holder of the "interest-only" security (IO) receives interest payments from the same underlying security. The prices of stripped mortgage-backed securities may be particularly affected by changes in interest rates. As interest rates fall, pre-payment rates tend to increase, which tends to reduce prices of IOs and increase prices of POs. Rising interest rates can have the opposite effect. DETERMINING MATURITIES OF MORTGAGE-BACKED SECURITIES Due to pre-payments of the underlying mortgage instruments, mortgage-backed securities do not have a known actual maturity. In the absence of a known maturity, market participants generally refer to an estimated average life. The Adviser believes that the estimated average life is the most appropriate measure of the maturity of a mortgage-backed security. Accordingly, in order to determine whether such security is a permissible investment for a Fund, it will be deemed to have a remaining maturity equal to its average life as estimated by the Adviser. An average life estimate is a function of an assumption regarding anticipated pre-payment patterns. The assumption is based upon current interest rates, current conditions in the relevant housing markets and other factors. The assumption is necessarily subjective, and thus different market participants could produce somewhat different average life estimates with regard to the same security. There can be no assurance that the average life as estimated by the Adviser will be the actual average life. MUNICIPAL SECURITIES The Institutional Cash Management Money Market Fund may invest in municipal securities. The two principal classifications of municipal securities are "general obligation" and "revenue" issues. General obligation issues are issues involving the credit of an issuer possessing taxing power and are payable from the issuer's general unrestricted revenues, although the characteristics and method of enforcement of general obligation issues may vary according to the law applicable to the particular issue. Revenue issues are payable only from the revenues derived from a particular facility or class of facilities or other specific revenue source. A Fund may also invest in "moral obligation" issues, which are normally issued by special purpose authorities. Moral obligation issues are not backed by the full faith and credit of the state and are generally backed by the agreement of the issuing authority to request appropriations from the state legislative body. Municipal securities include debt obligations issued by governmental entities to obtain funds for various public purposes, such as the construction of a wide range of public facilities, the refunding of outstanding obligations, the payment of general operating expenses, and the extension of loans to other public institutions and facilities. Certain private activity bonds that are issued by or on behalf of public authorities to finance various privately-owned or operated facilities are included within the term "Municipal Securities." Private activity bonds are generally revenue bonds, the credit and quality of which are directly related to the credit of the private user of the facilities. Municipal securities may also include general obligation notes, tax anticipation notes, bond anticipation notes, revenue anticipation notes, project notes, certificates of indebtedness, demand notes, tax-exempt commercial paper, construction loan notes and other forms of short-term, tax-exempt loans. Such instruments are issued with a short-term maturity in anticipation of the receipt of tax funds, the proceeds of bond placements or other revenues. Project notes are issued by a state or local housing agency and are sold by the Department of Housing and Urban Development. While the issuing agency has the primary obligation with respect to its project notes, they are also secured by the full faith and credit of the United States through agreements with the issuing authority which provide B-7 that, if required, the federal government will send the issuer an amount equal to the principal of and interest on the project notes. The quality of municipal securities, both within a particular classification and between classifications, will vary, and the yields on municipal securities depend upon a variety of factors, including general money market conditions, the financial condition of the issuer (or other entity whose financial resources are supporting the securities), general conditions of the municipal bond market, the size of a particular offering, the maturity of the obligation and the rating(s) of the issue. In this regard, it should be emphasized that the ratings of any NRSRO are general and are not absolute standards of quality. Municipal securities with the same maturity, interest rate and rating(s) may have different yields, while municipal securities of the same maturity and interest rate with different rating(s) may have the same yield. An issuer's obligations under its municipal securities are subject to the provisions of bankruptcy, insolvency, and other laws affecting the rights and remedies of creditors, such as the Federal Bankruptcy Code, and laws, if any, which may be enacted by Congress or state legislatures extending the time for payment of principal or interest, or both, or imposing other constraints upon the enforcement of such obligations or upon the ability of municipalities to levy taxes. The power or ability of an issuer to meet its obligations for the payment of interest on and principal of its municipal securities may be materially adversely affected by litigation or other conditions. MUNICIPAL NOTE RATINGS: Moody's highest rating for state and municipal and other short-term notes is MIG-1 and VMIG-1. Short-term municipal securities rated MIG-1 or VMIG-1 are of the best quality. They have strong protection from established cash flows of funds for their servicing or from established and broad-based access to the market for refinancing or both. Short-term municipal securities rated MIG-2 and VMIG-2 are of high quality. Margins of protection are ample although not so large as in the preceding group. An S&P note rating reflects the liquidity concerns and market access risks unique to notes. Notes due in 3 years or less will likely receive a long-term debt rating. The following criteria will be used in making that assessment. - Amortization schedule (the larger the final maturity relative to other maturities the more likely it will be treated as a note). - Source of payment (the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note). Note rate symbols are as follows: SP-1. Very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. SP-2. Satisfactory capacity to pay principal and interest. OTHER INVESTMENTS The Funds are not prohibited from investing in obligations of banks that are clients of SEI Investments Company ("SEI Investments"), the parent company of the Trust's administrator and the distributor. The purchase of shares of a Fund by such banks or by their customers will not be a consideration in determining which bank obligations a Fund may purchase. However, the Funds will not purchase obligations issued by the Adviser. RECEIPTS Receipts are interests in separately traded interest and principal component parts of U.S. Treasury obligations that are issued by banks and brokerage firms and are created by depositing U.S. Treasury obligations into a special account at a custodian bank. The custodian holds the interest and principal payments for the benefit of the registered B-8 owners of the certificates or receipts. The custodian arranges for the issuance of the certificates or receipts evidencing ownership and maintains the register. Receipts are sold as zero coupon securities which means that they are sold at a substantial discount and redeemed at face value at their maturity date without interim cash payments of interest or principal. This discount is amortized over the life of the security and such amortization will constitute the income earned on the security for both accounting and tax purposes. Because of these features, receipts may be subject to greater price volatility than interest paying U.S. Treasury obligations. See also "Taxes." REPURCHASE AGREEMENTS Each Fund may enter into repurchase agreements. Repurchase agreements are agreements by which a person (E.G., a Fund) obtains a security and simultaneously commits to return the security to the seller (a primary securities dealer as recognized by the Federal Reserve Bank of New York or a national member bank as defined in Section 3(d)(1) of the Federal Deposit Insurance Act, as amended) at an agreed-upon price (including principal and interest) on an agreed-upon date within a number of days (usually not more than seven) from the date of purchase. The resale price reflects the purchase price plus an agreed upon market rate of interest which is unrelated to the coupon rate or maturity of the underlying security. A repurchase agreement involves the obligation of the seller to pay the agreed upon price, which obligation is, in effect, secured by the value of the underlying security. Repurchase agreements are considered to be loans by a Fund for purposes of its investment limitations. The repurchase agreements entered into by a Fund will provide that the underlying security at all times shall have a value at least equal to 102% of the resale price stated in the agreement (the Adviser monitors compliance with this requirement). Under all repurchase agreements entered into by a Fund, the custodian or its agent must take possession of the underlying collateral. However, if the seller defaults, a Fund could realize a loss on the sale of the underlying security to the extent that the proceeds of the sale including accrued interest are less than the resale price provided in the agreement including interest. In addition, even though the Bankruptcy Code provides protection for most repurchase agreements, if the seller should be involved in bankruptcy or insolvency proceedings, a Fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if a Fund is treated as an unsecured creditor and required to return the underlying security to the seller's estate. RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS Investments by a money market fund are subject to limitations imposed under regulations adopted by the U.S. Securities and Exchange Commission. Under these regulations, money market funds may only acquire obligations that present minimal credit risk and that are "eligible securities," which means they are (i) rated, at the time of investment, by at least two NRSROs (one if it is the only organization rating such obligation) in the highest rating category or, if unrated, determined to be of comparable quality (a "first tier security"), or (ii) rated according to the foregoing criteria in the second highest rating category or, if unrated, determined to be of comparable quality ("second tier security"). A security is not considered to be unrated if its issuer has outstanding obligations of comparable priority and securities that have a short-term rating. In the case of taxable money market funds, investments in second tier securities are subject to the further constrains in that (i) no more than 5% of a Fund's assets may be invested in second tier securities and (ii) any investment in the securities of any one such issuer is limited to the greater of 1% of the Fund's total assets or $1 million. A taxable money market fund may also hold more than 5% of its assets in first tier secretes of a single issuer for three "business days" (that is, any day other than a Saturday, Sunday or customary business holiday). In the event that the security owned by a Fund is downgraded below the stated rating categories, the Adviser will review and take appropriate action with regard to the security. RESTRICTED SECURITIES Restricted securities are securities that may not be sold to the public without registration under the Securities Act of 1933 (the "1933 Act") absent an exemption from registration. The Funds may invest in restricted securities, and each Fund may invest up to 10% of its net assets in illiquid securities, subject to each Fund's investment limitations on the purchase of illiquid securities. Restricted securities, including securities eligible for re-sale under 1933 Act Rule 144A, that are determined to be liquid are not subject to this limitation. This determination is to be made by the B-9 Fund's Adviser pursuant to guidelines adopted by the Board of Trustees. Under these guidelines, the Adviser will consider the frequency of trades and quotes for the security, the number of dealers in, and potential purchasers for, the securities, dealer undertakings to make a market in the security, and the nature of the security and of the marketplace trades. In purchasing such restricted securities, the Adviser intends to purchase securities that are exempt from registration under Rule 144A under the 1933 Act. SECURITIES LENDING The Funds may lend securities pursuant to agreements which require that the loans be continuously secured by collateral at all times equal to 100% of the market value of the loaned securities which consists of cash, securities of the U.S. government or its agencies, or any combination of cash and such securities. Such loans will not be made if, as a result, the aggregate amount of all outstanding securities loans for a Fund exceed one-third of the value of the Fund's total assets taken at fair market value. A Fund will continue to receive interest on the securities lent while simultaneously earning interest on the investment of the cash collateral in U.S. government securities. However, a Fund will normally pay lending fees to such broker-dealers and related expenses from the interest earned on invested collateral. There may be risks of delay in receiving additional collateral or risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the securities fail financially. However, loans are made only to borrowers deemed by the Adviser to be of good standing and when, in the judgment of the Adviser, the consideration which can be earned currently from such securities loans justifies the attendant risk. Any loan may be terminated by either party upon reasonable notice to the other party. The Funds may use the Distributor or a broker-dealer affiliate of the Adviser as a broker in these transactions. STANDBY COMMITMENTS AND PUTS The Institutional Cash Management Money Market Fund may purchase securities at a price which would result in a yield-to-maturity lower than that generally offered by the seller at the time of purchase when it can simultaneously acquire the right to sell the securities back to the seller, the issuer, or a third party (the "writer") at an agreed-upon price at any time during a stated period or on a certain date. Such a right is generally denoted as a "standby commitment" or a "put." The purpose of engaging in transactions involving puts is to maintain flexibility and liquidity to permit the Fund to meet redemptions and remain as fully invested as possible in municipal securities. The Fund reserves the right to engage in put transactions. The right to put the securities depends on the writer's ability to pay for the securities at the time the put is exercised. The Institutional Cash Management Money Market Fund would limit its put transactions to institutions which the Adviser believes present minimal credit risks, and the Adviser would use its best efforts to initially determine and continue to monitor the financial strength of the sellers of the options by evaluating their financial statements and such other information as is available in the marketplace. It may, however be difficult to monitor the financial strength of the writers because adequate current financial information may not be available. In the event that any writer is unable to honor a put for financial reasons, the Fund would be a general creditor (I.E., on a parity with all other unsecured creditors) of the writer. Furthermore, particular provisions of the contract between the Fund and the writer may excuse the writer from repurchasing the securities; for example, a change in the published rating of the underlying securities or any similar event that has an adverse effect on the issuer's credit or a provision in the contract that the put will not be exercised except in certain special cases, for example, to maintain portfolio liquidity. The Fund could, however, at any time sell the underlying portfolio security in the open market or wait until the portfolio security matures, at which time it should realize the full par value of the security. The securities purchased subject to a put may be sold to third persons at any time, even though the put is outstanding, but the put itself, unless it is an integral part of the security as originally issued, may not be marketable or otherwise assignable. Therefore, the put would have value only to the Fund. Sale of the securities to third parties or lapse of time with the put unexercised may terminate the right to put the securities. Prior to the expiration of any put option, the Fund could seek to negotiate terms for the extension of such an option. If such a renewal cannot be negotiated on terms satisfactory to the Fund, the Fund could, of course, sell the portfolio security. The maturity of the underlying security will generally be different from that of the put. There will be no limit to the percentage of portfolio securities that the Fund may purchase subject to a standby commitment or put, but the amount paid directly B-10 or indirectly for all standby commitments or puts which are not integral parts of the security as originally issued held in the Fund will not exceed 1/2 of 1% of the value of its total assets of such Fund calculated immediately after any such put is acquired. STRIPS Each Fund may invest in Separately Traded Interest and Principal Securities ("STRIPS"), which are component parts of U.S. Treasury securities traded through the Federal Book-Entry System. The Adviser will only purchase STRIPS that it determines are liquid or, if illiquid, do not violate each Fund's investment policy concerning investments in illiquid securities. Consistent with Rule 2a-7 under the Investment Company Act of 1940, as amended, the Adviser will only purchase STRIPS for the Funds that have a remaining maturity of 397 days or less; therefore, the Funds currently may only purchase interest component parts of U.S. Treasury securities. While there is no limitation on the percentage of a Fund's assets that may be comprised of STRIPS, the Adviser will monitor the level of such holdings to avoid the risk of impairing Shareholders' redemption rights and of deviations in the value of shares of the Funds. SUPRANATIONAL AGENCY OBLIGATIONS The Institutional Cash Management Money Market Fund may purchase obligations of supranational agencies. Currently the Fund intends to invest only in obligations issued or guaranteed by the Asian Development Bank, Inter-American Development Bank, International Bank for Reconstruction and Development (World Bank), African Development Bank, European Coal and Steel Community, European Economic Community, European Investment Bank and the Nordic Investment Bank. TAXABLE MUNICIPAL SECURITIES The Institutional Cash Management Money Market Fund may invest in taxable municipal securities. Taxable municipal securities are municipal securities the interest on which is not exempt from federal income tax. Taxable municipal securities include "private activity bond" that are issued by or on behalf of states or political subdivisions thereof to finance privately-owned or operated facilities for business and manufacturing, housing, sports, and pollution control and to finance activities of and facilities for charitable institutions. Private activity bonds are also used to finance public facilities such as airports, mass transit systems, ports, parking lots, and low income housing. The payment of the principal and interest on private activity bonds is not backed by a pledge of tax revenues, and is dependent solely on the ability of the facility's user to meet its financial obligations, and may be secured by a pledge of real and personal property so financed. Interest on these bonds may not be exempt from federal income tax. U.S. GOVERNMENT AGENCY SECURITIES Certain investments of the Institutional Cash Management Money Market Fund and the U.S. Government Securities Money Market Fund may include U.S. Government Agency Securities. Agencies of the U.S. government which issue obligations consist of, among others, the Export Import Bank of the United States, Farmers Home Administration, Federal Farm Credit Bank, Federal Housing Administration, Government National Mortgage Association ("GNMA"), Maritime Administration, Small Business Administration, and The Tennessee Valley Authority. Obligations of instrumentalities of the U.S. government include securities issued by, among others, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land Banks, Fannie Mae, and the U.S. Postal Service as well as government trust certificates. Some of these securities are supported by the full faith and credit of the U.S. Treasury, others are supported by the right of the issuer to borrow from the Treasury and still others are supported only by the credit of the instrumentality. Guarantees of principal by agencies or instrumentalities of the U.S. government may be a guarantee of payment at the maturity of the obligation so that in the event of a default prior to maturity there might not be a market and thus no means of realizing the value of the obligation prior to maturity. B-11 U.S. TREASURY OBLIGATIONS U.S. Treasury obligations consist of bills, notes and bonds issued by the U.S. Treasury and separately traded interest and principal component parts of such obligations that are transferable through the Federal book-entry system known as Coupon Under Book Entry Safekeeping ("CUBES") or STRIPS. VARIABLE AND FLOATING RATE INSTRUMENTS Certain obligations may carry variable or floating rates of interest, and may involve a conditional or unconditional demand feature. Such instruments bear interest at rates which are not fixed, but which vary with changes in specified market rates or indices. The interest rates on these securities may be reset daily, weekly, quarterly or some other reset period, and may have a floor or ceiling on interest rate changes. There is a risk that the current interest rate on such obligations may not accurately reflect existing market interest rates. A demand instrument with a demand notice exceeding seven days may be considered illiquid if there is no secondary market for such security. VARIABLE RATE MASTER DEMAND NOTES The Institutional Cash Management Money Market Fund may invest in variable rate master demand notes which may or may not be backed by bank letters of credit. These notes permit the investment of fluctuating amounts at varying market rates of interest pursuant to direct arrangements between the Fund, as lender, and the borrower. Such notes provide that the interest rate on the amount outstanding varies on a daily, weekly or monthly basis depending upon a stated short-term interest rate index. Both the lender and the borrower have the right to reduce the amount of outstanding indebtedness at any time. There is no secondary market for the notes and it is not generally contemplated that such instruments will be traded. The quality of the note or the underlying credit must, in the opinion of the Adviser, be equivalent to the ratings applicable to permitted investments for the Fund. The Adviser will monitor on an ongoing basis the earning power, cash flow and liquidity ratios of the issuers of such instruments and will similarly monitor the ability of an issuer of a demand instrument to pay principal and interest on demand. ZERO COUPON OBLIGATIONS Zero coupon obligations are debt securities that do not bear any interest, but instead are issued at a deep discount from par. The value of a zero coupon obligations increases over time to reflect the interest accrued. Such obligations will not result in the payment of interest until maturity, and will have greater price volatility than similar securities that are issued at par and pay interest periodically. INVESTMENT POLICIES FUNDAMENTAL POLICIES The following are fundamental policies of each Fund and cannot be changed with respect to a Fund without the consent of the holders of a majority of a Fund's outstanding shares. The terms "a majority of the outstanding shares" of a Fund means the vote of the lesser of (i) 67% or more of the shares of such Fund present at a meeting, if the holders of more than 50% of the outstanding shares of such Fund are present or represented by proxy or (ii) more than 50% of the outstanding shares of such Fund. A Fund may not: 1. Acquire more than 10% of the voting securities of any one issuer. 2. Invest in companies for the purpose of exercising control. B-12 3. Borrow money except for temporary or emergency purposes and then only in an amount not exceeding one-third of the value of total assets. Any borrowing will be done from a bank and, to the extent that such borrowing exceeds 5% of the value of the Fund's assets, asset coverage of at least 300% is required. In the event that such asset coverage shall at any time fall below 300%, the Fund shall, within three days thereafter or such longer period as the Securities and Exchange Commission ("SEC") may prescribe by rules and regulations, reduce the amount of its borrowings to such an extent that the asset coverage of such borrowings shall be at least 300%. This borrowing provision is included solely to facilitate the orderly sale of portfolio securities to accommodate heavy redemption requests if they should occur and is not for investment purposes. All borrowings in excess of 5% of the value of a Fund's total assets will be repaid before making additional investments and any interest paid on such borrowings will reduce income. 4. Make loans, except that (a) a Fund may purchase or hold debt instruments in accordance with its investment objective and policies; (b) a Fund may enter into repurchase agreements; and (c) a Fund may engage in securities lending as described in the prospectus and in this Statement of Additional Information. 5. Pledge, mortgage or hypothecate assets except to secure temporary borrowings permitted by paragraph 3 above in aggregate amounts not to exceed 10% of the Fund's total assets, taken at current value at the time of the incurrence of such loan, except as permitted with respect to securities lending. 6. Purchase or sell real estate, real estate limited partnership interests, commodities or commodities contracts and interests in a pool of securities that are secured by interests in real estate. However, subject to their permitted investment spectrum, any Fund may invest in companies which invest in real estate commodities or commodities contracts. 7. Make short sales of securities, maintain a short position or purchase securities on margin, except that the Trust may obtain short-term credits as necessary for the clearance of security transactions. 8. Act as an underwriter of securities of other issuers except as it may be deemed an underwriter in selling a security. 9. Purchase securities of other investment companies except for money market funds and CMOs and REMICs deemed to be investment companies and then only as permitted by the 1940 Act and the rules and regulations thereunder. Under these rules and regulations, a Fund is prohibited from acquiring the securities of other investment companies if, as a result of such acquisition, the Fund owns more than 3% of the total voting stock of the company; securities issued by any one investment company represent more than 5% of the total assets of a Fund; or securities (other than treasury stock) issued by all investment companies represent more than 10% of the total assets of the Fund. 10. Issue senior securities (as defined in the 1940 Act) except in connection with permitted borrowings as described above or as permitted by rule, regulation or order of the SEC. 11. Purchase securities of any issuer (except securities issued or guaranteed by the United States, its agencies or instrumentalities and repurchase agreements involving such securities) if as a result more than 5% of the total assets of a Fund would be invested in the securities of such issuer; provided, however, that a Fund may invest up to 25% of its total assets without regard to this restriction as permitted by applicable law. 12. Purchase any securities which would cause more than 25% of the total assets of a Fund to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that this limitation does not apply to investments in obligations issued or guaranteed by the U.S. government or its agencies and instrumentalities, repurchase agreements involving such securities or tax-exempt securities issued by governments or political subdivisions of governments and, with respect to only the Classic Institutional Cash Management Money Market Fund, obligations issued by domestic branches of U.S. banks or U.S. branches of foreign banks subject to the same regulations as U.S. banks. B-13 For purposes of this limitation, (i) utility companies will be divided according to their services, for example, gas, gas transmission, electric and telephone will each be considered a separate industry; (ii) financial service companies will be classified according to the end users of their services, for example, automobile finance, bank finance and diversified finance will each be considered a separate industry; and (iii) supranational entities will be considered to be a separate industry. PROPOSED FUNDAMENTAL INVESTMENT POLICIES On August 15, 2000, the Board of Trustees recommended that shareholders of each Fund approve certain revisions to each Fund's fundamental investment policies. These revised policies, which are listed below, if approved, would replace each of the fundamental policies listed above. Shareholders of record on August 16, 2000 will be asked to approve the revised policies at shareholders meeting scheduled for October 27, 2000. If these revised policies are approved, they will take effect immediately. The Fund will update this SAI if the revised policies are not approved by the shareholders of each Fund. No Fund may: 1. With respect to 75% of each Fund's total assets, invest more than 5% of the value of the total assets of a Fund in the securities of any one issuer (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities, repurchase agreements involving such securities, and securities issued by investment companies), or purchase the securities of any one issuer if such purchase would cause more than 10% of the voting securities of such issuer to be held by a Fund. 2. Borrow money in an amount exceeding 33 1/3% of the value of its total assets, provided that, for the purposes of this limitation, investment strategies that either obligate a Fund to purchase securities or require a Fund to segregate assets are not considered to be borrowing. Asset coverage of at least 300% is required for all borrowing, except where the Fund has borrowed money for temporary purposes (less than 60 days), and in an amount not exceeding 5% of its total assets. 3. Underwrite securities issued by others, except to the extent that the Fund may be considered an underwriter within the meaning of the Securities Act of 1933 in the sale of portfolio securities. 4. Issue senior securities (as defined in the Investment Company Act of 1940 (the "1940 Act")), except as permitted by rule, regulation or order of the Securities and Exchange Commission. 5. Purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities and securities issued by investment companies) if, as a result, more than 25% of the Fund's total assets would be invested in the securities of companies who principal business activities are in the same industry. 5.1 With respect to the money market funds, this limitation does not apply to obligations issued by domestic branches of U.S. banks or U.S. branches of foreign banks subject to the same regulations as U.S. banks. B-14 6. Purchase or sell real estate, unless acquired as a result of ownership of securities or other instruments (but this shall not prevent a Fund from investing in securities or other instruments either issued by companies that invest in real estate, backed by real estate or securities of companies engaged in the real estate business). 7. Purchase or sell physical commodities, unless acquired as a result of ownership of securities or other instruments. 8. Make loans, except that a Fund may: (i) purchase or hold debt instruments in accordance with its investment objectives and policies; (ii) enter into repurchase agreements; and (iii) lend its portfolio securities. NON-FUNDAMENTAL POLICIES No Fund may purchase or hold illiquid securities, I.E., securities that cannot be disposed of for their approximate carrying value in seven days or less (which term includes repurchase agreements and time deposits maturing in more than seven days) if, in the aggregate, more than 10% of its net assets would be invested in illiquid securities. The foregoing percentages, except with respect to holding illiquid securities, will apply at the time of the purchase of a security and shall not be considered violated unless an excess occurs or exists immediately after and as a result of a purchase of such security. INVESTMENT ADVISER The Trust and Trusco Capital Management, Inc. (the "Adviser") have entered into an advisory agreement (the "Advisory Agreement"). As of July 1, 2000, the Adviser had $47 billion in assets. The Adviser is an indirect wholly-owned subsidiary of SunTrust Banks, Inc. ("SunTrust"), a bank holding company. The Advisory Agreement provides that the Adviser shall be liable to the Trust and/or its shareholders, for willful misconduct, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard of its obligations or duties thereunder. The Advisory Agreement provides that if, for any fiscal year, the ratio of expenses of a Fund (including amounts payable to the Adviser but excluding interest, taxes, brokerage, litigation, and other extraordinary expenses) exceeds limitations established by certain states, the Adviser and/or the administrator will bear the amount of such excess. The Adviser will not be required to bear expenses of the Trust to an extent which would result in a Fund's inability to qualify as a regulated investment company under provisions of the Internal Revenue Code. The continuance of the Advisory Agreement, after the first two years, must be specifically approved at least annually (i) by the vote of the Trustees, and (ii) by the vote of a majority of the Trustees who are not parties to the Advisory Agreement or "interested persons" of any party thereto, cast in person at a meeting called for the purpose of voting on such approval. The Advisory Agreement will terminate automatically in the event of its assignment, and is terminable at any time without penalty by the Trustees of the Trust or, with respect to the Funds, by a majority of the outstanding shares of the Funds, on not less than 30 days' nor more than 60 days' written notice to the Adviser, or by the Adviser on 90 days' written notice to the Trust. Prior to May 17, 1999, Crestar Asset Management Company served as the investment adviser to the predecessor of the Classic Institutional Cash Management Money Market Fund. Prior to May 24, 1999, Crestar Asset Management Company served as the investment adviser to the predecessor of the Classic Institutional U.S. Government Money Market Fund. B-15 For the fiscal years ended May 31, 2000, 1999, and 1998, the Funds paid the following advisory fees:
FEES PAID FEES WAIVED OR REIMBURSED FUND ----------------------------------------- -------------------------------------- 2000 1999 1998 2000 1999 1998 ------------------------------------- ---------- ---------- -------- -------- -------- -------- Classic Institutional Cash $4,393,000 $1,377,839 $444,000 $679,000 $799,660 $704,000 Management Money Market Fund* ------------------------------------- ---------- ---------- -------- -------- -------- -------- Classic Institutional U.S. $1,355,000 $ 265,960 $476,000 $181,000 $166,261 $906,000 Government Securities Money Market Fund* ------------------------------------- ---------- ---------- -------- -------- -------- -------- Classic Institutional U.S. $2,746,000 $ 0** $11,328 $305,000 $560,506 $197,908 Treasury Securities Money Market Fund ---------------------------------------------------------------------------------------------------------------------------------
* Prior to May 17, 1999, advisory fees were paid by the predecessor to this Fund pursuant to an agreement between The Arbor Fund and Crestar Asset Management Company for the fiscal years ended January 31, 1999 and January 31, 1998, respectively. ** The Adviser voluntarily waived all of its advisory fees to keep the total expense ratio of the Fund at 0.25%. THE ADMINISTRATOR The Trust and SEI Investments Mutual Funds Services (the "Administrator"), are parties to an administration agreement (the "Administration Agreement") dated May 29, 1992. The Administration Agreement provides that the Administrator shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the matters to which the Administration Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Administrator in the performance of its duties or from reckless disregard by it of its duties and obligations thereunder. The Administrator, a Delaware business trust, has its principal business offices at Oaks, Pennsylvania 19456. SEI Investments Management Corporation ("SIMC"), a wholly owned subsidiary of SEI Investments Company ("SEI Investments"), is the owner of all beneficial interest in the Administrator. SEI Investments and its subsidiaries and affiliates, including the Administrator, are leading providers of funds evaluation services, trust accounting systems, and brokerage and information services to financial institutions, institutional investors, and money managers. The Administrator and its affiliates also serve as administrator or sub-administrator to the other mutual funds including, but without limitation: The Achievement Funds Trust, The Advisors' Inner Circle Fund, Alpha Select Funds, Amerindo Funds Inc., The Arbor Fund, ARK Funds, Armada Funds, The Armada Advantage Fund, Bishop Street Funds, CNI Charter Funds, CUFUND, The Expedition Funds, First American Funds, Inc., First American Investment Funds, Inc., First American Strategy Funds, Inc., Friends Ivory Funds, HighMark Funds, Huntington Funds, Huntington VA Funds, The Nevis Fund, Inc., Oak Associates Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional Inter-national Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI Insurance Products Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Funds, STI Classic Variable Trust, TIP Funds, UAM Funds Trust, UAM Funds, Inc. and UAM Funds, Inc. II. For its administrative services, the Administrator is entitled to a fee, which is calculated daily and paid monthly, at an annual rate of: .12% of the first $1 billion of average aggregate net assets, .09% on the next $1 to $4 billion of average aggregate net assets, .07% of the next $4 to $7 billion of average aggregate net assets, .065% of the next $7 to $9 billion of average aggregate net assets, and .06% after $9 billion of average aggregate net assets. B-16 For the fiscal years ended May 31, 2000, May 31, 1999 and May 31, 1998, the Funds paid the following administration fees:
FEES PAID FEES WAIVED FUND ------------------------------------------ --------------------------------------- 2000 1999 1998 2000 1999 1998 ------------------------------------- ---------- ---------- --------- -------- --------- --------- Classic Institutional Cash $1,554,000 $ 530,802 $ 251,000 $439,000 $ 138,021 $ 210,000 Management Money Market Fund* ------------------------------------- ---------- ---------- --------- -------- --------- --------- Classic Institutional U.S. $ 486,000 $ 168,000 $ 310,000 $121,000 $ 268,476 $ 243,000 Government Securities Money Market Fund* ------------------------------------- ---------- ---------- --------- -------- --------- --------- Classic Institutional U.S. $ 972,000 $ 175,125 $ 61,988 $275,000 $ 45,029 $ 13,823 Treasury Securities Money Market Fund ---------------------------------------------------------------------------------------------------------------------------------
* Prior to May 17, 1999, administration fees were paid by the predecessor to this Fund pursuant to an agreement between The Arbor Fund and the Administrator for the fiscal years ended January 31, 1999 and January 31, 1998, respectively. THE DISTRIBUTOR SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary of SEI Investments, and the Trust have entered into a distribution agreement (the "Distribution Agreement") dated May 29, 1992. The Distributor will not receive any compensation for distribution of shares. The Distribution Agreement is renewable annually and may be terminated by the Distributor, the Qualified Trustees (as defined in the Distribution Agreement), or by a majority vote of the outstanding securities of the Trust upon not more than 60 days' written notice by either party. THE TRANSFER AGENT Federated Services Company, Federated Investors Tower, Pittsburgh, PA 15222-3779 serves as the Trust's transfer agent. THE CUSTODIAN SunTrust Bank, 303 Peachtree Street N.E., 14th Floor, Atlanta, GA 30308 serves as the custodian for the Funds. CODES OF ETHICS The Board of Trustees of the Trust has adopted a Code of Ethics pursuant to Rule 17j-1 under the Investment Company Act of 1940. In addition, the Adviser and Distributor have adopted Codes of Ethics pursuant to Rule 17j-1. These Codes of Ethics (each a "Code" and together the "Codes") apply to the personal investment activities of trustees, officers and certain employees (together, "access persons"). Rule 17j-1 and the Codes are designed to prevent unlawful practices in connection with the purchase or sale of securities by access persons. Under each Code, access persons are permitted to engage in personal securities transactions, but are required to report their personal securities transactions for monitoring purposes. In addition, certain access persons of the Trust and the Adviser are B-17 prohibited from acquiring beneficial ownership of securities offered in connection with initial public offerings. Certain access persons of the Adviser are further prohibited from acquiring beneficial ownership of securities offered in connection with a limited offering. The Distributor's Code requires certain access persons to obtain approval before investing in initial public offerings and limited offerings. Copies of these Code of Ethics are on file with the U.S. Securities and Exchange Commission, and are available to the public. INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen LLP serves as independent public accountants for the Trust. LEGAL COUNSEL Morgan, Lewis & Bockius LLP serves as legal counsel to the Trust. TRUSTEES AND OFFICERS OF THE TRUST The Trustees supervise the management and affairs of the Trust. The Trustees have approved contracts with certain companies that provide the Trust with essential management services. The Trustees and Executive Officers of the Trust, their respective dates of birth, and their principal occupations for the last five years are set forth below. Each may have held other positions with the named companies during that period. Unless otherwise noted, the business address of each Trustee and each Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain officers of the Trust also serve as officers to one or more mutual funds for which SEI Investments Company or its affiliates act as investment manager, administrator or distributor. THOMAS GALLAGHER (11/25/47) - Trustee* - President, Genuine Parts Company Wholesale Distribution, 1970 present; Director, National Service Industries; Director, Oxford Industries. DANIEL S. GOODRUM (7/11/26) - Trustee* - Chairman & CEO, SunBank/South Florida, N.A., 1985-1991; Chairman Audit Committee and Director, Holy Cross Hospital; Executive Committee Member and Director, Honda Classic Foundation; Director, Broward Community College Foundation. WILTON LOONEY (4/18/19) - Trustee* - President of Genuine Parts Company, 1961-1964; Chairman of the Board, 1964-1990; Honorary Chairman of the Board, 1990 to present. Director, Rollins, Inc.; Director, RPC Energy Services, Inc. CHAMPNEY A. MCNAIR (10/30/24) - Trustee* - Director and Chairman of Investment Committee and member of Executive Committee, Cotton States Life and Health Insurance Company; Director and Chairman of Investment Committee and member of Executive Committee, Cotton States Mutual Insurance Company; Chairman, Trust Company of Georgia Advisory Council. F. WENDELL GOOCH (12/3/32) - Trustee - Retired. President, Orange County Publishing Co., Inc., 1981-1997, publisher of the Paoli News and the Paoli Republican and Editor of the Paoli Republican, 1981-1997, President, H & W Distribution, Inc., 1984-1997. Current Trustee on the Board of Trustees for the SEI Family of Funds and The Capitol Mutual Funds. Executive Vice President, Trust Department, Harris Trust and Savings Bank and Chairman of the Board of Directors of The Harris Trust Company of Arizona before January 1981. T. GORDY GERMANY (11/28/25) -Trustee - Retired President, Chairman, and CEO of Crawford & Company; held these positions, 1973-1987. Member of the Board of Directors, 1970-1990, joined company in 1948; spent entire career at Crawford, currently serves on Boards of Norrell Corporation and Mercy Health Services, the latter being the holding company of St. Joseph's Hospitals. JAMES O. ROBBINS (7/4/42) - Trustee - President and Chief Executive Officer, Cox Communications, Inc., 1983 - present; Director, NCR; Director, Cox Communications. B-18 DR. BERNARD F. SLIGER (9/30/24) - Trustee - Director, Stavros Center for Economic Education, Florida State University, 1991-present. President of Florida State University, 1976-91; previous four years EVP and Chief Academic Officer. During educational career, taught at Florida State, Michigan State, Louisiana State and Southern University. Spent 19 years as faculty member and administrator at Louisiana State University and served as Head of Economics Department, member and Chairman of the Graduate Council, Dean of Academic Affairs and Vice Chancellor. Member of Board of Directors of Federal Reserve Bank of Atlanta, 1983-1988. JONATHAN T. WALTON (3/28/30) - Trustee - Retired. Executive Vice President, NBD Bank, N.A. and NBD Bancorp, October 1956 to March 1995. Trustee, W.K. Kellogg Trust. MARK NAGLE (10/20/59) - President - President of the Administrator and Senior Vice President of SEI Investments Mutual Funds Services Operations Group since 1998. Vice President of the Administrator and Vice President of Fund Accounting and Administration of SEI Investments Mutual Funds Services, 1996-1998. Vice President of the Distributor since December 1997. Senior Vice President, Fund Administration, BISYS Fund Services, September 1995-November 1996. Senior Vice President and Site Manager, Fidelity Investments 1981- September 1995. JENNIFER E. SPRATLEY, CPA (2/13/69) - Treasurer and Chief Financial Officer - Director, SEI Funds Accounting since November 1999. Audit Manager at Ernst & Young LLP, 1991-1999. JAMES R. FOGGO (02/14/66) - Vice President and Assistant Secretary - Vice President and Assistant Secretary of SEI Investments since 1998. Vice President and Assistant Secretary of the Administrator and the Distributor since May 1999. Associate, Paul Weiss, Rifkind, Wharton & Garrison (law firm), 1998. Associate, Baker & McKenzie (law firm), 1995-1998. Associate, Battle Fowler L.L.P. (law firm), 1993-1995. LYDIA A. GAVALIS (6/5/64) - Vice President and Assistant Secretary - Vice President and Assistant Secretary of the Administrator and the Distributor since 1998. Assistant General Counsel and Director of Arbitration, Philadelphia Stock Exchange, 1989-1998. TIMOTHY D. BARTO (3/28/68) - Vice President and Assistant Secretary - Employed by SEI Investments since October 1999. Vice President and Assistant Secretary of the Administrator and Distributor since December 1999. Associate at Dechert Price & Rhoads 1997-1999. Associate at Richter, Miller & Finn 1994-1997. TODD B. CIPPERMAN (2/14/66) - Vice President and Assistant Secretary - Senior Vice President and General Cousel of SEI Investments; Senior Vice President, General Counsel and Secretary of the Administrator and the Distributor since 2000. Vice President and Assistant Secretary of SEI Investments, the Administator and the Distributor, 1995-2000. Associate, Dewey Ballantine (law firm), 1994-1995. Associate, Winston & Strawn (law firm), 1991-1994. CHRISTINE M. MCCULLOUGH (12/2/60) - Vice President and Assistant Secretary - Employed by SEI Investments since November 1, 1999. Vice President and Assistant Secretary of the Administrator and the Distributor since December 1999. Associate at White and Williams LLP, 1991-1999. Associate at Montgomery, McCracken, Walker & Rhoads, 1990-1991. RICHARD W. GRANT (10/25/45) - Secretary - 1701 Market Street, Philadelphia, Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), counsel to the Trust, Administrator and Distributor, since 1989. JOHN H. GRADY, JR. (6/1/61) - Assistant Secretary - 1701 Market Street, Philadelphia, Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), counsel to the Trust, Administrator and Distributor, since 1995. ------------------------ * Messrs. Gallagher, Goodrum, Looney and McNair may be deemed to be "interested persons" of the Trust as defined in the Investment Company Act of 1940. The Trustees and Officers of the Trust own, in the aggregate, less than 1% of the outstanding shares of the Trust. B-19 For the fiscal year ended May 31, 2000, the Trust paid the following amounts to Trustees and Officers of the Trust:
============================ ====================== =========================== =================== ============================ AGGREGATE PENSION OR ESTIMATED TOTAL COMPENSATION NAME OF PERSON, COMPENSATION RETIREMENT BENEFITS ANNUAL FROM FUND AND FUND POSITION FROM FUND ACCRUED AS PART OF BENEFITS COMPLEX PAID TO FUND EXPENSES UPON TRUSTEES RETIREMENT ============================ ====================== =========================== =================== ============================ Thomas Gallagher, $ 6,000 N/A N/A $6,500 for service on Trustee# two boards ---------------------------- ---------------------- --------------------------- ------------------- ---------------------------- Daniel S. Goodrum, $16,500 N/A N/A $18,000 for service on Trustee+ two boards ---------------------------- ---------------------- --------------------------- ------------------- ---------------------------- Wilton Looney, $26,000 N/A N/A $28,000 for service on Trustee two boards ---------------------------- ---------------------- --------------------------- ------------------- ---------------------------- Champney A. $24,000 N/A N/A $26,000 for service on McNair, Trustee+ two boards ---------------------------- ---------------------- --------------------------- ------------------- ---------------------------- F. Wendell Gooch, $25,500 N/A N/A $27,500 for service on Trustee two boards ---------------------------- ---------------------- --------------------------- ------------------- ---------------------------- T. Gordy Germany, $25,500 N/A N/A $27,500 for service on Trustee+ two boards ---------------------------- ---------------------- --------------------------- ------------------- ---------------------------- James O. Robbins, $ 4,500 N/A N/A $4,500 for service on Trustee# two boards ---------------------------- ---------------------- --------------------------- ------------------- ---------------------------- Dr. Bernard F. Sliger, $25,500 N/A N/A $27,500 for service on Trustee+ two boards ---------------------------- ---------------------- --------------------------- ------------------- ---------------------------- Jonathan T. Walton, $25,500 N/A N/A $27,500 for service on Trustee two boards ---------------------------- ---------------------- --------------------------- ------------------- ---------------------------- William H. $ 0 N/A N/A $0 for service on two Cammack, Trustee* boards ---------------------------- ---------------------- --------------------------- ------------------- ----------------------------
* Mr. Cammack resigned as a Trustee of the Trust on May 16, 2000. # Messrs. Robbins and Gallagher did not serve as Trustees for a full year during the most recent fiscal year. + Pursuant to the Board's retirement policy, Messrs. Germany, Goodrum, McNair and Dr. Sliger will retire on November 18, 2000. Immediately thereafter, the five remaining Trustees will constitute the entire Board of Trustees. PERFORMANCE INFORMATION From time to time a Fund may advertise its performance. Performance figures are based on historical earnings and are not intended to indicate future performance. PERFORMANCE COMPARISONS Each Fund may periodically compare its performance to other mutual funds tracked by mutual fund rating services, to broad groups of comparable mutual funds, or to unmanaged indices. These comparisons may assume reinvestment B-20 of dividends but generally do not reflect deductions for administrative and management costs. COMPUTATION OF YIELD The current yield of the Funds will be calculated daily based upon the seven days ending on the date of calculation (the "base period"). The yield is computed by determining the net change (exclusive of capital changes) in the value of a hypothetical pre-existing shareholder account having a balance of one share at the beginning of the period, subtracting a hypothetical charge reflecting deductions from shareholder accounts, and dividing such net change by the value of the account at the beginning of the same period to obtain the base period return and multiplying the result by (365/7). Realized and unrealized gains and losses are not included in the calculation of the yield. The effective compound yield of the Funds is determined by computing the net change, exclusive of capital changes, in the value of a hypothetical pre-existing account having a balance of one share at the beginning of the period, subtracting a hypothetical charge reflecting deductions from shareholder accounts, and dividing the difference by the value of the account at the beginning of the base period to obtain the base period return, and then compounding the base period return by adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the result, according to the following formula: Effective Yield = [Base Period Return + 1)365/7] - 1. The current and the effective yields reflect the reinvestment of net income earned daily on portfolio assets.
------------------------------------------------------------------------------------------------------------------------ FUND 7-DAY YIELD 7-DAY EFFECTIVE YIELD ------------------------------------------------------------------------------------------------------------------------ Classic Institutional Cash Management Money Market Fund - 6.29% 6.49% Institutional Shares 1 ------------------------------------------------------------------------------------------------------------------------ Classic Institutional U.S. Government Securities Money Market Fund - 6.05% 6.24% Institutional Shares 2 ------------------------------------------------------------------------------------------------------------------------ Classic Institutional U.S. Treasury Securities Money Market Fund - 5.98% 6.15% Institutional Shares 3 ------------------------------------------------------------------------------------------------------------------------ Classic Institutional U.S. Treasury Securities Money Market 5.78% 5.95% Fund - Corporate Trust Shares 4 ------------------------------------------------------------------------------------------------------------------------
1 Commenced operations 10/25/95 3 Commenced operations 12/12/96 2 Commenced operations 8/1/94 4 Commenced operations 6/3/99 The yields of these Funds fluctuate, and the annualization of a week's dividend is not a representation by the Trust as to what an investment in the Fund will actually yield in the future. Actual yields will depend on such variables as asset quality, average asset maturity, the type of instruments the Fund invests in, changes in interest rates on money market instruments, changes in the expenses of the Fund and other factors. Yield is one basis upon which investors may compare the Funds with other money market funds; however, yields of other money market funds and other investment vehicles may not be comparable because of the factors set forth above and differences in the methods used in valuing portfolio instruments. CALCULATION OF TOTAL RETURN Total return will be calculated according to the following formula: P (1 + T)n = ERV, where P = a hypothetical initial payment of $1,000; T = average annual total return; n = number of years; and ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the designated time period as of the end of such period. From time to time, the Trust may include the names of clients of the Adviser in advertisements and/or sales literature for the Trust. The SEI Funds Evaluation database tracks the total return of numerous tax-exempt pension accounts. B-21 The range of returns in these accounts determines the percentile rankings. SunTrust Bank's investment advisory affiliate, Trusco Capital Management, Inc., has been in the top 1% of the SEI Funds Evaluation database for equity managers over the past ten years. SEI Investment's database includes research data on over 1,000 investment managers responsible for over $[XXX] billion in assets. Based on the foregoing, the average annual total returns for the Funds from inception through May 31, 2000 and for one-year periods ended May 31, 2000 were as follows:
------------------------------------------------------------------------------------------------------------------------ FUND AVERAGE ANNUAL TOTAL RETURN ------------------------------------- ONE-YEAR SINCE INCEPTION ------------------------------------------------------------------------------------------------------------------------ Classic Institutional Cash Management Money Market Fund - 5.56% 5.50% Institutional Shares 1 ------------------------------------------------------------------------------------------------------------------------ Classic Institutional U.S. Government Securities Money Market 5.39% 5.41% Fund - Institutional Shares 2 ------------------------------------------------------------------------------------------------------------------------ Classic Institutional U.S. Treasury Securities Money Market 5.25% 5.26% Fund - Institutional Shares 3 ------------------------------------------------------------------------------------------------------------------------ Classic Institutional U.S. Treasury Securities Money Market N/A 5.05% Fund - Corporate Trust Shares 4 ------------------------------------------------------------------------------------------------------------------------
1 Commenced operations 10/25/95 3 Commenced operations 12/12/96 2 Commenced operations 8/1/94 4 Commenced operations 6/3/99 ADVERTISING From time to time, the Trust may include the names of clients of the Adviser in advertisements and/or sales literature for the Trust. PURCHASING SHARES Purchases and redemptions of shares of the Funds may be made on any day the New York Stock Exchange ("NYSE") is open for business. Currently, the NYSE is closed on: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. REDEEMING SHARES A shareholder will at all times be entitled to aggregate cash redemptions from all Funds of the Trust during any 90-day period of up to the lesser of $250,000 or 1% of the Trust's net assets. The Trust reserves the right to suspend the right of redemption and/or to postpone the date of payment upon redemption for any period on which trading on the NYSE is restricted, or during the existence of an emergency (as determined by the Securities and Exchange Commission by rule or regulation) as a result of disposal or valuation of a Fund's securities is not reasonably practicable, or for such other periods as the Securities and Exchange Commission has by order permitted. The Trust also reserves the right to suspend sales of shares of a Fund for any period during which the NYSE, an Adviser, the Administrator and/or, the Custodian are not open for business. A number of Fund shareholders are institutions with significant share holdings that may be redeemed at any time. B-22 If a substantial number or amount of redemptions should occur within a relatively short period of time, a Fund may have to sell portfolio securities it would otherwise hold and incur the additional transaction costs. The sale of portfolio securities may result in the recognition of capital gains, which will be distributed annually and generally will be taxable to shareholders as ordinary income or capital gains. Shareholders are notified annually regarding the federal tax status of distributions they receive (see "Taxes"). Certain state securities laws may require those financial institutions providing certain distribution services to the Trust to register as dealers pursuant to state law. DETERMINATION OF NET ASSET VALUE The net asset value per share of the Funds is calculated daily by the Administrator by adding the value of securities and other assets, subtracting liabilities and dividing by the number of outstanding shares. Securities will be valued by the amortized cost method which involves valuing a security at its cost on the date of purchase and thereafter (absent unusual circumstances) assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuations in general market rates of interest on the value of the instrument. While this method provides certainty in valuation, it may result in periods during which a security's value, as determined by this method, is higher or lower than the price a Fund would receive if it sold the instrument. During periods of declining interest rates, the daily yield of a Fund may tend to be higher than a like computation made by a company with identical investments utilizing a method of valuation based upon market prices and estimates of market prices for all of its portfolio securities. Thus, if the use of amortized cost by a Fund resulted in a lower aggregate portfolio value on a particular day, a prospective investor in a Fund would be able to obtain a somewhat higher yield than would result from investment in a company utilizing solely market values, and existing investors in a Fund would experience a lower yield. The converse would apply in a period of rising interest rates. A Fund's use of amortized cost and the maintenance of a Fund's net asset value at $1.00 are permitted by regulations promulgated by Rule 2a-7 under the 1940 Act, provided that certain conditions are met. The regulations also require the Trustees to establish procedures which are reasonably designed to stabilize the net asset value per share at $1.00 for the Funds. Such procedures include the determination of the extent of deviation, if any, of the Funds' current net asset value per share calculated using available market quotations from the Funds amortized cost price per share at such intervals as the Trustees deem appropriate and reasonable in light of market conditions and periodic reviews of the amount of the deviation and the methods used to calculate such deviation. In the event that such deviation exceeds 1/2 of 1%, the Trustees are required to consider promptly what action, if any, should be initiated, and, if the Trustees believe that the extent of any deviation may result in material dilution or other unfair results to Shareholders, the Trustees are required to take such corrective action as they deem appropriate to eliminate or reduce such dilution or unfair results to the extent reasonably practicable. Such actions may include the sale of portfolio instruments prior to maturity to realize capital gains or losses or to shorten average portfolio maturity; withholding dividends; redeeming shares in kind; or establishing a net asset value per share by using available market quotations. In addition, if the Funds incur a significant loss or liability, the Trustees have the authority to reduce pro rata the number of shares of the Funds in each Shareholder's account and to offset each Shareholder's pro rata portion of such loss or liability from the Shareholder's accrued but unpaid dividends or from future dividends while each other Fund must annually distribute at least 90% of its investment company taxable income. TAXES The following is a summary of certain federal income tax considerations generally affecting the Funds and their shareholders that are not described in the Funds' prospectus. No attempt is made to present a detailed explanation of the federal tax treatment of the Funds or their Shareholders, and the discussion here and in the Funds' prospectus is not intended as a substitute for careful tax planning. This discussion of federal income tax consequences is based on the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations issued thereunder, in effect on the date of this Statement of Additional Information. New legislation, as well as administrative changes or court decisions, may change the conclusions expressed herein, B-23 and may have a retroactive effect with respect to the transactions contemplated herein. FEDERAL INCOME TAX In order to qualify for treatment as a regulated investment company ("RIC") under the Internal Revenue Code of 1986, as amended ("Code"), each Fund must distribute annually to its shareholders at least the sum of 90% of its net interest income excludable from gross income plus 90% of its investment company taxable income (generally, net investment income plus net short-term capital gain) ("Distribution Requirement") and also must meet several additional requirements. Among these requirements are the following: (i) at least 90% of a Fund's gross income each taxable year must be derived from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of stock or securities, or certain other income; (ii) at the close of each quarter of a Fund's taxable year, at least 50% of the value of its total assets must be represented by cash and cash items, U.S. government securities, securities of other RIC's and other securities, with such other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of a Fund's assets and that does not represent more than 10% of the outstanding voting securities of such issuer; and (iii) at the close of each quarter of a Fund's taxable year, not more than 25% of the value of its assets may be invested in securities (other than U.S. government securities or the securities of other RIC's) of any one issuer, or of two or more issuers engaged in same or similar businesses if the Fund owns at least 20% of the voting power of such issuers. In addition, each Fund will distribute by the end of any calendar year 98% of its ordinary income for that year and 98% of its capital gain net income for the one-year period ending on October 31st of that calendar year, plus certain other amounts. Each Fund intends to make sufficient distributions prior to the end of each calendar year to avoid liability for the federal excise tax applicable to regulated investment companies. If, at the close of each quarter of its taxable year, at least 50% of the value of a Fund's total assets consists of obligations the interest on which is excludable from gross income, a Fund may pay "exempt-interest dividends," as defined in Section 852(b)(5) of the Code, to its Shareholders. Any gain or loss recognized on a sale or redemption of Shares of a Fund by a Shareholder who is not a dealer in securities will generally be treated as a long-term capital gain or loss if the shares have been held for more than twelve months, and short-term if for a year or less. If shares held for six months or less are sold or redeemed for a loss, two special rules apply: First, if shares on which a net capital gain distribution has been received are subsequently sold or redeemed, and such shares have been held for six months or less, any loss recognized will be treated as long-term capital loss to the extent of the long-term capital gain distributions. Second, any loss recognized by a Shareholder upon the sale or redemption of shares of a tax-exempt fund held for six months or less will be disallowed to the extent of any exempt-interest dividends received by the Shareholder with respect to such shares. The Funds will make annual reports to shareholders of the federal income tax status of all distributions. FOREIGN TAXES Dividends and interests received by the Classic Institutional Cash Management Money Market Fund may be subject to income, withholding or other taxes imposed by foreign countries and U.S. possessions that would reduce the yield on the Fund's stock or securities. Tax conventions between certain countries and the United States may reduce or eliminate these taxes. The Fund will not be able to treat shareholders as having paid their proportionate share of such taxes for foreign tax credit purposes. Foreign countries generally do not impose taxes on capital gains with respect to investments by foreign investors. FUND TRANSACTIONS The Trust has no obligation to deal with any dealer or group of dealers in the execution of transactions in portfolio securities. Subject to policies established by the Trustees, the Adviser is responsible for placing the orders to execute B-24 transactions for a Fund. In placing orders, it is the policy of the Trust to seek to obtain the best net results taking into account such factors as price (including the applicable dealer spread), the size, type and difficulty of the transaction involved, the firm's general execution and operational facilities, and the firm's risk in positioning the securities involved. While the Adviser generally seeks reasonably competitive spreads or commissions, the Trust will not necessarily be paying the lowest spread or commission available. The money market securities in which the Funds invest are traded primarily in the over-the-counter market. Bonds and debentures are usually traded over-the-counter, but may be traded on an exchange. Where possible, the Adviser will deal directly with the dealers who make a market in the securities involved except in those circumstances where better prices and execution are available elsewhere. Such dealers usually are acting as principal for their own account. On occasion, securities may be purchased directly from the issuer. Money market securities are generally traded on a net basis and do not normally involve either brokerage commissions or transfer taxes. The cost of executing portfolio securities transactions of the Trust will primarily consist of dealer spreads and underwriting commissions. TRADING PRACTICES AND BROKERAGE The Trust selects brokers or dealers to execute transactions for the purchase or sale of portfolio securities on the basis of its judgment of their professional capability to provide the service. The primary consideration is to have brokers or dealers provide transactions at best price and execution for the Trust. Best price and execution includes many factors, including the price paid or received for a security, the commission charged, the promptness and reliability of execution, the confidentiality and placement accorded the order and other factors affecting the overall benefit obtained by the account on the transaction. The Trust's determination of what are reasonably competitive rates is based upon the professional knowledge of its trading department as to rates paid and charged for similar transactions throughout the securities industry. In some instances, the Trust pays a minimal share transaction cost when the transaction presents no difficulty. Some trades are made on a net basis where the Trust either buys securities directly from the dealer or sells them to the dealer. In these instances, there is no direct commission charged but there is a spread (the difference between the buy and sell price) which is the equivalent of a commission. The Trust may allocate out of all commission business generated by all of the funds and accounts under management by an Adviser, brokerage business to brokers or dealers who provide brokerage and research services. These research services include advice, either directly or through publications or writings, as to the value of securities, the advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities; furnishing of analyses and reports concerning issuers, securities or industries; providing information on economic factors and trends, assisting in determining portfolio strategy, providing computer software used in security analyses, and providing portfolio performance evaluation and technical market analyses. Such services are used by an Adviser in connection with its investment decision-making process with respect to one or more funds and accounts managed by it, and may not be used exclusively with respect to the fund or account generating the brokerage. As provided in the Securities Exchange Act of 1934 (the "1934 Act") higher commissions may be paid to broker-dealers who provide brokerage and research services than to broker-dealers who do not provide such services if such higher commissions are deemed reasonable in relation to the value of the brokerage and research services provided. Although transactions are directed to broker-dealers who provide such brokerage and research services, the Trust believes that the commissions paid to such broker-dealers are not, in general, higher than commissions that would be paid to broker-dealers not providing such services and that such commissions are reasonable in relation to the value of the brokerage and research services provided. In addition, portfolio transactions which generate commissions or their equivalent are directed to broker-dealers who provide daily portfolio pricing services to the Trust. Subject to best price and execution, commissions used for pricing may or may not be generated by the funds receiving the pricing service. An Adviser may place a combined order for two or more accounts or funds engaged in the purchase or sale of the same security if, in its judgment, joint execution is in the best interest of each participant and will result in best price B-25 and execution. Transactions involving commingled orders are allocated in a manner deemed equitable to each account or fund. It is believed that the ability of the accounts to participate in volume transactions will generally be beneficial to the accounts and funds. Although it is recognized that, in some cases, the joint execution of orders could adversely affect the price or volume of the security that a particular account or Fund may obtain, it is the opinion of each Adviser and the Trust's Board of Trustees that the advantages of combined orders outweigh the possible disadvantages of separate transactions. Consistent with the Conduct Rules of the National Association of Securities Dealers, Inc., and subject to seeking best price and execution, the Funds, at the request of the Distributor, give consideration to sales of shares of the Trust as a factor in the selection of brokers and dealers to execute Trust portfolio transactions. It is expected that the Trust may execute brokerage or other agency transactions through the Distributor or an affiliate of an Adviser, both of which are registered broker-dealers, for a commission in conformity with the 1940 Act, the 1934 Act and rules promulgated by the SEC. Under these provisions, the Distributor or an affiliate of an Adviser is permitted to receive and retain compensation for effecting portfolio transactions for the Trust on an exchange if a written contract is in effect between the Distributor and the Trust expressly permitting the Distributor or an affiliate of an Adviser to receive and retain such compensation. These rules further require that commissions paid to the Distributor by the Trust for exchange transactions not exceed "usual and customary" brokerage commissions. The rules define "usual and customary" commissions to include amounts which are "reasonable and fair compared to the commission, fee or other renumeration received or to be received by other brokers in connection with comparable transactions involving similar securities being purchased or sold on a securities exchange during a comparable period of time." In addition, the Trust may direct commission business to one or more designated broker-dealers in connection with such broker/dealer's provision of services to the Trust or payment of certain Trust expenses (E.G., custody, pricing and professional fees). The Trustees, including those who are not "interested persons" of the Trust, have adopted procedures for evaluating the reasonableness of commissions paid to the Distributor, and will review these procedures periodically. For the fiscal year ended May 31, 2000, the Funds paid the following brokerage commissions with respect to portfolio transactions:
==================================================================================================================================== % of Total Total Brokerage % of Total Brokered Commissions Paid to Total $ Amount of Total $ Amount of Brokerage Transactions SFS in Connection Brokerage Brokerage Commissions Commissions Effected Through with Repurchase Commissions Paid to Paid to Affiliated Affiliated Agreement Paid in FYE Affiliates for Brokers in Brokers in Transactions for FYE Portfolio 5/31/00 FYE 5/31/00 FYE 5/31/00 FYE 5/31/00 5/31/00 ------------------------------------------------------------------------------------------------------------------------------------ Classic Institutional Cash $169,140 $169,140 100% 100% $169,140 Management Money Market Fund ------------------------------------------------------------------------------------------------------------------------------------ Classic Institutional U.S. $ 99,268 $ 99,268 100% 100% $ 99,268 Government Securities Money Market Fund ------------------------------------------------------------------------------------------------------------------------------------ Classic Institutional U.S. $641,816 $641,816 100% 100% $641,816 Treasury Securities Money Market Fund ------------------------------------------------------------------------------------------------------------------------------------
B-26 For the fiscal year ended May 31, 1999, the Funds paid the following brokerage commissions with respect to portfolio transactions:
==================================================================================================================================== Total Brokerage % of Total % of Total Brokered Commissions Paid to Total $ Amount of Total $ Amount of Brokerage Transactions SFS in Connection Brokered Brokered Commissions Commissions Effected Through with Repurchase Portfolio Commissions Paid to Paid to Affiliated Affiliated Agreement Paid in FYE Affiliates for Brokers in Brokers in Transactions for FYE 5/31/99 FYE 5/31/99 FYE 5/31/99 FYE 5/31/99 5/31/99 ------------------------------------------------------------------------------------------------------------------------------------ Classic Institutional Cash $ 77,975 $ 77,975 100 % 100 % $77,975 Management Money Market Fund (1) ------------------------------------------------------------------------------------------------------------------------------------ Classic Institutional U.S. $ 67 $ 67 100 % 100 % $ 67 Government Securities Money Market Fund (1) ------------------------------------------------------------------------------------------------------------------------------------ Classic Institutional U.S. $ 25,484 $ 25,484 100 % 100 % $25,484 Treasury Securities Money Market Fund ------------------------------------------------------------------------------------------------------------------------------------
1 Prior to May 17, 1999, the fiscal year of the predecessor to this Fund ended on November 30 of each year. For the fiscal year ended May 31, 1998, the Funds paid the following brokerage commissions with respect to portfolio transactions:
==================================================================================================================================== Total $ Amount of % of Total Brokerage Total Brokerage Total $ Amount of Brokerage Commissions Commissions Paid to SFS in Brokerage Commissions Commissions Paid to Affiliated Connection with Repurchase Paid in Paid to Affiliates in Brokers in Agreement Transactions for Portfolio FYE 5/31/98 FYE 5/31/98 FYE 5/31/98 FYE 5/31/98 ------------------------------------------------------------------------------------------------------------------------------------ Classic Institutional Cash $142,350 $142,350 100 % $142,350 Management Money Market Fund (1) ------------------------------------------------------------------------------------------------------------------------------------ Classic Institutional U.S. $ 60,314 $ 60,314 100 % $ 60,314 Government Securities Money Market Fund (1) ------------------------------------------------------------------------------------------------------------------------------------ Classic Institutional U.S. Treasury $ 51,533 $ 51,533 100 % $ 51,533 Securities Money Market Fund ------------------------------------------------------------------------------------------------------------------------------------
1 Prior to May 17, 1999, fiscal year of the predecessor to this fund ended on November 30 of each year. DESCRIPTION OF SHARES The Declaration of Trust authorizes the issuance of an unlimited number of shares and classes of shares of the Funds each of which represents an equal proportionate interest in that Fund with each other share. Shares are entitled upon liquidation to a PRO RATA share in the net assets of the Funds. Shareholders have no preemptive rights. The Declaration of Trust provides that the Trustees of the Trust may create additional series of shares or classes of series. All consideration received by the Trust for shares of any additional series and all assets in which such consideration is invested would belong to that series and would be subject to the liabilities related thereto. Share certificates representing shares will not be issued. SHAREHOLDER LIABILITY The Trust is an entity of the type commonly known as a "Massachusetts business trust." Under Massachusetts law, shareholders of such a trust could, under certain circumstances, be held personally liable as partners for the obligations B-27 of the trust. Even if, however, the Trust were held to be a partnership, the possibility of the Shareholders' incurring financial loss for that reason appears remote because the Trust's Declaration of Trust contains an express disclaimer of Shareholder liability for obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by or on behalf of the Trust or the Trustees, and because the Declaration of Trust provides for indemnification out of the Trust property for any Shareholder held personally liable for the obligations of the Trust. LIMITATION OF TRUSTEES' LIABILITY The Declaration of Trust provides that a Trustee shall be liable only for his own willful defaults and, if reasonable care has been exercised in the selection of officers, agents, employees or investment advisers, shall not be liable for any neglect or wrongdoing of any such person. The Declaration of Trust also provides that the Trust will indemnify its Trustees and officers against liabilities and expenses incurred in connection with actual or threatened litigation in which they may be involved because of their offices with the Trust unless it is determined in the manner provided in the Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the Trust. However, nothing in the Declaration of Trust shall protect or indemnify a Trustee against any liability for his willful misfeasance, bad faith, gross negligence or reckless disregard of his duties. 5% AND 25% SHAREHOLDERS As of August 23, 2000, the following persons were the only persons who were record owners (or to the knowledge of the Trust, beneficial owners) of 5% and 25% or more of the shares of the Funds. Persons who owned of record or beneficially more than 25% of a Fund's outstanding shares may be deemed to control the Fund within the meaning of the Act. The Trust believes that most of the shares of the Institutional Class of the Funds were held for the record owner's fiduciary, agency or custodial customers.
==================================================================================================================================== FUND NAME AND ADDRESS NUMBER OF SHARES CLASS % OF CLASS ==================================================================================================================================== Classic Institutional SunTrust Banks 818,649,492.2600 Institutional 32.52% Cash Management Attn: Susan Grider Money Market Mail Center 3133 Fund P.O. Box 105504 Atlanta, GA 30348-5504 ------------------------------------------------------------------------------------------------------------------------------------ SunTrust Capital Markets ACH Acct. 1,669,537,247.1200 Institutional 66.31% Attn: Anita Woods Ctr 3910 303 Peachtree Street, 24th FL Atlanta, GA 30308-3503 ------------------------------------------------------------------------------------------------------------------------------------ Classic Institutional SunTrust Banks 18,443,554.6200 Institutional 6.38% U.S. Treasury Attn: Susan Grider Securities Money Mail Center 3133 Market Fund P.O. Box 105504 Atlanta, GA 30348-5504 ------------------------------------------------------------------------------------------------------------------------------------ SunTrust Capital Markets ACH Acct. 270,860,803.4000 Institutional 93.62% Attn: Anita Woods Ctr 3910 303 Peachtree Street, 24th FL Atlanta, GA 30308-3503 ------------------------------------------------------------------------------------------------------------------------------------ SunTrust Bank 1,289,407,609.5600 Corporate Trust 100% Attn: Susan Grider Mail Center 3133 P.O. Box 105504 Atlanta, GA 30348-5504 ------------------------------------------------------------------------------------------------------------------------------------
B-28
------------------------------------------------------------------------------------------------------------------------------------ Classic Institutional SunTrust Banks 818,649,492.2600 Institutional 32.52% Cash Management Attn. Susan Grider Money Market Mail Center 3133 Fund PO Box 105504 Atlanta, GA 30348-5504 ------------------------------------------------------------------------------------------------------------------------------------ SunTrust Capital Markets ACH Acct. 1,669,537,247.1200 Institutional 66.31% Attn. Anita Woods Ctr 3910 303 Peachtree Street, 24th FL Atlanta, GA 30308-3503 ------------------------------------------------------------------------------------------------------------------------------------ Classic Institutional SunTrust Capital Markets ACH Acct. 270,860,803.4000 Institutional 93.62% U.S. Treasury Attn. Anita Woods Ctr 3910 Securities Money 303 Peachtree Street, 24th FL Market Fund Atlanta, GA 30308-3503 ------------------------------------------------------------------------------------------------------------------------------------ Classic Institutional. SunTrust Bank 1,289,407,609.5600 Institutional 100.00% U.S. Treasury Attn. Susan Grider Securities Money Mail Center 3133 Market Fund P.O. Box 105504 Atlanta, GA 30348-5504 ------------------------------------------------------------------------------------------------------------------------------------
EXPERTS The financial statements as of May 31, 2000 have been audited by Arthur Andersen LLP, Independent Public Accountants, as indicated in their report dated July 18th, 2000 with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report. B-29 APPENDIX DESCRIPTION OF RATINGS The following descriptions are summaries of published ratings. DESCRIPTION OF COMMERCIAL PAPER RATINGS A-1 This is the highest category by Standard and Poor's (S&P) and indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2 Capacity for timely payment on issues with this designation is satisfactory and the obligation is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. PRIME-1 Issues rated Prime-1 (or supporting institutions) by Moody's have a superiorability for repayment of senior short-term debt obligations. Prime-1 repaymentability will often be evidenced by many of the following characteristics: - Leading market positions in well-established industries. - High rates of return on funds employed. - Conservative capitalization structure with moderate reliance on debt and ample asset protection. - Broad margins in earnings coverage of fixed financial charges and high internal cash generation. - Well-established access to a range of financial markets and assured sources of alternate liquidity. The rating F1 (Highest Credit Quality) is the highest commercial rating assigned by Fitch. Paper rated F1 is regarded as having the strongest capacity for timely payment of financial commitments. The rating F2 (Good Credit Quality) is the second highest commercial paper rating assigned by Fitch which reflects a satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of the higher ratings. The rating TBW-1 by Thomson BankWatch ("Thomson") indicates a very high likelihood that principal and interest will be paid on a timely basis. DESCRIPTION OF MUNICIPAL NOTE RATINGS Moody's highest rating for state and municipal and other short-term notes is MIG-1 and VMIG-l. Short-term municipal securities rated MIG-1 or VMIG-1 are of the best quality. They have strong protection from established cash flows, superior liquidity support, or demonstrated broad-based access to the market for refinancing or both. Short-tenn municipal securities rated MIG-2 or VMIG-2 are of high quality. Margins of protection are ample although not so large as in the MIG-I/VMIG-2 group. An S&P note rating reflects the liquidity concerns and market access risks unique to notes. Notes due in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment: - Amortization Schedule - the larger the final maturity relative to other maturities, the more likely it will be treated as a note, and A-1 - Source of Payment - the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note. S&P note rating symbols are as follows: SP-1 Strong capacity to pay principal and interest. Those issues determined to possess a very strong capacity to pay a debt service is given a plus (+) designation. SP-2 Satisfactory capacity to pay principal and interest with some vulnerability to adverse financial and economic changes over the term of the votes. DESCRIPTION OF CORPORATE BOND RATINGS S&P Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a rating indicates an extremely strong capacity to pay principal and interest. Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay principal and interest is very strong, and in the majority of instances they differ from AAA issues only in small degree. Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. Debt rated BB and B is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. Debt rated BB has less near-term vulnerability to default than other speculative grade debt. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to inadequate capacity to meet timely interest and principal payments. The BB rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BBB- rating. Debt rate B has greater vulnerability to default but presently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions would likely impair capacity or willingness to pay interest and repay principal. The B rating category also is used for debt subordinated to senior debt that is assigned an actual or implied BB or BB- rating. MOODY'S Bonds which are rated Aaa by Moody's are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large, or an exceptionally stable, margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Bonds rated Aa by Moody's are judged by Moody's to be of high quality by all standards. Together with bonds rated Aaa, they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than the Aaa securities. Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. Bonds which are rated Baa are considered as medium-grade obligations (I.E., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may A-2 be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Moody's bond ratings, where specified, are applied to financial contracts, senior bank obligations and insurance company senior policyholder and claims obligations with an original maturity in excess of one-year. Obligations relying upon support mechanisms such as letters-of-credit and bonds of indemnity are excluded unless explicitly rated. Obligations of a branch of a bank are considered to be domiciled in the country in which the branch is located. Unless noted as an exception, Moody's rating on a bank's ability to repay senior obligations extends only to branches located in countries which carry a Moody's sovereign rating. Such branch obligations are rated at the lower of the bank's rating or Moody's sovereign rating for the bank deposits for the country in which the branch is located. When the currency in which an obligation is denominated is not the same as the currency of the country in which the obligation is domiciled, Moody's ratings do not incorporate an opinion as to whether payment of the obligation will be affected by the actions of the government controlling the currency of denomination. In addition, risk associated with bilateral conflicts between an investor's home country and either the issuer's home country or the country where an issuer branch is located are not incorporated into Moody's ratings. Moody's makes no representation that rated bank obligations or insurance company obligations are exempt from registration under the U.S. Securities Act of 1933 or issued in conformity with any other applicable law or regulation. Nor does Moody's represent that any specific bank or insurance company obligation is legally enforceable or is a valid senior obligation of a rated issuer. Moody's ratings are opinions, not recommendations to buy or sell, and their accuracy is not guaranteed. A rating should be weighed solely as one factor in an investment decision and you should make your own study and evaluation of any issuer whose securities or debt obligations you consider buying or selling. FITCH Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade, broadly marketable, suitable for investment by trustees and fiduciary institutions liable to but slight market fluctuation other than through changes in the money rate. The prime feature of an AAA bond is a showing of earnings several times or many times interest requirements, with such stability of applicable earnings that safety is beyond reasonable question whatever changes occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be of safety virtually beyond question and are readily salable, whose merits are not unlike those of the AAA class, but whose margin of safety is less strikingly broad. The issue may be the obligation of a small company, strongly secured but influenced as to rating by the lesser financial power of the enterprise and more local type market. Bonds rated A are considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings. Bonds rated BBB are considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings. Bonds rated BB are considered speculative. The obligor's ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified which could assist the obligor A-3 in satisfying its debt service requirements. Bonds rated B are considered highly speculative. While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and interest reflects the obligor's limited margin of safety and the need for reasonable business and economic activity throughout the life of the issue. THOMSON Bonds rated AAA by Thomson BankWatch indicate that the ability to repay principal and interest on a timely basis is extremely high. Bonds rated AA indicate a very strong ability to repay principal and interest on a timely basis, with limited incremental risk compared to issues rated in the highest category. Bonds rated A indicate the ability to repay principal and interest is strong. Issues rated A could be more vulnerable to adverse developments (both internal and external) than obligations with higher ratings. Bonds rated BBB (the lowest investment-grade category) indicate an acceptable capacity to repay principal and interest. Issues rated "BBB" are, however, more vulnerable to adverse developments (both internal and external) than obligations with higher ratings. While not investment grade, the BB rating suggests that the likelihood of default is considerably less than for lower-rated issues. However, there are significant uncertainties that could affect the ability to adequately service debt obligations. Issues rated B show a higher degree of uncertainty and therefore greater likelihood of default than higher-rated issues. Adverse developments could negatively affect the payment of interest and principal on a timely basis. A-4 FINANCIAL STATEMENTS Following are the audited financial statements for the fiscal year ended May 31, 2000 and the reports of Arthur Andersen LLP, independent public accountants, dated July 18, 2000, relating to the financial statements and financial highlights. F-1 STATEMENT OF NET ASSETS ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND ------------------------------------------------------------------------------- FACE AMOUNT (000)VALUE (000) ------------------------------------------------------------------------------- COMMERCIAL PAPER (22.0%) FINANCE (2.2%) Sigma Finance 5.750%, 07/20/00 $25,000 $ 25,000 7.400%, 05/25/01 25,000 25,000 ---------- 50,000 ---------- INDUSTRIAL (2.8%) DaimlerChrysler 6.040%, 06/21/00 30,000 29,899 General Electric Capital 5.730%, 08/01/00 35,000 34,660 ---------- 64,559 ---------- INVESTMENT BANKERS/BROKER DEALERS (8.4%) Bear Stearns 6.100%, 06/01/00 40,000 40,000 Credit Suisse First Boston 5.750%, 07/14/00 25,000 25,000 6.200%, 07/25/00 30,000 29,721 Morgan Stanley Dean Witter (B) 6.880%, 06/01/00 50,000 50,000 6.880%, 06/01/00 50,000 50,000 ---------- 194,721 ---------- PERSONAL CREDIT INSTITUTIONS (8.6%) Ford Motor Credit 6.410%, 06/28/00 100,000 99,519 GMAC 6.070%, 06/28/00 30,000 29,863 6.150%, 07/12/00 70,000 69,510 ---------- 198,892 ---------- Total Commercial Paper (Cost $508,172) 508,172 ---------- CORPORATE OBLIGATIONS (44.7%) BANKS (13.8%) AmSouth Bank (B) 6.850%, 06/01/00 50,000 49,986 ------------------------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------ BANKS--CONTINUED Branch Banking & Trust (B) 6.870%, 06/01/00 $40,000 $ 40,000 6.880%, 06/01/00 35,000 34,989 Canadian Imperial Bank 7.070%, 05/03/01 40,000 39,997 First Union (B) 6.870%, 06/01/00 50,000 50,000 6.910%, 06/01/00 25,000 25,000 Key Bank (B) 6.910%, 06/01/00 39,000 38,998 Wachovia Bank, MTN (B) 6.119%, 06/05/00 40,000 39,997 ---------- 318,967 ---------- ENTERTAINMENT (3.2%) Tampa Bay Devil Rays (A) (B) 6.710%, 06/01/00 50,745 50,745 Walt Disney (A) 4.200%, 03/15/01 25,000 24,525 ---------- 75,270 ---------- FINANCE (8.9%) Beneficial, MTN (B) 6.181%, 06/01/00 10,000 10,000 Beta Finance, MTN 5.520%, 06/12/00 25,000 25,000 Beta Finance, MTN (B) 6.805%, 06/07/00 30,000 30,000 7.010%, 08/16/00 30,000 30,000 Household Finance, MTN (B) 7.050%, 06/01/00 30,000 29,995 Sigma Finance (A) 6.570%, 01/10/01 20,000 20,000 Sigma Finance, MTN 6.800%, 03/30/01 30,000 30,000 UBS Finance 6.475%, 01/08/01 30,000 29,994 ---------- 204,989 ---------- 2 ----------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ----------------------------------------------------------------------------- INDUSTRIAL (1.7%) Anheuser Busch (B) 6.440%, 06/16/00 $40,000 $ 39,999 ---------- INVESTMENT BANKERS/BROKER DEALERS (15.8%) Bear Stearns 6.500%, 07/05/00 25,000 25,008 Bear Stearns, MTN (B) 6.900%, 06/01/00 40,000 40,000 6.910%, 06/01/00 35,000 35,000 Credit Suisse First Boston, MTN (A) 5.590%, 06/08/00 10,000 10,000 Credit Suisse First Boston, MTN (A) (B) 6.900%, 06/01/00 35,000 35,000 Goldman Sachs, MTN, Ser B (B) 7.080%, 06/01/00 30,000 30,013 Goldman Sachs, MTN 6.100%, 09/25/00 30,000 30,000 6.500%, 12/22/00 20,000 20,000 JP Morgan, MTN (B) 6.281%, 06/03/00 40,000 40,000 Merrill Lynch, MTN 6.735%, 02/28/01 25,000 24,997 7.260%, 05/15/01 50,000 49,995 Merrill Lynch, MTN (B) 6.985%, 06/01/00 25,000 24,999 ---------- 365,012 ---------- LEASING COMPANY (1.3%) Xerox Credit, MTN 5.635%, 07/14/00 30,000 29,999 ---------- Total Corporate Obligations (Cost $1,034,236) 1,034,236 ---------- ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- CERTIFICATES OF DEPOSIT (8.4%) Albertson's (A) (B) 6.503%, 06/14/00 $40,000 $ 39,998 Canadian Imperial Bank 6.670%, 02/12/01 40,000 39,987 First USA Bank 6.040%, 08/04/00 40,000 40,000 Royal Bank of Canada 6.180%, 10/25/00 35,000 34,991 6.470%, 01/10/01 40,000 39,988 ---------- Total Certificates of Deposit (Cost $194,964) 194,964 ---------- TAXABLE MUNICIPAL BONDS (2.4%) California Housing Finance Agency, MBIA (B) 6.650%, 08/01/00 31,715 31,715 Mt. Vernon Multi-Family Housing Notes (B) 6.700%, 07/01/00 23,000 23,000 ---------- Total Taxable Municipal Bonds (Cost $54,715) 54,715 ---------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (5.2%) FHLB (B) 6.168%, 06/07/00 50,000 50,000 FHLMC, MTN 6.255%, 01/12/01 20,000 19,983 FNMA, MTN, Ser B 6.320%, 02/02/01 50,000 49,968 ---------- Total U.S. Agency Mortgage-Backed Obligations (Cost $119,951) 119,951 ---------- 3 STATEMENT OF NET ASSETS ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND--CONCLUDED ------------------------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------ BANK NOTES (3.5%) American Express Centurion (B) 6.910%, 06/01/00 $35,000 $ 35,000 Branch Banking and Trust (B) 7.010%, 06/05/00 20,000 20,000 FCC National Bank 6.065%, 08/14/00 25,000 24,998 ---------- Total Bank Notes (Cost $79,998) 79,998 ---------- REPURCHASE AGREEMENTS (10.2%) ABN-Amro 6.440%, dated 05/31/00, matures 06/01/00, repurchase price $63,011,270 (collateralized by various FHLMC obligations: total market value $64,260,000) (C) 63,000 63,000 Barclays 6.440%, dated 05/31/00, matures 06/01/00, repurchase price $62,705,360 (collateralized by a FNMA and SLMA obligations: total market value $63,948,043) (C) 62,694 62,694 Deutsche Bank 6.440%, dated 05/31/00, matures 06/01/00, repurchase price $42,016,473 (collateralized by a FNMA obligation: total market value $42,849,138) (C) 42,009 42,009 Merrill Lynch 6.440%, dated 05/31/00, matures 06/01/00, repurchase price $30,618,206 (collateralized by various FNMA obligations: total market value $31,227,271) (C) 30,613 30,613 ------------------------------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- REPURCHASE AGREEMENTS--CONTINUED Warburg Dillon 6.440%, dated 05/31/00, matures 06/01/00, repurchase price $37,487,902 (collateralized by a U.S. Treasury Note: total market value 38,233,442) (C) $37,481 $ 37,481 ---------- Total Repurchase Agreements (Cost $235,797) 235,797 ---------- CASH EQUIVALENT (4.3%) Aim Liquid Assets Fund 100,000,000 100,000 ---------- Total Cash Equivalent (Cost $100,000) 100,000 ---------- Total Investments (100.7%) (Cost $2,327,833) 2,327,833 ---------- OTHER ASSETS AND LIABILITIES, NET (-0.7%) (16,148) ---------- NET ASSETS: Fund shares of Institutional Shares (unlimited authorization -- no par value based on 2,312,249,074 outstanding shares of beneficial interest 2,312,249 Distributions in excess of net investment income (565) Accumulated net realized gain on investments 1 ---------- Total Net Assets (100.0%) $2,311,685 ========== Net Asset Value, Offering Redemption Price Per Share -- Institutional Shares $ 1.00 ========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 9. 4 ------------------------------------------------------------------------------- CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND ------------------------------------------------------------------------------- FACE AMOUNT (000 VALUE (000) ------------------------------------------------------------------------------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (77.8%) FHLB 5.810%, 09/15/00 $20,000 $ 19,677 5.965%, 12/01/00 20,000 19,982 4.950%, 12/04/00 20,000 19,868 6.580%, 02/09/01 15,000 15,000 FHLB (B) 6.083%, 09/01/00 35,000 35,000 6.750%, 09/22/00 40,000 39,996 6.168%, 12/20/00 50,000 50,000 FHLMCDN 6.090%, 07/13/00 35,000 34,751 6.115%, 03/16/01 15,000 14,266 6.730%, 05/24/01 15,000 13,999 FNMA 7.000%, 05/17/01 15,000 15,004 FNMA, MTN 5.460%, 06/21/00 30,000 29,999 6.445%, 02/23/01 10,00 09,989 6.625%, 03/01/01 15,000 14,999 FNMA, MTN (B) 6.770%, 09/29/00 50,000 49,995 6.735%, 11/06/00 25,000 24,990 6.449%, 11/22/00 30,000 29,989 FNMADN 5.785%, 07/07/00 20,000 19,890 5.485%, 08/11/00 20,000 19,785 5.900%, 10/06/00 20,000 19,606 6.700%, 05/10/01 10,000 9,362 ------- Total U.S. Agency Mortgage-Backed Obligations (Cost $506,147) 506,147 -------- ------------------------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------ REPURCHASE AGREEMENTS (21.8%) ABN-Amro 6.470%, dated 05/31/00, matures 06/01/00, repurchase price $106,987,008 (collateralized by various FNMA and FHLMC obligations: total market value $109,107,139) (C) $106,968 $106,968 Deutsche Bank 6.470%, dated 05/31/00, matures 06/01/00, repurchase price $12,019,620 (collateralized by a FNMA obligation: total market value $12,257,810) (C) 12,017 12,017 Greenwich Capital 6.470%, dated 05/31/00, matures 06/01/00, repurchase price $18,760,082 (collateralized by various GNMA obligations: total market value $19,132,971) (C) 18,757 18,757 JP Morgan 6.470%, dated 05/31/00, matures 06/01/00, repurchase price $4,232,698 (collateralized by a GNMA obligation: total market value $4,316,577) (C) 4,232 4,232 ------- Total Repurchase Agreements (Cost $141,974) 141,974 -------- Total Investments (99.6%) (Cost $648,121) 648,121 -------- OTHER ASSETS AND LIABILITIES, NET (0.4%) 2,505 -------- 5 STATEMENT OF NET ASSETS ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND--CONCLUDED ------------------------------------------------------------------------------- VALUE (000) ------------------------------------------------------------------------------- NET ASSETS: Fund shares of Institutional Shares (unlimited authorization -- no par value) based on 650,651,141 outstanding shares of beneficial interest $650,651 Accumulated net realized loss on investments (25) -------- Total Net Assets (100.0%) $650,626 ======== Net Asset Value, Offering and Redemption Price Per Share -- Institutional Shares $ 1.00 ======== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 9. 6 ------------------------------------------------------------------------------- CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND ------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) ------------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS (19.8%) U.S. Treasury Bills 5.980%, 08/10/00 $ 75,000 $ 74,216 5.605%, 10/12/00 190,000 186,051 U.S. Treasury Note 5.000%, 02/28/0 30,000 29,704 --------- Total U.S. Treasury Obligations (Cost $289,971 289,971 --------- REPURCHASE AGREEMENTS (76.2%) ABN-Amro 6.310%, dated 05/31/00, matures 06/01/00, repurchase price $340,530,770 (collateralized by various U.S. Treasury Notes and U.S. Treasury Bonds: total market value $347,289,622) (C) 340,471 340,471 Barclays 6.310%, dated 05/31/00, matures 06/01/00, repurchase price $64,893,233 (collateralized by a U.S. Treasury Bond: total market value $66,180,031) (C) 64,882 64,882 Duetsche Bank 6.310%, dated 05/31/00, matures 06/01/00, repurchase price $64,418,025 (collateralized by various U.S. Treasury Bonds: total market value $65,695,776) (C) 64,407 64,407 Greenwich Capital 6.310%, dated 05/31/00, matures 06/01/00, repurchase price $340,553,316 (collateralized by various U.S. Treasury Notes and U.S. Treasury Bonds: total market value $347,305,585) (C) 340,494 340,494 -------------------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) -------------------------------------------------------------------------------- REPURCHASE AGREEMENTS--CONTINUED JP Morgan 6.310%, dated 05/31/00, matures 06/01/00, repurchase price $49,842,397 (collateralized by a U.S. Treasury Note: total market value $50,830,553) (C) $49,834 $ 49,834 Merrill Lynch 6.310%, dated 05/31/00, matures 06/01/00, repurchase price $64,975,703 (collateralized by a U.S. Treasury Bond: total market value $66,263,648) (C) 64,964 64,964 Morgan Stanley Dean Witter 6.310%, dated 05/31/00, matures 06/01/00, repurchase price $64,267,065 (collateralized by various U.S. Treasury Notes and U.S. Treasury Bonds: total market value $65,659,713) (C) 64,256 64,256 Salomon Smith Barney 6.310%, dated 05/31/00, matures 06/01/00, repurchase price $64,772,503 (collateralized by various U.S. Treasury Bonds: total market value $66,064,316) (C) 64,761 64,761 Warburg Dillon 6.310%, dated 05/31/00, matures 06/01/00, repurchase price $64,487,731 (collateralized by a U.S. Treasury Note: total market value $65,768,430) (C) 64,476 64,476 --------- Total Repurchase Agreements (Cost $1,118,545) 1,118,545 --------- 7 STATEMENT OF NET ASSETS --------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND--CONCLUDED --------------------------------------------------------- SHARES VALUE (000) --------------------------------------------------------- CASH EQUIVALENT (4.4%) AIM Institutional Treasury Fund 65,000,000 $ 65,000 ---------- Total Cash Equivalent (Cost $65,000) 65,000 ---------- Total Investments (100.4%) (Cost $1,473,516) 1,473,516 ---------- OTHER ASSETS AND LIABILITIES, NET (-0.4%) (5,250) ---------- NET ASSETS: Fund shares of Institutional Shares (unlimited authorization -- no par value) based on 329,699,333 outstanding shares of beneficial interest 329,699 Fund shares of Corporate Trust Shares (unlimited authorization -- no par value) based on 1,138,531,073 outstanding shares of beneficial interest 1,138,531 Undistributed net investment income 36 ---------- Total Net Assets (100.0%) $1,468,266 ========== Net Asset Value, Offering and Redemption Price Per Share -- Institutional Shares $ 1.00 ========== Net Asset Value, Offering and Redemption Price Per Share -- Corporate Trust Shares $ 1.00 ========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 9. 8 ------------------------------------------------------------------------------- KEY TO ABBREVIATIONS USED IN THE STATEMENT OF NET ASSETS FHLB Federal Home Loan Bank FHLMC Federal Home Loan Mortgage Corporation FHLMCDN Federal Home Loan Mortgage Corporation Discount Note FNMA Federal National Mortgage Association FNMADN Federal National Mortgage Association Discount Note GNMA Government National Mortgage Association MBIA Security insured by the Municipal Bond Investors Assurance Corporation MTN Medium Term Note Ser Series SLMA Student Loan Marketing Association (A) Private Placement Security (B) Adjustable Rate Security. The rate reported on the Statement of Net Assets is the rate in effect on May 31,2000. The date shown is the next scheduled reset date. (C) Tri-Party Repurchase Agreement 9 This page intentionally left blank. STATEMENTS OF OPERATIONS (000) --------------------------------------------------------------------------------------------------------------------------- STI CLASSIC FUNDS FOR THE YEAR ENDED MAY 31, 2000 CLASSIC CLASSIC CLASSIC INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL CASH MANAGEMENT U.S. GOVERNMENT U.S. TREASURY MONEY MARKET SECURITIES MONEY SECURITIES MONEY FUND MARKET FUND MARKET FUND -------------- ---------------------------------- 06/01/99- 06/01/99- 06/01/99- 05/31/00 05/31/00 05/31/00 ---------- --------- ---------- Income: Interest Income $124,453 $37,419 $74,129 -------- ------- ------- Expenses: Investment Advisory Fees ............................. 4,393 1,355 2,746 Less: Investment Advisory Fees Waived ................ (679) (181 (305) Administrator Fees ................................... 1,554 486 972 Less: Administrator Fees Waived ...................... (439) (121) (275) Transfer Agent Fees - Institutional Shares ........... 5 16 14 Transfer Agent Fees - Corporate Trust Shares ......... -- -- 15 Transfer Agent Out of Pocket Expenses ................ 156 40 1 Printing Fees ........................................ 153 43 39 Custody Fees ......................................... 102 10 7 Professional Fees .................................... 134 30 35 Trustee Fees ......................................... 21 6 5 Registration Fees .................................... 58 14 145 Shareholder Service Fee .............................. -- -- 2,182 Insurance and Other Fees ............................. 40 -- 3 --------- ------- ------- Total Expenses ....................................... 5,498 1,698 5,584 --------- ------- ------- Net Investment Income ................................ 118,955 35,721 68,545 --------- ------- ------- Net Realized Gain on Securities Sold ................. -- -- 3 --------- ------- ------- Increase in Net Assets Resulting from Operation ...... $118,955 $35,721 $68,548 ========= ======= ======= Amounts designated as "--" are either $0 or round to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 11 STATEMENTS OF CHANGES IN NET ASSETS (000) --------------------------------------------------------------------------------------------------------------------------- STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31, AND JANUARY 31, CLASSIC CLASSIC CLASSIC INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL CASH MANAGEMENT U.S. GOVERNMENT U.S. TREASURY MONEY MARKET SECURITIES MONEY SECURITIES MONEY FUND MARKET FUND MARKET FUND -------------------------------- ----------------------------- --------------------- 06/01/99- 02/01/99- 02/01/98- 06/01/99- 02/01/99- 02/01/98- 06/01/99- 06/01/98- 05/31/00 05/31/99 01/31/99 05/31/00 05/31/99 01/31/99 05/31/00 05/31/99 --------- --------- --------- -------- --------- --------- --------- -------- Operations: Net Investment Income $ 118,955 $ 15,177 $ 42,861 $ 35,721 $ 10,264 $ 34,235 $ 68,545 $ 10,844 Net Realized Gain on Investments -- 1 -- -- -- -- 3 25 ---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- Increase in Net Assets from Operations 118,955 15,178 42,861 35,721 10,264 34,235 68,548 10,869 ---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- Distributions to Shareholders: Net Investment Income: Institutional Shares (119,528) (15,172) (42,874) (35,721) (10,249) (34,250) (14,676) (10,842) Corporate Trust Shares -- -- -- -- -- -- (53,866) -- ---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- Total Distributions (119,528) (15,172) (42,874) (35,721) (10,249) (34,250) (68,542) (10,842) ---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- Capital Transactions (1): Institutional Shares: Proceeds from Shares Issued 7,310,322 2,243,802 7,764,540 1,986,992 1,958,641 6,897,369 1,631,329 1,267,762 Shares Issued in Connection with Crestar Arbor Merger -- 1,072,229 -- -- -- -- -- -- Reinvestments of Cash Distributions 76,132 7,086 10,074 12,023 3,113 13,467 14,668 7,876 Cost of Shares Repurchased (6,962,679)(2,319,130)(7,630,948) (1,965,478)(2,032,711)(7,012,200)(1,599,793)(1,132,474) ---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- Increase (Decrease) in Net Assets from Institutional Share Transactions 423,775 1,003,987 143,666 33,537 (70,957) (101,364) 46,204 143,164 ---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- Corporate Trust Shares: Proceeds from Shares Issued -- -- -- -- -- -- 3,577,647 -- Cost of Shares Repurchased -- -- -- -- -- (2,439,116) -- ---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- Increase in Net Assets from Corporate Trust Share Transactions -- -- -- -- -- -- 1,138,531 -- ---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- Increase (Decrease) in Net Assets from Share Transactions 423,775 1,003,987 143,666 33,537 (70,957) (101,364) 1,184,735 143,164 ---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- Total Increase (Decrease) in Net Assets 423,202 1,003,993 143,653 33,537 (70,942) (101,379) 1,184,741 143,191 ---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- Net Assets: Beginning of Period 1,888,483 884,490 740,837 617,089 688,031 789,410 283,525 140,334 ---------- ---------- ---------- ---------- ---------- --------- ---------- ---------- End of Period $2,311,685 $1,888,483 $ 884,490 $ 650,626 $ 617,089 $ 688,031 $1,468,266 $ 283,525 ========== ========== ========== ========== ========== ========= ========== ==========
12 ----------------------------------------------------------------------------------------------------------------------- CLASSIC CLASSIC CLASSIC INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL CASH MANAGEMENT U.S. GOVERNMENT U.S. TREASURY MONEY MARKET SECURITIES MONEY SECURITIES MONEY FUND MARKET FUND MARKET FUND ------------------------------- ------------------------------ --------------------- 06/01/99- 02/01/99- 02/01/98- 06/01/99- 02/01/99- 02/01/98- 06/01/99- 06/01/98- 05/31/00 05/31/99 01/31/99 05/31/00 05/31/99 01/31/99 05/31/00 05/31/99 ---------- --------- --------- --------- --------- --------- ---------- ---------- (1) Shares Issued and Redeemed: Institutional Shares: Shares Issued 7,310,322 2,243,802 7,764,540 1,986,991 1,958,641 6,897,369 1,631,329 1,267,762 Shares Issued in Connection with Crestar Arbor Merger -- 1,072,211 -- -- -- -- -- -- Shares Issued in Lieu of Cash Distributions 76,132 7,086 10,074 12,023 3,113 13,467 14,668 7,876 Shares Redeemed (6,962,679)(2,319,131)(7,630,948) (1,965,478)(2,032,711)(7,012,200)(1,599,793) (1,132,474) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net Institutional Share Transactions 423,775 1,003,968 143,666 33,536 (70,957) (101,364) 46,204 143,164 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Corporate Trust Shares: Shares Issued -- -- -- -- -- -- 3,577,647 -- Shares Redeemed -- -- -- -- -- -- (2,439,116) -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net Corporate Trust Share Transactions -- -- -- -- -- -- 1,138,531 -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net Change in Capita Shares 423,775 1,003,968 143,666 33,536 (70,957) (101,364) 1,184,735 143,164 ========== ========== ========== ========== ========== ========== ========== ========== Amounts designated as "--" are either $0 or round to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
13 FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------------------------------------- STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31, (UNLESS OTHERWISE NOTED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD NET NET ASSET NET ASSET VALUE INVESTMENT DISTRIBUTIONS FROM VALUE END TOTAL BEGINNING OF PERIOD INCOME NET INVESTMENT INCOME OF PERIOD RETURN+ ---------------------- ----------- ---------------------- ----------- --------- CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND (A) Institutional Shares 2000 $1.00 $0.05 $(0.05) $1.00 5.56% 1999* 1.00 0.02 (0.02) 1.00 1.58 For the years ended January 31: 1999 1.00 0.05 (0.05) 1.00 5.46 1998 1.00 0.06 (0.06 1.00 5.66 1997 1.00 0.05 (0.05) 1.00 5.45 1996(B) 1.00 0.02 (0.02) 1.00 1.42 CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY MARKET FUND (C) Institutional Shares 2000 $1.00 $0.05 $(0.05) $1.00 5.39% 1999 1.00 0.02 (0.02 1.00 1.56 For the years ended January 31: 1999 1.00 0.05 (0.05) 1.00 5.30 1998 1.00 0.05 (0.05) 1.00 5.52 1997 1.00 0.05 (0.05) 1.00 5.29 199 1.00 0.05 (0.06) 1.00 5.88 CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND Institutional Shares 2000 $1.00 $0.05 $(0.05) $1.00 5.25% 1999 1.00 0.05 (0.05) 1.00 4.97 1998 1.00 0.05 (0.05) 1.00 5.50 1997(D) 1.00 0.02 (0.02) 1.00 2.46 Corporate Trust Shares 2000 (E) $1.00 $0.05 $(0.05) $1.00 5.02% (A) On May 17, 1999, the Arbor Prime Obligations Fund exchanged all of its assets and certain liabilities for shares of the Classic Institutional Cash Management Money Market Fund. The Arbor Prime Obligations Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 17, 1999 have been carried forward in these financial highlights. (B) Commenced operations on October 25, 1995. All ratios for the period have been annualized. (C) On May 24, 1999, the Arbor U.S. Government Securities Money Fund exchanged all of its assets and certain liabilities for shares of the Classic Institutional U.S. Government Securities Money Market Fund. The Arbor U.S. Government Securities Money Fund is the accounting survivor in this transaction, and as a result, its basis of accounting for assets and liabilities and its operating results for the periods prior to May 24, 1999 have been carried forward in these financial highlights.
14 ------------------------------------------------------------------------------------------------ RATIO OF RATIO OF NET INVESTMENT RATIO OF EXPENSES TO INCOME TO NET ASSETS RATIO OF NET INVESTMENT AVERAGE NET ASSETS AVERAGE NET ASSETS END OF EXPENSES TO INCOME TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) ------------ ------------------ ------------------ ------------------- ------------------- $2,311,685 0.25% 5.42% 0.30% 5.37% 1,888,483 0.25 4.79 0.35 4.69 884,490 0.23 5.31 0.35 5.19 740,837 0.20 5.52 0.36 5.36 477,435 0.20 5.33 0.38 5.15 382,632 0.20 5.61 0.40 5.41 $ 650,626 0.25% 5.27% 0.29% 5.23% 617,089 0.25 4.73 0.36 4.62 688,031 0.23 5.18 0.36 5.05 789,410 0.20 5.39 0.37 5.22 586,731 0.20 5.17 0.37 5.00 514,870 0.20 5.72 0.37 5.55 $ 329,725 0.25% 5.17% 0.31% 5.11% 283,525 0.20 4.83 0.47 4.56 140,334 0.18 5.34 0.38 5.14 20,238 0.09 5.27 0.51 4.85 $1,138,541 0.45% 4.93% 0.49% 4.89% (D) Commenced operations on December 12, 1996. All ratios for the period have been annualized. (E) Commenced operations on June 3, 1999. All ratios for the period have been annualized. + Returns are for the period indicated and have not been annualized. * For the period February 1, 1999 to May 31, 1999. All ratios for the period have been annualized. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
15 NOTES TO FINANCIAL STATEMENTS ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 1. Organization: The STI Classic Funds (the "Trust") was organized as a Massachusetts business trust under a Declaration of Trust dated January 15, 1992. The Trust is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company with thirty-five funds as of May 31, 2000: the Balanced Fund, the Capital Appreciation Fund (formerly the Capital Growth Fund), the Core Equity Fund, the E-Commerce Opportunity Fund, the Growth and Income Fund, the International Equity Fund, the International Equity Index Fund, the Life Vision Aggressive Growth Fund (formerly Life Vision Maximum Growth Portfolio), the Life Vision Growth and Income Fund (formerly Life Vision Growth and Income Portfolio), the Life Vision Moderate Growth Fund (formerly Life Vision Balanced Portfolio), the Mid-Cap Equity Fund, the Small Cap Growth Stock Fund, the Small Cap Value Equity Fund (formerly Small Cap Equity Fund), the Tax Sensitive Growth Stock Fund, the Value Income Stock Fund, (collectively the "Equity Funds"), the Florida Tax-Exempt Bond Fund, the Georgia Tax-Exempt Bond Fund, the High Income Fund, the Investment Grade Bond Fund, the Investment Grade Tax-Exempt Bond Fund, the Limited-Term Federal Mortgage Securities Fund, the Maryland Municipal Bond Fund, the Short-Term Bond Fund, the Short-Term U.S. Treasury Securities Fund, and the U.S. Government Securities Fund, the Virginia Intermediate Municipal Bond Fund, the Virginia Municipal Bond Fund, (collectively the "Fixed Income Funds"), the Prime Quality Money Market Fund, the Tax-Exempt Money Market Fund, the Tax-Free Money Market Fund, the U.S. Government Securities Money Market Fund, the U.S. Treasury Money Market Fund (collectively the "Retail Money Market Funds"), the Classic Institutional Cash Management Money Market Fund, the Classic Institutional U.S. Government Securities Money Market Fund and the Classic Institutional U.S. Treasury Securities Money Market Fund, (collectively the "Institutional Money Market Funds" or the "Funds"). The assets of each Fund are segregated, and a shareholder's interest is limited to the fund in which shares are held. Each Fund's prospectus provides a description of the Fund's investment objectives, policies and strategies. The financial statements presented herein are those of the Institutional Money Market Funds. The financial statements of the Equity Funds, the Fixed Income Funds and the Retail Money Market Funds are not presented herein, but are presented separately. Effective May 1999, the Board of Trustees of the STI Classic Funds and Board of Trustees of the Arbor Funds approved an Agreement and Plan of Reorganization (the "Reorganization Agreement") providing for the transfer of all assets and certain stated liabilities of the Arbor Funds in exchange for the issuance of shares in the Funds in a tax-free reorganization (see Note 8). 2. Significant Accounting Policies: The following is a summary of significant accounting policies followed by the Trust: BASIS OF PRESENTATION OF STATEMENTS -- As more fully described in Note 8 the STI Classic Funds acquired certain Arbor Funds in a tax-free business combination. While each Fund now exists as a STI Classic Fund, both the surviving funds for accounting purposes are Arbor Funds. In accordance with generally accepted accounting principles, the financial statements presented herein represent those of accounting survivors. Accordingly, the Statements of Changes in Net Assets and Financial Highlights presented for the periods prior to and ending on May 31, 1999 reflect activity beginning on the first day of the accounting survivor's fiscal year. 16 ------------------------------------------------------------------------------- SECURITY VALUATION -- Investment securities held by the Funds are stated at amortized cost, which approximates market value. FEDERAL INCOME TAXES -- It is each Fund's intention to qualify as a regulated investment company for Federal income tax purposes and distribute all of its taxable income and net capital gains. Accordingly, no provisions for Federal income taxes are required. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are accounted for on the date the security is purchased or sold (trade date). Interest income is recognized on an accrual basis. Costs used in determining net realized gains and losses on the sales of investment securities are those of the specific securities sold adjusted for the accretion and amortization of purchase discounts and premiums during the respective holding period. Purchase discounts and premiums on securities held by the Funds are accreted and amortized ratably to maturity and are included in interest income. REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase agreements are held by the custodian bank until the respective agreements mature. Provisions of the repurchase agreements ensure that the market value of the collateral, including accrued interest thereon, is sufficient in the event of default of the counterparty. If the counterparty defaults and the value of the collateral declines or if the counterparty enters into an insolvency proceeding, realization of the collateral by the Funds may be delayed or limited. NET ASSET VALUE PER SHARE -- The net asset value per share of each Fund is calculated each business day, by dividing the total value of each Fund's assets, less liabilities, by the number of shares outstanding. OTHER -- Expenses that are directly related to a specific Fund are charged to that Fund. Class specific expenses are borne by that class. Other operating expenses of the Trust are pro-rated to the Funds on the basis of relative net assets. Fund expenses are pro-rated to the respective classes on the basis of relative net assets. DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income of each of the Funds are declared on each business day and paid to shareholders on a monthly basis. Any net realized capital gains on sales of securities are distributed to shareholders at least annually. RECLASSIFICATION OF COMPONENTS OF NET ASSETS -- The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from generally accepted accounting principles. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These book/tax differences may be temporary or permanent in nature. To the extent these differences are permanent, they are charged or credited to paid-in-capital or accumulated net realized gain, as appropriate, in the period that the differences arise. Accordingly, the Institutional Cash Management Money Market Fund and the Institutional U.S. Treasury Securities Money Market Fund have reclassified $9,970 and $26,668, respectively, from Undistributed Net Investment Income to Accumulated Net Realized Gain. These reclassifications are attributable to the classification of short-term capital gains and ordinary income treatment for tax purposes. These reclassifications have no effect on net assets or net asset value per share. 17 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------------------------------------------------ STI CLASSIC FUNDS MAY 31, 2000 USE OF ESTIMATES -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates. 3. Transactions with Affiliates: Certain officers of the Trust are also officers of SEI Investments Mutual Funds Services ("the Administrator") and/or SEI Investments Distribution Co. (the "Distributor").Such officers are paid no fees by the Trust for serving as officers of the Trust. The Trust and the Distributor are parties to a Distribution Agreement dated November 21, 1995. The Distributor does not receive any fees for its distribution services provided under this agreement. The Fund has entered into an agreement with the Distributor to manage the investments of repurchase agreements for the Funds. For its services the Distributor received $1,846,277 for the year ended May 31, 2000. 4. Administration, Shareholder, and Transfer Agency Servicing Agreements: The Trust and the Administrator are parties to an Administration Agreement dated May 29, 1995, as amended November 19, 1997 and March 1, 1999, under which the Administrator provides administrative services for an annual fee (expressed as a percentage of the combined average daily net assets of the Trust and STI Classic Variable Trust) of: .12% up to $1 billion, .09% on the next $4 billion, .07% on the next $3 billion, .065% on the next $2 billion and .06% for over $10 billion. Prior to May 1999, administrative and accounting services were provided to the Arbor U.S. Government Securities Money Fund and Arbor Prime Obligations Fund by SEI Investments Mutual Funds Services who was entitled to receive a fee at an annual rate of .08% of the average daily net assets of these funds. A portion of these fees were voluntarily waived. The Institutional U.S. Treasury Money Market Fund has adopted a Shareholder Services Plan (the "Plan") for the Corporate Trust Shares. The Fund pays the Distributor a monthly shareholder services fee at an annual rate of 0.20% of the average daily net assets of the Fund's Corporate Trust Shares, which may be used by the Distributor to provide compensation to service providers that have agreed to provide shareholder support services for their customers who own Corporate Trust Shares of the Fund. The Trust and Federated Services Company are parties to a Transfer Agency servicing agreement dated May 14, 1994 under which Federated Services Company provides transfer agency services to the Trust. 5. Investment Advisory and Custodian Agreements: The Trust and Trusco Capital Management, Inc. (the "Investment Adviser") have entered into an advisory agreement dated July 15, 1993. Under terms of the respective agreements, the Funds are charged the following annual fees based upon average daily net assets: 18 ------------------------------------------------------------------------------- MAXIMUM INSTITUTIONAL CORPORATE ANNUAL SHARE TRUST SHARE ADVISORY MAXIMUM MAXIMUM FEE EXPENSE EXPENSE --------- ------------ ------------ Classic Institutional Cash Management Money Market Fund .20% .25% -- Classic Institutional U.S. Government Securities Money Market Fund .20% .25% -- Classic Institutional U.S. Treasury Money Market Fund .20% .25% .45% The Investment Adviser and the Administrator have voluntarily agreed to waive all or a portion of their fees (and to reimburse Funds' expenses) in order to limit operating expenses to an amount as outlined in the table above. Fee waivers and expense reimbursements are voluntary and may be terminated at any time. Prior to May 1999, Crestar Asset Management Company ("CAMCO") provided Investment Advisory services to certain Arbor Funds. CAMCO was paid for advisory services to each Fund at an annual rate of .10% and .11% of the average daily net assets for Arbor U.S. Government Securities Money and Arbor Prime Obligations Funds, respectively. SunTrust Bank, Atlanta, acts as custodian for the Funds. Fees of the Custodian are paid on the basis of the net assets of the Funds. The Custodian plays no role in determining the investment policies of the Trust or which securities are to be purchased or sold in the Funds. 6. Concentration of Credit Risk: The Classic Institutional Cash Management Money Market Fund invests in high quality money market instruments issued by corporations and the U.S. Government and rated by one or more nationally recognized statistical rating organizations, or, if not rated, are determined by the Adviser to be of comparable quality. The Classic Institutional U.S. Government Securities Money Market Fund invests in U.S. Treasury obligations, U.S. Government subsidiary corporation securities which are backed by the full faith and credit of the U.S. government and repurchase agreements with approved dealers collateralized by U.S. Treasury securities and U.S. Government subsidiary corporation securities. The Classic Institutional U.S. Treasury Securities Money Market Fund invests in U.S. Treasury Obligations, which are backed by the full faith and credit of the U.S. Government and repurchase agreements with approved dealers collateralized by U.S. Treasury securities. 7. Investment Transactions: Subsequent to October 31, 1999, the Funds recognized net capital losses for tax purposes that have been deferred to 2000 and can be used to offset future capital gains at May 31, 2000. The Funds also had capital loss carryforwards at May 31, 2000 as follows: CAPITAL LOSS POST 10/31 CARRYOVER EXPIRES EXPIRES DEFERRED 5/31/00 2003 2004 LOSS FUND (000) 000) (000) (000) ------ ---------- ------- ------- ---------- Classic Institutional U.S. Government Securities Money Market Fund $25 $11 $14 $-- Classic Institutional U.S. Treasury Securities Money Market Fund -- -- -- 3 For tax purposes, the losses in the Funds can be carried forward for a maximum of eight years to offset any net realized capital gains. 19 NOTES TO FINANCIAL STATEMENTS (concluded) ------------------------------------------------------------------------------ STI CLASSIC FUNDS MAY 31, 2000 8. Arbor Funds Merger: The Board of Trustees and shareholders of certain of the Arbor Funds approved a reorganization of certain of the Arbor Funds into the STI Classic Funds which took place during May 1999. The following table summarizes certain relevant information of the funds prior to and immediately after the business combinations in May 1999 and is unaudited: SHARES OUTSTANDING SHARES ISSUED NET ASSETS NAV ON MERGER IN BUSINESS AFTER PER ARBOR FUND DATE STI CLASSIC FUND COMBINATION COMBINATION SHARE -------------------------- -------------- ----------------------------------- -------------- ------------ --------- U.S. Government Securities 684,672,707 Classic Institutional U.S. Government 684,672,707 684,647,218 $1.00 Money Fund (1) Securities Money Market Fund Prime Obligations Fund (1) 711,747,295 Classic Institutional Cash Management 711,747,295 1,783,974,148 1.00 Money Market Fund (1) Represents the accounting survivor in this business combination. 9. Subsequent Event: Effective June 30, 2000, SunTrustBanks, Inc. reorganized all of the investment management functions of its three institutional money management units, including SunTrust Bank, into Trusco Capital Management, Inc. 20 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ------------------------------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 2000 To the Shareholders and Board of Trustees of STI Classic Funds: We have audited the accompanying statements of net assets of the Classic Institutional Cash Management Money Market, Classic Institutional U.S. Government Securities Money Market, and Classic Institutional U.S. Treasury Securities Money Market Funds of STI Classic Funds (the "Trust") as of May 31, 2000, and the related statements of operations, changes in net assets, and financial highlights for the periods presented, excluding the periods indicated below. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The statements of changes for the year ended January 31, 1999 and financial highlights for the periods presented prior to May 31, 1999, for the Classic Institutional Cash Management Money Market and Classic Institutional U.S. Government Securities Money Market Funds, were audited by other auditors whose report, dated March 15, 1999, expressed an unqualified opinion on this information. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whe-ther the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of May 31, 2000, by correspondence with the custodian and the application of alternative auditing procedures with respect to unsettled securities transactions. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights audited by us present fairly, in all material respects, the financial position of the Classic Institutional Cash Management Money Market, Classic Institutional U.S. Government Securities Money Market, and Classic Institutional U.S. Treasury Securities Money Market Funds, of STI Classic Funds as of May 31, 2000, the results of their operations, changes in their net assets, and financial highlights for each of the periods described in the first paragraph above, in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Philadelphia, Pennsylvania July 18, 2000 21 NOTICE TO SHAREHOLDERS ------------------------------------------------------------------------------ STI CLASSIC FUNDS MAY 31, 2000UNAUDITED For shareholders that do not have a May 31, 2000 tax year end, this notice is for informational purposes only. For shareholders with a May 31, 2000, please consult your tax adviser as to the pertinence of this notice. For the fiscal year ended May 31, 2000, each portfolio is designating the following items with regard to distributions paid during the year. LONG TERM (20% RATE) ORDINARY CAPITAL GAIN INCOME TAX-EXEMPT TOTAL QUALIFYING FUND DISTRIBUTIONS DISTRIBUTIONS INTEREST DISTRIBUTIONS DIVIDENDS (1) -------------------------------------- --------------- -------------- ---------- -------------- -------------- Classic Institutional Cash Management Money Market Fund --% 100.00% --% 100.00% --% Classic Institutional U.S. Treasury Securities Money Market Fund --% 100.00% --% 100.00% --% Classic Institutional U.S. Government Money Market Fund --% 100.00% --% 100.00% --% (1) Qualifying dividends represent dividends which qualify for the corporate dividends received deduction and is reflected as a percentage of "OrdinaryIncome Distributions".
22 INVESTMENT ADVISER Trusco Capital Management, Inc. STI Classic Funds are not deposits, are not insured or guaranteed by the FDIC or any other government agency, and are not endorsed by and do not constitute obligations of SunTrust Banks, Inc. or any other of its affiliates. Investment in the Funds involves risk, including the possible loss of principal. There is no guarantee that any STI Classic Fund will achieve its investment objective. The STI Classic Funds are advised by affiliates of SunTrust Banks, Inc. DISTRIBUTOR SEI Investments Distribution Co. This information must be preceded or accompanied by a current prospectus for each Fund described. STI CLASSIC FUNDS PART C: OTHER INFORMATION POST-EFFECTIVE AMENDMENT NO. 37 Item 23. Exhibits: (a) Declaration of Trust - originally filed with Registrant's Registration Statement on Form N-1A filed February 12, 1992 and incorporated by reference to Exhibit 1 of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (b) Amended and Restated By-Laws, as approved by the Board of Trustees on August 15, 2000, are filed herewith. (c) Not applicable. (d)(1) Revised Investment Advisory Agreement with Trusco Capital Management, Inc. as originally filed with Registrant's Post-Effective Amendment No. 5 filed August 2, 1993 and incorporated by reference to Exhibit 5(c) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (d)(2) Investment Advisory Agreement with American National Bank and Trust Company as originally filed with Registrant's Post-Effective Amendment No. 6 filed October 22, 1993 and as Exhibit 5(d) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (d)(3) Investment Advisory Agreement with Sun Bank Capital Management, National Association (now Trusco Capital Management, Inc.) as originally filed with Registrant's Post-Effective Amendment No. 6 filed October 22, 1993 and incorporated by reference to Exhibit 5(e) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (d)(4) Investment Advisory Agreement with Trust Company Bank (now Trusco Capital Management, Inc.) as originally filed with Registrant's Post-Effective Amendment No. 6 filed October 22, 1993 and incorporated by reference to Exhibit D(4) of Post-Effective Amendment No. 24 to the Registrant's Statement filed with the SEC via EDGAR Accession No. 0001047469-98-028802 on July 30, 1998. (d)(5) Revised Schedule A to the Revised Investment Advisory Agreement with Trusco Capital Management, Inc. dated May 24, 1999 - incorporated by reference to the Registrant's Post-Effective Amendment No. 32 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0001047469-99-037088 on September 28, 1999. (d)(6) Revised Schedule A to the Revised Investment Advisory Agreement with Trusco Capital Management, Inc. dated October 1, 1999 - incorporated by reference to the Registrant's Post-Effective Amendment No. 33 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-99-007899 on December 1, 1999. (d)(7) Revised Schedule A to the Revised Investment Advisory Agreement with Trusco Capital Management, Inc. dated March 27, 2000 - incorporated by reference to the Registrant's Post-Effective Amendment No. 35 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000916641-00-000365 on March 28, 2000. (e) Distribution Agreement dated May 26, 1992 - incorporated by reference to Exhibit 6 of Post-Effective Amendment No. 16 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-021336 on September 27, 1996. (f) Not applicable. (g)(1) Custodian Agreement with Trust Company Bank dated February 1, 1994 originally filed with Registrant's Post-Effective Amendment No. 13 filed September 28, 1995 and incorporated by reference to Exhibit 8(b) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (g)(2) Custodian Agreement with the Bank of California incorporated by reference to Exhibit 8(a) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. C-2 (g)(3) Fourth Amendment to Custodian Agreement by and between STI Trust & Investment Operations, Inc. and The Bank of New York dated May 6, 1997 incorporated by reference to Exhibit 8(d) of Post-Effective Amendment No. 21 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-97-032207 on September 30, 1997. (h)(1) Transfer Agent Agreement with Federated Services Company dated May 14, 1994 originally filed with Post-Effective Amendment No. 9 filed September 22, 1994 and incorporated by reference to Exhibit 8(c) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (h)(2) Administration Agreement with SEI Financial Management Corporation dated May 29, 1995 - incorporated by reference to the Registrant's Post-Effective Amendment No. 32 to the Registrant's Registration Statement filed the SEC via EDGAR Accession No. 0001047469-99-037088 on September 28, 1999. (h)(3) Consent to Assignment and Assumption of the Administration Agreement between STI Classic Funds and SEI Financial Management Corporation - incorporated by reference to Exhibit 9(b) of Post-Effective Amendment No. 21 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-97-032207 on September 30, 1997. (i) Opinion and Consent of Counsel is filed herewith. (j)(1) Consent of Arthur Andersen LLP, independent public accountants, is filed herewith. (j)(2) Consent of Deloitte & Touche LLP, independent public accountants, is filed herewith. (j)(3) Consent of PricewaterhouseCoopers LLP, independent public accountants, is filed herewith. (j)(4) Consent of PricewaterhouseCoopers LLP, independent public accountants, is filed herewith. (k) Not applicable. (l) Not applicable. (m)(1) Distribution Plan - Investor Class - incorporated by reference to Exhibit 15 of Post-Effective Amendment No. 16 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-021336 on September 27, 1996. (m)(2) Distribution and Service Agreement relating to Flex Shares dated May 29, 1995 - originally filed with Post-Effective Amendment No. 12 filed August 17, 1995 and incorporated by reference to Exhibit 15(a) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (n)(1) Rule 18f-3 Plan - incorporated by reference to Exhibit (o) of Post-Effective Amendment No. 23 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0001047469-98-027407 on July 15, 1998. (n)(2) Certificate of Class Designation - incorporated by reference to Exhibit (o)(1) of Post-Effective Amendment No. 27 to the Registrant's Statement filed with the SEC via EDGAR Accession No. 0001047469-99-009731 on April 15, 1999. (o) Powers of Attorney are filed herewith. (p)(1) Code of Ethics for STI Classic Funds - incorporated by reference to Exhibit (p)(1) of Post-Effective Amendment No. 35 to the Registrant's Statement filed with the SEC via EDGAR Accession No. 0000916641-00-000365 on March 28, 2000. (p)(2) Code of SEI Investments Company - incorporated by reference to Exhibit (p)(2) of Post-Effective Amendment No. 35 to the Registrant's Statement filed with the SEC via EDGAR Accession No. 0000916641-00-000365 on March 28, 2000. (p)(3) Code of Ethics for Trusco Capital Management, Inc. - incorporated by reference to Exhibit (p)(3) of Post-Effective Amendment No. 35 to the Registrant's Statement filed with the SEC via EDGAR Accession No. 0000916641-00-000365 on March 28, 2000. (p)(4) Code of Ethics for Trusco Capital Management, Inc., as approved by the Board of Trustees on August 15, 2000, is filed herewith. Item 24. Persons Controlled by or under Common Control with Registrant: See the Prospectus and Statement of Additional Information regarding the Trust's control relationships. The Administrator is a subsidiary of SEI Investments which also controls the distributor of the Registrant, SEI Investments Distribution Co., and other corporations engaged in providing various financial and record keeping services, primarily to bank trust departments, pension plan sponsors, and investment managers. C-3 Item 25. Indemnification: Article VIII of the Agreement of Declaration of Trust filed as Exhibit (a) to the Registration Statement is incorporated by reference. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to trustees, directors, officers and controlling persons of the Registrant by the Registrant pursuant to the Declaration of Trust or otherwise, the Registrant is aware that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and, therefore, is unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by trustees, directors, officers or controlling persons of the Registrant in connection with the successful defense of any act, suit or proceeding) is asserted by such trustees, directors, officers or controlling persons in connection with the shares being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issues. Item 26. Business and Other Connections of Investment Advisors: Other business, profession, vocation, or employment of a substantial nature in which each director or principal officer of each Advisor is or has been, at any time during the last two fiscal years, engaged for his own account or in the capacity of director, officer, employee, partner or trustee are as follows:
--------------------------------------------- -------------------------------- ------------------------- Name of Connection with Name Other Company Other Company --------------------------------------------- -------------------------------- ------------------------- TRUSCO CAPITAL MANAGEMENT, INC. E. Jenner Wood, III Director SunTrust Banks, Inc. Executive Vice President Donald W. Thurmond Director SunTrust Bank, Atlanta Executive Vice President Douglas S. Phillips President/CEO/Director -- Paul L. Robertson, III Executive Vice President/Secretary/Treasurer -- Andrew J. Muldoon, III Executive Vice President -- Robert J. Rhodes Executive Vice President -- --------------------------------------------- -------------------------------- -------------------------
C-4
--------------------------------------------- -------------------------------- ------------------------- Name of Connection with Name Other Company Other Company --------------------------------------------- -------------------------------- ------------------------- Bob M. Farmer Managing Director -- Alan M. Gayle Managing Director -- Gay B. Cash Vice President SunTrust Bank, Atlanta First Vice President C. William Cherry, Jr. Vice President -- Eunice Gillespie Vice President -- Wayne G. Larochelle Managing Director -- Stuart L. Oglesby Vice President -- Josie C. Rosson Vice President -- John H. Stebbins Vice President -- --------------------------------------------- -------------------------------- -------------------------
C-5
--------------------------------------------- -------------------------------- ------------------------- Name of Connection with Name Other Company Other Company --------------------------------------------- -------------------------------- ------------------------- J. Kurt Wood Vice President -- Charles B. Arrington Vice President -- Brett L. Barner Vice President -- Shane Coldren Vice President -- Larry M. Cole Managing Director -- J. Chadwick Deakins Vice President -- James R. Dillon, Jr. Managing Director -- Martin J. Duffy Vice President -- James P. Foster Vice President -- Mark D. Garfinkel Vice President -- John M. Hamlin Vice President -- Peter P. Hardy Vice President -- Christopher A. Jones Managing Director -- Alan S. Kelley Vice President -- Jeffrey E. Markunas Managing Director -- Kurt T. Momand Managing Director -- Peter T. Montgomery Vice President -- Jonathan C. Mote Vice President -- Steven A. Noone Managing Director -- Sheri L. Paquette Vice President -- Elliott A. Perny Managing Director -- --------------------------------------------- -------------------------------- -------------------------
C-6
--------------------------------------------- -------------------------------- ------------------------- Name of Connection with Name Other Company Other Company --------------------------------------------- -------------------------------- ------------------------- Joe E. Ransom Managing Director -- Mills A. Riddick Managing Director -- Marc H. Schneidau Vice President -- George D. Smith, Jr. Vice President -- William L. Wilson, Jr. Vice President -- Jennifer M. Constine Vice President -- L. Earl Denney Managing Director -- Charles B. Leonard Managing Director -- --------------------------------------------- -------------------------------- -------------------------
C-7
--------------------------------------------- -------------------------------- ------------------------- Name of Connection with Name Other Company Other Company --------------------------------------------- -------------------------------- ------------------------- Agnes G. Pampush Managing Director -- Neil J. Powers Managing Director -- Boyce G. Reid Vice President -- J. Buist Richardson Vice President -- Ronald H. Schwartz Managing Director -- Garrett P. Smith Managing Director -- David E. West Managing Director -- Robert S. Bowman Vice President -- Casey C. Brogdon Managing Director -- Robert W. Corner Vice President -- James E. Kofron Vice President -- --------------------------------------------- -------------------------------- -------------------------
C-8
--------------------------------------------- -------------------------------- ------------------------- Name of Connection with Name Other Company Other Company --------------------------------------------- -------------------------------- ------------------------- Kimberly C. Maichle Vice President -- Teresa W. Phillips Vice President -- E. Sonny Surkin Vice President -- David S. Yealy Managing Director -- Frances J. Aylor Vice President -- Edward E. Best Managing Director -- Neil L. Halpert Vice President -- Christian G. Koch Vice President -- Kar Ming Leong Vice President -- Daniel J. Lewis Vice President -- R. Douglas Mitchell Vice President -- Elizabeth G. Pola Managing Director -- Glenn H. Shaw Vice President -- Rebekah R. Alley Vice President -- Charles Guilfoyle Vice President -- Celia S. Stanley Vice President -- Natalie Wright Vice President -- Stephen M. Yarbrough Managing Director --
Item 27. Principal Underwriters: (a) Furnish the name of each investment company (other than the Registrant) for which each principal underwriter currently distributing the securities of the Registrant also acts as a principal underwriter, distributor or investment adviser. Registrant's distributor, SEI Investments Distribution Co. (the "Distributor"), acts as distributor for: SEI Daily Income Trust July 15, 1982 SEI Liquid Asset Trust November 29, 1982 SEI Tax Exempt Trust December 3, 1982 SEI Index Funds July 10, 1985 SEI Institutional Managed Trust January 22, 1987 SEI Institutional International Trust August 30, 1988 The Advisors' Inner Circle Fund November 14, 1991 The Pillar Funds February 28, 1992 CUFUND May 1, 1992 First American Funds, Inc. November 1, 1992 First American Investment Funds, Inc. November 1, 1992 The Arbor Fund January 28, 1993 The PBHG Funds, Inc. July 16, 1993 The Achievement Funds Trust December 27, 1994 Bishop Street Funds January 27, 1995 STI Classic Variable Trust August 18, 1995 ARK Funds November 1, 1995 Huntington Funds January 11, 1996 SEI Asset Allocation Trust April 1, 1996 TIP Funds April 28, 1996 SEI Institutional Investments Trust June 14, 1996 First American Strategy Funds, Inc. October 1, 1996 HighMark Funds February 15, 1997 Armada Funds March 8, 1997 PBHG Insurance Series Fund, Inc. April 1, 1997 The Expedition Funds June 9, 1997 Alpha Select Funds January 1, 1998 Oak Associates Funds February 27, 1998 The Nevis Fund, Inc. June 29, 1998 CNI Charter Funds April 1, 1999 The Armada Advantage Fund May 1, 1999 Amerindo Funds Inc. July 13, 1999 Huntington VA Funds October 15, 1999 Friends Ivory Funds December 16, 1999 SEI Insurance Products Trust March 29, 2000 Pitcairn Funds August 1, 2000 C-9 The Distributor provides numerous financial services to investment managers, pension plan sponsors, and bank trust departments. These services include portfolio evaluation, performance measurement and consulting services ("Funds Evaluation") and automated execution, clearing and settlement of securities transactions ("MarketLink"). (b) Furnish the Information required by the following table with respect to each director, officer or partner of each principal underwriter named in the answer to Item 21 of Part B. Unless otherwise noted, the business address of each director or officer is Oaks, PA 19456.
Position and Office Positions and Offices Name with Underwriter with Registrant ---- ------------------- --------------------- Alfred P. West, Jr. Director, Chairman of the Board of Directors -- Richard B. Lieb Director, Executive Vice President -- Carmen V. Romeo Director -- Mark J. Held President & Chief Operating Officer -- Dennis J. McGonigle Executive Vice President -- Robert M. Silvestri Chief Financial Officer & Treasurer -- Todd Cipperman Senior Vice President & General Counsel Vice President & Assistant Secretary Leo J. Dolan, Jr. Senior Vice President -- Carl A. Guarino Senior Vice President -- Jack May Senior Vice President -- Hartland J. McKeown Senior Vice President -- Kevin P. Robins Senior Vice President -- Patrick K. Walsh Senior Vice President -- Wayne M. Withrow Senior Vice President -- Robert Aller Vice President -- John D. Anderson Vice President & Managing Director -- Timothy D. Barto Vice President & Assistant Secretary Vice President & Assistant Secretary S. Courtney E. Collier Vice President & Assistant Secretary -- Robert Crudup Vice President & Managing Director -- Richard A. Deak Vice President & Assistant Secretary -- Scott W. Dellorfano Vice President & Managing Director -- Barbara Doyne Vice President -- Jeff Drennen Vice President -- Scott C. Fanatico Vice President & Managing Director -- James R. Foggo Vice President & Assistant Secretary Vice President & Assistant Secretary Vic Galef Vice President & Managing Director -- Steven A. Gardner Vice President & Managing Director -- Lydia A. Gavalis Vice President & Assistant Secretary Vice President & Assistant Secretary Greg Gettinger Vice President & Assistant Secretary -- Kathy Heilig Vice President -- Jeff Jacobs Vice President -- Samuel King Vice President -- John Kirk Vice President & Managing Director -- Kim Kirk Vice President & Managing Director -- John Krzeminski Vice President & Managing Director -- Paul Lonergan Vice President & Managing Director -- Ellen Marquis Vice President -- Christine M. McCullough Vice President & Assistant Secretary Vice President & Assistant Secretary Carolyn McLaurin Vice President & Managing Director -- Mark Nagle Vice President President Joanne Nelson Vice President --
C-10
Position and Office Positions and Offices Name with Underwriter with Registrant ---- ------------------- --------------------- Cynthia M. Parrish Vice President & Secretary -- Rob Redican Vice President -- Maria Rinehart Vice President -- Steve Smith Vice President -- Daniel Spaventa Vice President -- Kathryn L. Stanton Vice President -- Lori L. White Vice President & Assistant Secretary --
Item 28. Location of Accounts and Records: Books or other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940, and the rules promulgated thereunder, are maintained as follows: (a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3); (6); (8); (12); and 31a-1(d), the required books and records are maintained at the offices of Registrant's Custodians: Trust Company Bank Park Place P.O. Box 105504 Atlanta, Georgia 30348 Bank of New York One Wall Street New York, New York (International Equity Index Fund and International Equity Fund) (b)/(c) With respect to Rules 31a-1(a); 31a-1(b)(1),(4); (2)(C) and (D); (4); (5); (6); (8); (9); (10); (11); and 31a-1(f), the required books and records are maintained at the offices of Registrant's Administrator: SEI Investments Mutual Funds Services One Freedom Valley Road Oaks, Pennsylvania 19456 (c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f), the required books and records are maintained at the principal offices of the Registrant's Advisors: Trusco Capital Management P.O. Box 3808 Orlando, Florida 32802 Trusco Capital Management 50 Hurt Plaza, Suite 1400 Atlanta, Georgia 30303 Trusco Capital Management 25 Park Place Atlanta, Georgia 30303 Item 29. Management Services: None. Item 30. Undertakings: None. C-11 NOTICE A copy of the Agreement and Declaration of Trust for STI Classic Funds is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this Registration Statement has been executed on behalf of the Trust by an officer of the Trust as an officer and by its Trustees as trustees and not individually and the obligations of or arising out of this Registration Statement are not binding upon any of the Trustees, officers, or Shareholders individually but are binding only upon the assets and property of the Trust. C-12 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 (the "Securities Act") and the Investment Company Act of 1940, as amended, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-Effective Amendment No. 37 to Registration Statement No. 33-45671 to be signed on its behalf by the undersigned, duly authorized, in the City of Oaks, Commonwealth of Pennsylvania on the 21st day of September, 2000. By: /s/ Mark E. Nagle Mark Nagle, President Pursuant to the requirements of the Securities Act, this Registration Statement has been signed below by the following persons in the capacity on the dates indicated.
* Trustee September 21, 2000 -------------------------------------------------- F. Wendell Gooch * Trustee September 21, 2000 -------------------------------------------------- Daniel S. Goodrum * Trustee September 21, 2000 -------------------------------------------------- Wilton Looney * Trustee September 21, 2000 -------------------------------------------------- Champney A. McNair * Trustee September 21, 2000 -------------------------------------------------- T. Gordy Germany * Trustee September 21, 2000 -------------------------------------------------- Bernard F. Sliger * Trustee September 21, 2000 -------------------------------------------------- Jonathan T. Walton * Trustee September 21, 2000 -------------------------------------------------- James O. Robbins * Trustee September 21, 2000 -------------------------------------------------- Thomas Gallagher /s/ Mark E. Nagle President September 21, 2000 -------------------------------------------------- Mark Nagle * Treasurer & Chief September 21, 2000 -------------------------------------------------- Financial Officer Jennifer Spratley * By: /s/ Mark E. Nagle Mark Nagle, With Power of Attorney
C-13 EXHIBIT INDEX NUMBER EXHIBIT EX-99.A Declaration of Trust - originally filed with Registrant's Registration Statement on Form N-1A filed February 12, 1992 and incorporated by reference to Exhibit 1 of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. EX-99.B Amended and Restated By-Laws, as approved by the Board of Trustees on August 15, 2000, are filed herewith. EX-99.C Not applicable. EX-99.D1 Revised Investment Advisory Agreement with Trusco Capital Management, Inc. as originally filed with Registrant's Post-Effective Amendment No. 5 filed August 2, 1993 and incorporated by reference to Exhibit 5(c) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. EX-99.D2 Investment Advisory Agreement with American National Bank and Trust Company as originally filed with Registrant's Post-Effective Amendment No. 6 filed October 22, 1993 and as Exhibit 5(d) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. EX-99.D3 Investment Advisory Agreement with Sun Bank Capital Management, National Association (now Trusco Capital Management, Inc.) as originally filed with Registrant's Post-Effective Amendment No. 6 filed October 22, 1993 and incorporated by reference to Exhibit 5(e) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. EX-99.D4 Investment Advisory Agreement with Trust Company Bank (now Trusco Capital Management, Inc.) as originally filed with Registrant's Post-Effective Amendment No. 6 filed October 22, 1993 and incorporated by reference to Exhibit D(4) of Post-Effective Amendment No. 24 to the Registrant's Statement filed with the SEC via EDGAR Accession No. 0001047469-98-028802 on July 30, 1998. EX-99.D5 Revised Schedule A to the Revised Investment Advisory Agreement with Trusco Capital Management, Inc. dated May 24, 1999 - incorporated by reference to the Registrant's Post-Effective Amendment No. 32 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0001047469-99-037088 on September 28, 1999. EX-99.D6 Revised Schedule A to the Revised Investment Advisory Agreement with Trusco Capital Management, Inc. dated October 1, 1999 - incorporated by reference to the Registrant's Post-Effective Amendment No. 33 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-99-007899 on December 1, 1999. EX-99.D7 Revised Schedule A to the Revised Investment Advisory Agreement with Trusco Capital Management, Inc. dated March 27, 2000 - incorporated by reference to the Registrant's Post-Effective Amendment No. 35 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000916641-00-000365 on March 28, 2000. EX-99.E Distribution Agreement dated May 26, 1992 - incorporated by reference to Exhibit 6 of Post-Effective Amendment No. 16 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-021336 on September 27, 1996. EX-99.F Not applicable. EX-99.G1 Custodian Agreement with Trust Company Bank dated February 1, 1994 originally filed with Registrant's Post-Effective Amendment No. 13 filed September 28, 1995 and incorporated by reference to Exhibit 8(b) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. EX-99.G2 Custodian Agreement with the Bank of California incorporated by reference to Exhibit 8(a) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. EX-99.G3 Fourth Amendment to Custodian Agreement by and between STI Trust & Investment Operations, Inc. and The Bank of New York dated May 6, 1997 incorporated by reference to Exhibit 8(d) of Post-Effective Amendment No. 21 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-97-032207 on September 30, 1997. C-14 EX-99.H1 Transfer Agent Agreement with Federated Services Company dated May 14, 1994 originally filed with Post-Effective Amendment No. 9 filed September 22, 1994 and incorporated by reference to Exhibit 8(c) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. EX-99.H2 Administration Agreement with SEI Financial Management Corporation dated May 29, 1995 - Incorporated by reference to the Registrant's Post-Effective Amendment No. 32 to the Registrant's Registration Statement filed the SEC via EDGAR Accession No. 0001047469-99-037088 on September 28, 1999. EX-99.H3 Consent to Assignment and Assumption of the Administration Agreement between STI Classic Funds and SEI Financial Management Corporation - incorporated by reference to Exhibit 9(b) of Post-Effective Amendment No. 21 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-97-032207 on September 30, 1997. EX-99.I Opinion and Consent of Counsel is filed herewith. EX-99.J1 Consent of Arthur Andersen LLP, independent public accountants, is filed herewith. EX-99.J2 Consent of Deloitte & Touche LLP, independent public accountants, is filed herewith. EX-99.J3 Consent of PricewaterhouseCoopers LLP, independent public accountants, is filed herewith. EX-99.J4 Consent of PricewaterhouseCoopers LLP, independent public accountants, is filed herewith. EX-99.K Not applicable. EX-99.L Not applicable. EX-99.M1 Distribution Plan - Investor Class - incorporated by reference to Exhibit 15 of Post-Effective Amendment No. 16 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-021336 on September 27, 1996. EX-99.M2 Distribution and Service Agreement relating to Flex Shares dated May 29, 1995 - originally filed with Post-Effective Amendment No. 12 filed August 17, 1995 and incorporated by reference to Exhibit 15(a) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. EX-99.N1 Rule 18f-3 Plan - incorporated by reference to Exhibit (o) of Post-Effective Amendment No. 23 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0001047469-98-027407 on July 15, 1998. EX-99.N2 Certificate of Class Designation - incorporated by reference to Exhibit (o)(1) of Post-Effective Amendment No. 27 to the Registrant's Statement filed with the SEC via EDGAR Accession No. 0001047469-99-009731 on April 15, 1999. EX-99.O Powers of Attorney are filed herewith. EX-99.P1 Code of Ethics for STI Classic Funds - incorporated by reference to Exhibit (p)(1) of Post-Effective Amendment No. 35 to the Registrant's Statement filed with the SEC via EDGAR Accession No. 0000916641-00-000365 on March 28, 2000. EX-99.P2 Code of SEI Investments Company - incorporated by reference to Exhibit (p)(2) of Post-Effective Amendment No. 35 to the Registrant's Statement filed with the SEC via EDGAR Accession No. 0000916641-00-000365 on March 28, 2000. EX-99.P3 Code of Ethics for Trusco Capital Management, Inc. - incorporated by reference to Exhibit (p)(3) of Post-Effective Amendment No. 35 to the Registrant's Statement filed with the SEC via EDGAR Accession No. 0000916641-00-000365 on March 28, 2000. EX-99.P4 Code of Ethics for Trusco Capital Management, Inc., as approved by the Board of Trustees on August 15, 2000, is filed herewith. C-15