0000935069-01-500566.txt : 20011009
0000935069-01-500566.hdr.sgml : 20011009
ACCESSION NUMBER: 0000935069-01-500566
CONFORMED SUBMISSION TYPE: 485BPOS
PUBLIC DOCUMENT COUNT: 5
FILED AS OF DATE: 20010928
EFFECTIVENESS DATE: 20010928
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: STI CLASSIC FUNDS
CENTRAL INDEX KEY: 0000883939
STANDARD INDUSTRIAL CLASSIFICATION: []
STATE OF INCORPORATION: MA
FISCAL YEAR END: 0531
FILING VALUES:
FORM TYPE: 485BPOS
SEC ACT: 1933 Act
SEC FILE NUMBER: 033-45671
FILM NUMBER: 1747689
BUSINESS ADDRESS:
STREET 1: 2 OLIVER STREET
CITY: BOSTON
STATE: MA
ZIP: 02109
BUSINESS PHONE: 6109896602
MAIL ADDRESS:
STREET 1: 530 E SWEDESFORD ROAD
CITY: WAYNE
STATE: PA
ZIP: 19087-1693
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: STI CLASSIC FUNDS
CENTRAL INDEX KEY: 0000883939
STANDARD INDUSTRIAL CLASSIFICATION: []
STATE OF INCORPORATION: MA
FISCAL YEAR END: 0531
FILING VALUES:
FORM TYPE: 485BPOS
SEC ACT: 1940 Act
SEC FILE NUMBER: 811-06557
FILM NUMBER: 1747690
BUSINESS ADDRESS:
STREET 1: 2 OLIVER STREET
CITY: BOSTON
STATE: MA
ZIP: 02109
BUSINESS PHONE: 6109896602
MAIL ADDRESS:
STREET 1: 530 E SWEDESFORD ROAD
CITY: WAYNE
STATE: PA
ZIP: 19087-1693
485BPOS
1
sti485b10_01.txt
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 28, 2001
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. 41 [X]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 43 [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
----------------
James R. Foggo
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 October 1, 2001 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.
C-1
[PHOTO OF STI SUNDIAL OMITTED]
100093/10-01
STI CLASSIC FUNDS - EQUITY FUNDS
TRUST SHARES
PROSPECTUS
OCTOBER 1, 2001
BALANCED FUND
CAPITAL APPRECIATION FUND
GROWTH AND INCOME FUND
INFORMATION AND TECHNOLOGY FUND
(FORMERLY, E-COMMERCE OPPORTUNITY FUND)
INTERNATIONAL EQUITY FUND
INTERNATIONAL EQUITY INDEX FUND
MID-CAP EQUITY FUND
SMALL CAP GROWTH STOCK FUND
SMALL CAP VALUE EQUITY FUND
TAX SENSITIVE GROWTH STOCK FUND
VALUE INCOME STOCK FUND
INVESTMENT ADVISER
TO THE FUNDS:
TRUSCO CAPITAL MANAGEMENT, INC.
(the "Adviser")
[STI CLASSIC FUNDS 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 GROWTH AND INCOME FUND
8 INFORMATION AND TECHNOLOGY FUND
10 INTERNATIONAL EQUITY FUND
12 INTERNATIONAL EQUITY INDEX FUND
14 MID-CAP EQUITY FUND
16 SMALL CAP GROWTH STOCK FUND
18 SMALL CAP VALUE EQUITY FUND
20 TAX SENSITIVE GROWTH STOCK FUND
22 VALUE INCOME STOCK FUND
24 MORE INFORMATION ABOUT RISK
25 MORE INFORMATION ABOUT FUND INVESTMENTS
25 INVESTMENT ADVISER
26 PORTFOLIO MANAGERS
27 PURCHASING AND SELLING FUND SHARES
28 DIVIDENDS AND DISTRIBUTIONS
29 TAXES
30 FINANCIAL HIGHLIGHTS
34 HOW TO OBTAIN MORE INFORMATION ABOUT THE
STICLASSIC FUNDS
--------------------------------------------------------------------------------
[BRIEFCASE ICON OMITTED] FUND SUMMARY
[TELESCOPE ICON OMITTED] INVESTMENT STRATEGY
[LIFE PRESERVER ICON OMITTED] WHAT ARE THE RISKS OF INVESTING?
[BULLSEYE ICON OMITTED] PERFORMANCE INFORMATION
[GRAPH ICON OMITTED] WHAT IS AN INDEX?
[COINS ICON OMITTED] FUND FEES AND EXPENSES
[MOUNTAIN ICON OMITTED] MORE INFORMATION ABOUT FUND INVESTMENTS
[MAGNIFYING ICON OMITTED] INVESTMENT ADVISER
[HANDSHAKE ICON OMITTED] PURCHASING AND SELLING FUND SHARES
--------------------------------------------------------------------------------
OCTOBER 1, 2001
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 ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 market has 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 ICON 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.*
[GRAPHIC OF CHART OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC:
1995 25.51%
1996 12.13%
1997 21.14%
1998 19.55%
1999 4.66%
2000 4.79%
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 1/1/01 TO 6/30/01 WAS 0.61%.
PROSPECTUS 3
--------------------------------------------------------------------------------
BALANCED FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, 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 4.79% 12.24% 11.48%*
--------------------------------------------------------------------------------
Lehman Brothers
U.S. Government/
Credit Index 11.84% 6.23% 6.53%**
--------------------------------------------------------------------------------
S&P 500 Index -9.11% 18.33% 18.25%**
--------------------------------------------------------------------------------
* SINCE 1/3/94
** SINCE 12/31/93
[GRAPH ICON 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 U.S. equity market's industry weightings.
[COINS ICON 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 0.10%
-----
Total Annual Fund Operating Expenses 1.05%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT ANY TIME. WITH
THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Balanced Fund -- Trust Shares 1.02%
--------------------------------------------------------------------------------
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
$107 $334 $579 $1,283
--------------------------------------------------------------------------------
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
4 PROSPECTUS
--------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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 uses a "bottom-up" process based on individual
company earnings trends and fundamentals to determine the weighting of the
Fund's investments in various equity market sectors. The Adviser's strategy
focuses primarily on large-cap stocks, but will also utilize mid-cap stocks. 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.
[LIFE PRESERVER ICON 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 market has 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 ICON OMITTED] PERFORMANCE INFORMATIO
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.*
[CHART OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC:
1993 9.89%
1994 -7.41%
1995 31.15%
1996 20.31%
1997 31.13%
1998 28.06%
1999 9.71%
2000 1.62%
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 1/1/01 TO 6/30/01 WAS -2.63%.
PROSPECTUS 5
--------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE S&P 500 INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Capital Appreciation
Fund 1.62% 17.63% 15.45%*
--------------------------------------------------------------------------------
S&P 500 Index -9.11% 18.33% 17.20%**
--------------------------------------------------------------------------------
* SINCE 7/1/92
** SINCE 6/30/92
[GRAPH ICON 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 U.S. equity
market's industry weightings.
[COINS ICON 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%*
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT ANY TIME. WITH
THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Capital Appreciation Fund -- Trust Shares 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
$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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
6 PROSPECTUS
--------------------------------------------------------------------------------
GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 some income with
less volatility than the equity markets as a
whole
--------------------------------------------------------------------------------
[TELESCOPE ICON OMITTED] INVESTMENT STRATEGY
The Growth and Income Fund invests primarily in equity securities, including
common stocks of domestic companies and listed American Depositary Receipts
(ADRs) of foreign companies, all 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 potential to secure the best relative values in each economic sector.
[LIFE PRESERVER ICON 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 market has 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 ICON 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.*
[GRAPHIC OMITTED]
EDGAR REPRESENATION OF DATA POINTS USED IN PRINTED GRAPHIC:
1993 10.20%
1994 -0.81%
1995 29.38%
1996 19.06%
1997 27.69%
1998 18.20%
1999 14.17%
2000 1.43%
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 1/1/01 TO 6/30/01 WAS -3.12%.
PROSPECTUS 7
--------------------------------------------------------------------------------
GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE S&P 500/BARRA VALUE INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Growth and Income
Fund 1.43% 15.79% 14.86%*
--------------------------------------------------------------------------------
S&P 500/BARRA
Value Index 6.08% 16.81% 16.96%**
--------------------------------------------------------------------------------
* SINCE 9/26/92
** SINCE 9/30/92
[GRAPH ICON 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.
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 U.S. equity market's industry weightings.
[COINS ICON 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 0.09%
-----
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
8 PROSPECTUS
--------------------------------------------------------------------------------
INFORMATION AND TECHNOLOGY FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON OMITTED] FUND SUMMARY
INVESTMENT GOAL Long-term capital growth
--------------------------------------------------------------------------------
INVESTMENT FOCUS Common stocks of companies benefiting from
information and technology
--------------------------------------------------------------------------------
SHARE PRICE VOLATILITY Very high
--------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies benefiting from
technology and information 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 ICON OMITTED] INVESTMENT STRATEGY
The Information and Technology Fund invests primarily in common stocks of U.S.
companies that are expected to benefit substantially from information and
technology and achieve above average growth. The Fund believes that
information-oriented companies and technology-oriented companies offer the
potential for significant long-term growth. 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
information-related or technology-related market. The second segment consists of
established technology companies that provide the infrastructure to support the
transfer of information. The third segment includes established, non-tech
corporations from multiple industries that are harnessing the power of
information to drive company growth. In selecting investments for the Fund, the
Adviser uses 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.
[LIFE PRESERVER ICON 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 market has 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 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 ICON 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 THE LAST
YEAR.*
[GRAPHIC OMITTED]
EDGAR REPRESENATION OF DATA POINTS USED IN PRINTED GRAPHIC:
2000 -16.75%
BEST QUARTER WORST QUARTER
11.44% -25.18%
(3/31/00) (12/31/00)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR
YEAR. THE FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS -14.22%.
PROSPECTUS 9
--------------------------------------------------------------------------------
INFORMATION AND TECHNOLOGY FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE GOLDMAN SACHS E-COMMERCE INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION
--------------------------------------------------------------------------------
Information and
Technology Fund -16.75% 35.06%*
--------------------------------------------------------------------------------
Goldman Sachs
E-Commerce Index -41.32% -7.40%*
--------------------------------------------------------------------------------
* SINCE 9/30/99
[GRAPH ICON 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. Developed jointly by the Goldman Sachs E-Commerce
research team and Goldman Sachs Index Services, the Goldman Sachs E-Commerce
Index is built from a universe of 39 stocks. To be included in the index, firms
must generate a majority of their revenues online, operate as virtual companies
outside the traditional "bricks and mortar" framework or be key e-commerce
infrastructure providers.
[COINS ICON 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 0.11%
-----
Total Annual Fund Operating Expenses 1.21%
--------------------------------------------------------------------------------
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
$123 $384 $665 $1,466
--------------------------------------------------------------------------------
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
10 PROSPECTUS
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 market has 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 market 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 ICON 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 11
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM
YEAR TO YEAR.*
[CHART OMITTED]
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
1996 22.08%
1997 13.35%
1998 11.22%
1999 9.47%
2000 -3.46%
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 1/1/01 TO 6/30/01 WAS -10.72%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL
EUROPE, AUSTRALASIA AND FAR EAST (MSCI EAFE) INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
International
Equity Fund -3.46% 10.22% 14.69%*
--------------------------------------------------------------------------------
MSCI EAFE Index -14.17% 7.14% 8.64%*
--------------------------------------------------------------------------------
* SINCE 1/31/95
[GRAPH ICON 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 ICON 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 0.20%
-----
Total Annual Fund Operating Expenses 1.45%
--------------------------------------------------------------------------------
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
$148 $459 $792 $1,735
--------------------------------------------------------------------------------
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
12 PROSPECTUS
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 market or the equity market 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 ICON 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.*
[CHART OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC:
1995 10.73%
1996 6.04%
1997 8.99%
1998 30.02%
1999 30.66%
2000 -17.06%
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 1/1/01 TO 6/30/01 WAS -13.39%.
PROSPECTUS 13
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, 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 -17.06% 10.24% 8.97%*
--------------------------------------------------------------------------------
MSCI EAFE-GDP
Weighted Index
(Price Return) -16.45% 8.42% 7.60%**
--------------------------------------------------------------------------------
* SINCE 6/6/94
** SINCE 5/31/94
[GRAPH ICON 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 ICON 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 0.25%
-----
Total Annual Fund Operating Expenses 1.15%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT ANY TIME. WITH
THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
International Equity Index Fund -- Trust Shares 1.06%
--------------------------------------------------------------------------------
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
$117 $365 $633 $1,398
--------------------------------------------------------------------------------
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
14 PROSPECTUS
--------------------------------------------------------------------------------
MID-CAP EQUITY FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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 Mid Cap 400 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.
[LIFE PRESERVER ICON 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 market has 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 market 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 ICON 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.*
[CHART OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC:
1995 31.22%
1996 15.42%
1997 21.23%
1998 6.48%
1999 16.14%
2000 -2.97%
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 1/1/01 TO 6/30/01 WAS 3.29%.
PROSPECTUS 15
--------------------------------------------------------------------------------
MID-CAP EQUITY FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE S&P MID CAP 400 INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Mid-Cap
Equity Fund -2.97% 10.92% 11.85%*
--------------------------------------------------------------------------------
S&P Mid Cap
400 Index 17.50% 20.41% 17.90%**
--------------------------------------------------------------------------------
* SINCE 2/2/94
** SINCE 1/31/94
[GRAPH ICON 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 Mid Cap 400 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 ICON 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%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT ANY TIME. WITH
THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Mid-Cap Equity Fund -- Trust Shares 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
$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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
16 PROSPECTUS
--------------------------------------------------------------------------------
SMALL CAP GROWTH STOCK FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON OMITTED] FUND SUMMAR
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 ICON 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.
[LIFE PRESERVER ICON 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 market 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 ICON 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.*
[CHART OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC:
1999 20.55%
2000 -11.76%
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 1/1/01 TO 6/30/01 WAS 3.72%.
PROSPECTUS 17
--------------------------------------------------------------------------------
SMALL CAP GROWTH STOCK FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE S&P SMALL CAP 600 INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION
--------------------------------------------------------------------------------
Small Cap Growth
Stock Fund 11.76% 35.60%*
--------------------------------------------------------------------------------
S&P Small Cap 600 Index 11.80% 18.96%**
--------------------------------------------------------------------------------
* SINCE 10/8/98
** SINCE 9/30/98
[GRAPH ICON 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 Small Cap 600 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 ICON 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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
18 PROSPECTUS
--------------------------------------------------------------------------------
SMALL CAP VALUE EQUITY FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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 $2 billion) that it believes are undervalued in the market.
[LIFE PRESERVER ICON 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 the equity market or the equity market 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 ICON 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.*
[CHART OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC:
1995 30.99%
1996 34.25%
1997 32.59%
1998 -13.45%
1999 -2.72%
2000 17.96%
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 1/1/01 TO 6/30/01 WAS 14.84%.
PROSPECTUS 19
--------------------------------------------------------------------------------
SMALL CAP VALUE EQUITY FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE RUSSELL 2000 VALUE INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Small Cap Value
Equity Fund 17.96% 12.07% 14.31%*
--------------------------------------------------------------------------------
Russell 2000
Value Index 22.83% 12.60% 13.14%*
--------------------------------------------------------------------------------
* SINCE 8/31/94
[GRAPH ICON 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 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 ICON 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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
20 PROSPECTUS
--------------------------------------------------------------------------------
TAX SENSITIVE GROWTH STOCK FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 ICON 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.*
[CHART OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC:
1996 21.04%
1997 28.76%
1998 31.73%
1999 24.74%
2000 -12.15%
BEST QUARTER WORST QUARTER
27.74% -11.19%
(12/31/98) (12/31/00)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS -12.93%.
PROSPECTUS 21
--------------------------------------------------------------------------------
TAX SENSITIVE GROWTH STOCK FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF S&P 500 INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Tax Sensitive
Growth Stock Fund -12.15% 17.61% 17.61%*
--------------------------------------------------------------------------------
S&P 500 Index -9.11% 18.33% 18.33%*
--------------------------------------------------------------------------------
* SINCE 12/31/95
[GRAPH ICON 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 U.S. equity
market's industry weightings.
[COINS ICON 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
share 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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
22 PROSPECTUS
--------------------------------------------------------------------------------
VALUE INCOME STOCK FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON OMITTED] FUND SUMMAR
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 ICON 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 dividend-paying stocks that trade below their historical value. The Adviser's
"bottom-up" approach to stock selection emphasizes individual stocks over
economic trends.
[LIFE PRESERVER ICON 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 market has 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 ICON 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.*
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC:
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%
2000 10.85%
BEST QUARTER WORST QUARTER
18.56% -12.14%
(3/31/91) (9/30/99)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS 0.78%.
PROSPECTUS 23
--------------------------------------------------------------------------------
VALUE INCOME STOCK FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE LEHMAN BROTHERS U.S. GOVERNMENT/CREDIT
INDEX AND THE S&P 500 INDEX.
TRUST SHARES 1 YEAR 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Value Income
Stock Fund 10.85% 12.55% 16.80%
--------------------------------------------------------------------------------
S&P 500/
BARRA Value
Index 6.08% 16.81% 16.87%
--------------------------------------------------------------------------------
[GRAPH ICON 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.
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 U.S. equity market's industry weightings.
[COINS ICON 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 0.10%
-----
Total Annual Fund Operating Expenses 0.90%
--------------------------------------------------------------------------------
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
$92 $287 $498 $1,108
--------------------------------------------------------------------------------
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
24 PROSPECTUS
--------------------------------------------------------------------------------
MORE INFORMATION ABOUT RISK
--------------------------------------------------------------------------------
[LIFE PRESERVER ICON 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
BALANCED 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 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 its benchmark, rounding of share prices, changes to the
benchmark, regulatory policies, and leverage, may affect the Fund's 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
PROSPECTUS 25
--------------------------------------------------------------------------------
MORE INFORMATION ABOUT FUND INVESTMENTS
--------------------------------------------------------------------------------
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.
[MOUNTAIN ICON 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
objective. 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 the 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.
[MAGNIFYING ICON OMITTED] INVESTMENT ADVISER
The investment adviser (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 or the Adviser), 50 Hurt Plaza, Suite
1400, Atlanta, Georgia 30303, serves as the Adviser to the Funds. As of June 30,
2001, Trusco had in excess of $45 billion in assets under management. For the
fiscal period ended May 31, 2001, the Adviser received advisory fees of:
BALANCED FUND 0.91%
CAPITAL APPRECIATION FUND 1.12%
GROWTH AND INCOME FUND 0.90%
INFORMATION AND TECHNOLOGY FUND 1.09%
INTERNATIONAL EQUITY FUND 1.25%
INTERNATIONAL EQUITY INDEX FUND 0.81%
MID-CAP EQUITY FUND 1.11%
SMALL CAP GROWTH STOCK FUND 1.14%
SMALL CAP VALUE EQUITY FUND 1.15%
TAX SENSITIVE GROWTH STOCK FUND 1.14%
VALUE INCOME STOCK FUND 0.80%
The Adviser may use its affiliates as brokers for Fund transactions.
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,
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.
26 PROSPECTUS
--------------------------------------------------------------------------------
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 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 28 years of
investment experience. In January 2000, Mr. West was named Managing Director of
SunTrust Bank, and is now a Managing Director of Trusco after working at STI
since 1985. Mr. West has more than 15 years of investment experience. In January
2000, Mr. Denney was named Managing Director of SunTrust Bank and is now a
Managing Director of Trusco after serving as Managing Director of STI since
1983. Mr. Denney has more than 22 years of investment experience.
The Information and Technology Fund has been team managed since June 1, 2001,
with Mr. Alan S. Kelley serving as the Lead Portfolio Manager. He has served as
Vice President of Trusco and has managed the 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 18 years of investment experience.
The International Equity Index Fund is managed by Mr. Chad Deakins. Mr. Deakins
serves as a Vice President of Trusco and has worked there since 1996. He has
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 7 years of
investment experience.
Mr. John Hamlin has served as a Vice president of Trucso 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 12 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 14 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
17 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 16 years of investment
experience.
The Value Income Stock Fund is managed by Mr. Mills Riddick, CFA. 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 19 years of investment experience.
PROSPECTUS 27
--------------------------------------------------------------------------------
PURCHASING AND SELLING FUND SHARES
--------------------------------------------------------------------------------
[HANDSHAKE ICON 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, generally a Fund
must receive your purchase order in proper form before 4:00 p.m., Eastern time.
The Fund will not accept orders that request a particular day or price for the
transaction or any other special conditions.
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.
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.
28 PROSPECTUS
--------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
--------------------------------------------------------------------------------
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 net investment income as follows:
QUARTERLY
--------------------------------------------------------------------------------
BALANCED FUND CAPITAL
APPRECIATION FUND
GROWTH AND INCOME FUND
INFORMATION AND TECHNOLOGY 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 its net realized 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 29
--------------------------------------------------------------------------------
TAXES
--------------------------------------------------------------------------------
TAXES
PLEASE CONSULT YOUR TAX ADVISOR 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 net investment income and its
net realized capital gains, if any, at least annually. 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 OF FUND
SHARES MAY BE A TAXABLE EVENT. FOR TAX PURPOSES, AN EXCHANGE OF FUND SHARES FOR
SHARES OF A DIFFERENT STI CLASSIC FUND IS TREATED THE SAME AS A SALE.
If you have a tax-advantaged or other retirement account you will generally not
be subject to federal taxation on income and capital gain distributions until
you begin receiving your distributions from your retirement account. You should
consult your tax advisor regarding the rules governing your own retirement plan.
The International Equity Fund and International Equity Index Fund may be able to
pass along a tax credit for foreign income taxes they pay. In such event, each
Fund will provide you with the information necessary to reflect such foreign
taxes on your federal income tax return.
MORE INFORMATION ABOUT TAXES IS IN THE SAI.
30 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 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 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
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
2001 ........... $13.37 $ 0.30 $ 0.12 $(0.31) $(0.30) $13.18 3.24%
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
-------------------------
CAPITAL APPRECIATION FUND
-------------------------
Trust Shares
2001 ........... $17.12 $(0.05) $(0.38) $ -- $(2.80) $13.89 (3.74)%
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
--------------------------
GROWTH AND INCOME FUND (A)
--------------------------
Trust Shares
2001 ........... $15.53 $0.07 $(0.04) $(0.08) $(0.43) $15.05 0.11%
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
-------------------------------
INFORMATION AND TECHNOLOGY FUND
-------------------------------
Trust Shares
2001 ........... $15.87 $(0.08) $(2.45) $ -- $ -- $13.34 (15.94)%
2000(2) ........ 10.00 (0.04) 5.91 -- -- 15.87 58.70
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
------------ ---------- ---------- --------------- --------------- --------
-------------
BALANCED FUND
-------------
Trust Shares
2001 ........... $209,316 1.01% 2.24% 1.05% 2.20% 99%
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
-------------------------
CAPITAL APPRECIATION FUND
-------------------------
Trust Shares
2001 ........... $1,177,933 1.21% (0.29)% 1.24% (0.32)% 75%
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
--------------------------
GROWTH AND INCOME FUND (A)
--------------------------
Trust Shares
2001 ........... $867,664 0.99% 0.49% 0.99% 0.49% 73%
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
-------------------------------
INFORMATION AND TECHNOLOGY FUND
-------------------------------
Trust Shares
2001 ........... $87,045 1.20% (0.45)% 1.21% (0.46)% 750%
2000(2) ........ 106,425 1.20 (0.54) 1.34 (0.68) 250
(+) Returns are for the period indicated and have not been annualized.
(1) For the six month period ended May 31, 1999. All ratios for the period have
been annualized.
(2) Commenced operations on September 30, 1999. All ratios for the period 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 round to $0.
PROSPECTUS 31
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
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 (+)
--------- ------ -------------- ------ ------------- --------- ----------
-------------------------
INTERNATIONAL EQUITY FUND
-------------------------
Trust Shares
2001 ........... $12.56 $ -- $(1.22) $(0.04) $(1.11) $10.19 (10.79)%
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
-------------------------------
INTERNATIONAL EQUITY INDEX FUND
-------------------------------
Trust Shares
2001 ........... $13.97 $ 0.06 $(2.69) $(0.07) $(0.09) $11.18 (18.90)%
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
-------------------
MID-CAP EQUITY FUND
-------------------
Trust Shares
2001 ........... $14.10 $(0.03) $(0.61) $ -- $(2.51) $10.95 (6.92)%
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
---------------------------
SMALL CAP GROWTH STOCK FUND
---------------------------
Trust Shares
2001 ........... $18.30 $(0.18) $ 1.71 $ -- $(1.46) $18.37 8.33%
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
2001 ........... $ 9.13 $ 0.17 $ 3.07 $(0.16) $ -- $12.21 35.90%
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
-------------------------------
TAX SENSITIVE GROWTH STOCK FUND
-------------------------------
Trust Shares
2001 ........... $33.10 $(0.03) $(6.33) $ -- $ -- $26.74 (19.21)%
2000 ........... 29.96 0.02 3.12 -- -- 33.10 10.48
1999(3)......... 25.61 0.02 4.34 (0.01) -- 29.96 17.04
-----------------------
VALUE INCOME STOCK FUND
-----------------------
Trust Shares
2001 ........... $10.38 $ 0.19 $ 1.24 $(0.20) $ -- $11.61 14.09%
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
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
2001 ........... $ 208,120 1.45% 0.50% 1.45% 0.50% 68%
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
-------------------------------
INTERNATIONAL EQUITY INDEX FUND
-------------------------------
Trust Shares
2001 ........... $ 236,862 1.06% 0.40% 1.09% 0.37% 13%
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
-------------------
MID-CAP EQUITY FUND
-------------------
Trust Shares
2001 ........... $ 156,111 1.21% (0.24)% 1.25% (0.28)% 100%
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
---------------------------
SMALL CAP GROWTH STOCK FUND
---------------------------
Trust Shares
2001 ........... $ 508,857 1.24% (0.95)% 1.25% (0.96)% 112%
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
2001 ........... $ 401,900 1.25% 1.72% 1.25% 1.72% 86%
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
-------------------------------
TAX SENSITIVE GROWTH STOCK FUND
-------------------------------
Trust Shares
2001 ........... $ 460,311 1.24% (0.10)% 1.25% (0.11)% 103%
2000 ........... 710,179 1.20 0.13 1.26 0.07 30
1999(3)......... 223,543 1.20 0.21 1.34 0.07 18
-----------------------
VALUE INCOME STOCK FUND
-----------------------
Trust Shares
2001 ........... $ 704,842 0.90% 1.70% 0.90% 1.70% 77%
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
(1) Commenced operations on October 8, 1998. All ratios for the period have been
annualized.
(2) Commenced operations on January 31, 1997. All ratios for the period have
been annualized.
(3) Commenced operations on December 11, 1998. All ratios for the period have
been annualized.
Amounts designated as "--" are either $0 or round to $0.
32 PROSPECTUS
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
PROSPECTUS 33
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
34 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, 2001, 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.
[PHOTO OMITTED]
STI CLASSIC FUNDS-EQUITY FUNDS
FLEX AND INVESTOR SHARES
PROSPECTUS
OCTOBER 1, 2001
BALANCED FUND
CAPITAL APPRECIATION FUND
GROWTH AND INCOME FUND
INFORMATION AND TECHNOLOGY FUND
(FORMERLY, E-COMMERCE
OPPORTUNITY 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 CLASSIC FUNDS
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
o Front-end sales charge
o 12b-1 fees
o $2,000 minimum initial investment
FLEX SHARES
o Contingent deferred sales charge
o Higher 12b-1 fees
o $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 BALANCED FUND
4 CAPITAL APPRECIATION FUND
6 GROWTH AND INCOME FUND
8 INFORMATION AND TECHNOLOGY FUND
10 INTERNATIONAL EQUITY FUND
13 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
27 PORTFOLIO MANAGERS
28 PURCHASING, SELLING AND EXCHANGING FUND SHARES
34 DIVIDENDS AND DISTRIBUTIONS
34 TAXES
35 FINANCIAL HIGHLIGHTS
38 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS
--------------------------------------------------------------------------------
[BRIEFCASE ICON OMITTED] FUND SUMMARY
[TELESCOPE ICON OMITTED] INVESTMENT STRATEGY
[LIFE PRESERVER ICON OMITTED] WHAT ARE THE RISKS OF INVESTING?
[BULLSEYE ICON OMITTED] PERFORMANCE INFORMATION
[GRAPH ICON OMITTED] WHAT IS AN INDEX?
[COINS ICON OMITTED] FUND FEES AND EXPENSES
[MOUNTAIN ICON OMITTED] MORE INFORMATION ABOUT FUND INVESTMENTS
[MAGNIFYING ICON OMITTED] INVESTMENT ADVISER
[HANDSHAKE ICON OMITTED] PURCHASING, SELLING AND EXCHANGING FUND SHARES
[DOLLAR ICON OMITTED] SALES CHARGES
--------------------------------------------------------------------------------
OCTOBER 1, 2001
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 ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 market has 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 ICON OMITTED] PERFORMANCE INFORMATION
The bar chart and the performance table that follow 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 TO FOLLOW:]
1995 25.08%
1996 11.85%
1997 20.71%
1998 19.21%
1999 4.31%
2000 4.44%
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 1/1/01 TO 6/30/01 WAS 0.46%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, 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 0.50% 11.03% 10.48%*
--------------------------------------------------------------
Lehman Brothers
U.S. Government/
Credit Index 11.84% 6.23% 6.53%**
--------------------------------------------------------------
S&P 500 Index -9.11% 18.33% 18.25%**
--------------------------------------------------------------
* SINCE 1/3/94
** SINCE 12/31/93
FLEX SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------
Balanced Fund 1.68% 11.05% 11.95%*
--------------------------------------------------------------
Lehman Brothers
U.S. Government/
Credit Index 11.84% 6.23% 6.94%**
--------------------------------------------------------------
S&P 500 Index -9.11% 18.33% 19.60%**
--------------------------------------------------------------
* SINCE 6/14/95
** SINCE 5/31/95
PROSPECTUS 3
--------------------------------------------------------------------------------
BALANCED FUND
--------------------------------------------------------------------------------
[GRAPH ICON 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 U.S. equity market's industry weightings.
[COINS ICON 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. YOU MAY BUY
INVESTOR SHARES IN AMOUNTS OF $1,000,000 OR MORE AT NET ASSET VALUE (WITHOUT
AN INITIAL SALES CHARGE), BUT IF YOU REDEEM THOSE SHARES WITHIN ONE YEAR OF
YOUR PURCHASE, YOU WILL PAY A DEFERRED SALES CHARGE OF 1.00%. SEE "SALES
CHARGES."
** 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 "SALES CHARGES."
--------------------------------------------------------------------------------
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 0.31% 0.20%
----- -----
Total Annual Fund Operating Expenses 1.54%* 2.15%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER AND THE
DISTRIBUTOR WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING
EXPENSES AT A SPECIFIED LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE
OF THIS PROSPECTUS, BUT THE ADVISER AND THE DISTRIBUTOR MAY DISCONTINUE ALL OR
PART OF THESE WAIVERS AT ANY TIME. WITH THESE FEE WAIVERS, THE FUND'S ACTUAL
TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Balanced Fund - Investor Shares 1.33%
Balanced Fund - Flex Shares 2.09%
--------------------------------------------------------------------------------
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:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Investor Shares $526 $843 $1,183 $2,141
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 $526 $843 $1,183 $2,141
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."
4 PROSPECTUS
--------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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 uses a "bottom-up" process based on individual
company earnings trends and fundamentals to determine the weighting of the
Fund's investments in various equity market sectors. The Adviser's strategy
focuses primarily on large cap stocks, but will also utilize mid-cap stocks. 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.
[LIFE PRESERVER ICON 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 market has 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 ICON OMITTED] PERFORMANCE INFORMATION
The bar chart and the performance table that follow 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 TO FOLLOW:]
1993 9.27%
1994 -8.01%
1995 30.33%
1996 19.50%
1997 30.34%
1998 27.26%
1999 9.06%
2000 0.94%
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 1/1/01 TO 6/30/01 WAS -2.95%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE S&P 500 INDEX.
INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION
-----------------------------------------------------------------
Capital Appreciation Fund -2.85% 15.99% 14.57%*
-----------------------------------------------------------------
S&P 500 Index -9.11% 18.33% 16.81%**
-----------------------------------------------------------------
* SINCE 6/9/92
** SINCE 5/31/92
FLEX SHARES 1 YEAR 5 YEARS SINCE INCEPTION
-----------------------------------------------------------------
Capital Appreciation Fund -1.27% 16.33% 17.59%*
-----------------------------------------------------------------
S&P 500 Index -9.11% 18.33% 19.60%**
-----------------------------------------------------------------
* SINCE 6/1/95
** SINCE 5/31/95
PROSPECTUS 5
--------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND
--------------------------------------------------------------------------------
[GRAPH ICON 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 U.S. equity
market's industry weightings.
[COINS ICON 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. YOU MAY BUY
INVESTOR SHARES IN AMOUNTS OF $1,000,000 OR MORE AT NET ASSET VALUE (WITHOUT
AN INITIAL SALES CHARGE), BUT IF YOU REDEEM THOSE SHARES WITHIN ONE YEAR OF
YOUR PURCHASE, YOU WILL PAY A DEFERRED SALES CHARGE OF 1.00%. SEE "SALES
CHARGES."
** 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 "SALES CHARGES."
--------------------------------------------------------------------------------
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%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER AND THE
DISTRIBUTOR WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING
EXPENSES AT A SPECIFIED LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE
OF THIS PROSPECTUS, BUT THE ADVISER AND THE DISTRIBUTOR MAY DISCONTINUE ALL OR
PART OF THESE WAIVERS AT ANY TIME. WITH THESE FEE WAIVERS, THE FUND'S ACTUAL
TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Capital Appreciation Fund - Investor Shares 1.88%
Capital Appreciation Fund - Flex Shares 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
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."
6 PROSPECTUS
--------------------------------------------------------------------------------
GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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
some income with less volatility
than the equity markets as a whole
--------------------------------------------------------------------------------
[TELESCOPE ICON OMITTED] INVESTMENT STRATEGY
The Growth and Income Fund invests primarily in equity securities, including
common stocks of domestic companies and listed American Depositary Receipts
(ADRs) of foreign companies, all 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 potential to secure the best relative values in each economic sector.
[LIFE PRESERVER ICON 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 market has 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 ICON 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
FOR ONE YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD
BEEN REFLECTED, THE RETURN WOULD BE LESS THAN THAT SHOWN BELOW.*
[BAR CHART OMITTED]
[PLOT POINTS TO FOLLOW:]
1994 -0.91%
1995 29.45%
1996 19.12%
1997 27.58%
1998 18.25%
1999 14.10%
2000 1.30%
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 1/1/01 TO 6/30/01 WAS -3.25%.
PROSPECTUS 7
--------------------------------------------------------------------------------
GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE S&P 500/BARRA VALUE INDEX.
INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Growth and
Income Fund -2.48% 14.86% 13.89%*
--------------------------------------------------------------------------------
S&P 500/BARRA
Value Index 6.08% 16.81% 16.51%**
--------------------------------------------------------------------------------
* SINCE 5/7/93
** SINCE 4/30/93
FLEX SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Growth and
Income Fund -1.45% 14.91% 16.11%*
--------------------------------------------------------------------------------
S&P 500/BARRA
Value Index 6.08% 16.81% 18.98%**
--------------------------------------------------------------------------------
* SINCE 4/5/95
** SINCE 3/31/95
[GRAPH ICON 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.
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 U.S. equity market's industry weightings.
[COINS ICON 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. YOU MAY BUY
INVESTOR SHARES IN AMOUNTS OF $1,000,000 OR MORE AT NET ASSET VALUE (WITHOUT
AN INITIAL SALES CHARGE), BUT IF YOU REDEEM THOSE SHARES WITHIN ONE YEAR OF
YOUR PURCHASE, YOU WILL PAY A DEFERRED SALES CHARGE OF 1.00%. SEE "SALES
CHARGES."
** 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 "SALES CHARGES."
--------------------------------------------------------------------------------
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 0.20% 0.24%
----- -----
Total Annual Fund Operating Expenses 1.35%* 2.14%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE DISTRIBUTOR
WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A
SPECIFIED LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS
PROSPECTUS, BUT THE DISTRIBUTOR MAY DISCONTINUE ALL OR PART OF THESE WAIVERS
AT ANY TIME. WITH THESE FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES
ARE AS FOLLOWS:
Growth and Income Fund - Investor Shares 1.18%
Growth and Income Fund - Flex Shares 1.93%
--------------------------------------------------------------------------------
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:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Investor Shares $507 $787 $1,087 $1,938
Flex Shares $417 $670 $1,149 $2,472
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Investor Shares $507 $787 $1,087 $1,938
Flex Shares $217 $670 $1,149 $2,472
--------------------------------------------------------------------------------
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."
8 PROSPECTUS
--------------------------------------------------------------------------------
INFORMATION AND TECHNOLOGY FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON OMITTED] FUND SUMMARY
INVESTMENT GOAL Long-term capital growth
--------------------------------------------------------------------------------
INVESTMENT FOCUS Common stocks of companies
benefiting from information and
technology
--------------------------------------------------------------------------------
SHARE PRICE VOLATILITY Very high
--------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies
benefiting from technology and
information 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 ICON OMITTED] INVESTMENT STRATEGY
The Information and Technology Fund invests primarily in common stocks of U.S.
companies that are expected to benefit substantially from information and
technology and achieve above average growth. The Fund believes that
information-oriented companies and technology-oriented companies offer the
potential for significant long-term growth. 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
information-related or technology-related market. The second segment consists of
established technology companies that provide the infrastructure to support the
transfer of information. The third segment includes established, non-tech
corporations from multiple industries that are harnessing the power of
information to drive company growth. In selecting investments for the Fund, the
Adviser uses 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.
[LIFE PRESERVER ICON 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 market has 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 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 ICON 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 FOR
ONE YEAR. THE CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN
REFLECTED, THE RETURN WOULD BE LESS THAN THAT SHOWN BELOW.*
[BAR CHART OMITTED]
[PLOT POINTS TO FOLLOW:]
2000 -17.56%
BEST QUARTER WORST QUARTER
11.27% -25.41%
(3/31/00) (12/31/00)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS -14.64%.
PROSPECTUS 9
--------------------------------------------------------------------------------
INFORMATION AND TECHNOLOGY FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE GOLDMAN SACHS E-COMMERCE INDEX.
FLEX SHARES 1 YEAR SINCE INCEPTION
--------------------------------------------------------------------------------
Information and
Technology Fund -19.21% 34.01%*
--------------------------------------------------------------------------------
Goldman Sachs
E-Commerce Index -41.32% -7.40%*
--------------------------------------------------------------------------------
* SINCE 9/30/99
[GRAPH ICON 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. Developed jointly by the Goldman Sachs E-Commerce
research team and Goldman Sachs Index Services, the Goldman Sachs E-Commerce
Index is built from a universe of 39 stocks. To be included in the index, firms
must generate a majority of their revenues online, operate as virtual companies
outside the traditional "bricks and mortar" framework or be key e-commerce
infrastructure providers.
[COINS ICON 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)
--------------------------------------------------------------------------------
FLEX SHARES
Investment Advisory Fees 1.10%
Distribution and Service (12b-1) Fees 1.00%
Other Expenses 0.35%
-----
Total Annual Fund Operating Expenses 2.45%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE DISTRIBUTOR WAIVED
A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE DISTRIBUTOR MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH
THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Information and Technology Fund - Flex Shares 2.25%
--------------------------------------------------------------------------------
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:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$448 $764 $1,306 $2,786
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$248 $764 $1,306 $2,786
--------------------------------------------------------------------------------
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."
10 PROSPECTUS
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 market has 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 market 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.
PROSPECTUS 11
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
[BULLSEYE ICON 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 TO FOLLOW:]
1996 21.58%
1997 13.01%
1998 10.69%
1999 9.05%
2000 -3.74%
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 1/1/01 TO 6/30/01 WAS -10.96%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL
EUROPE, AUSTRALASIA, AND FAR EAST (MSCI EAFE) INDEX.
INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
International Equity Fund-7.38% 8.98% 13.60%*
--------------------------------------------------------------------------------
MSCI EAFE Index -14.17% 7.14% 8.64%*
--------------------------------------------------------------------------------
* SINCE 1/31/95
FLEX SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
International Equity Fund-6.20% 9.06% 13.67%*
--------------------------------------------------------------------------------
MSCI EAFE Index -14.17% 7.14% 8.64%*
--------------------------------------------------------------------------------
* SINCE 1/31/95
[GRAPH ICON 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 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 market
capitalization of each of the various countries, and then with respect to the
market capitalization of the various companies operating in each country.
12 PROSPECTUS
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
[COINS ICON 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. YOU MAY BUY
INVESTOR SHARES IN AMOUNTS OF $1,000,000 OR MORE AT NET ASSET VALUE (WITHOUT
AN INITIAL SALES CHARGE), BUT IF YOU REDEEM THOSE SHARES WITHIN ONE YEAR OF
YOUR PURCHASE, YOU WILL PAY A DEFERRED SALES CHARGE OF 1.00%. SEE "SALES
CHARGES."
** 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 "SALES CHARGES."
--------------------------------------------------------------------------------
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 0.39% 0.32%
----- -----
Total Annual Fund Operating Expenses 1.97%* 2.57%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE DISTRIBUTOR WAIVED
A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE DISTRIBUTOR MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH
THESE FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
International Equity Fund - Investor Shares 1.83%
International Equity Fund - Flex Shares 2.53%
--------------------------------------------------------------------------------
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 $567 $970 $1,398 $2,585
Flex Shares $460 $799 $1,365 $2,905
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Investor Shares $567 $970 $1,398 $2,585
Flex Shares $260 $799 $1,365 $2,905
--------------------------------------------------------------------------------
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."
PROSPECTUS 13
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 market or the equity market 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 ICON 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 TO FOLLOW:]
1995 10.20%
1996 5.78%
1997 8.44%
1998 29.68%
1999 29.97%
2000 -17.44%
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 1/1/01 TO 6/30/01 WAS -13.59%.
14 PROSPECTUS
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, 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 -20.51% 8.96% 7.87%*
--------------------------------------------------------------------------------
MSCI EAFE-GDP
Weighted Index
(Price Return) -16.45% 8.42% 7.60%**
--------------------------------------------------------------------------------
* SINCE 6/6/94
** SINCE 5/31/94
FLEX SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
International Equity
Index Fund -19.64% 9.06% 8.96%*
--------------------------------------------------------------------------------
MSCI EAFE-GDP
Weighted Index
(Price Return) -16.45% 8.42% 8.40%**
--------------------------------------------------------------------------------
* SINCE 6/8/95
** SINCE 5/31/95
[GRAPH ICON 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 ICON 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. YOU MAY BUY
INVESTOR SHARES IN AMOUNTS OF $1,000,000 OR MORE AT NET ASSET VALUE (WITHOUT
AN INITIAL SALES CHARGE), BUT IF YOU REDEEM THOSE SHARES WITHIN ONE YEAR OF
YOUR PURCHASE, YOU WILL PAY A DEFERRED SALES CHARGE OF 1.00%. SEE "SALES
CHARGES."
** 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 "SALES CHARGES."
--------------------------------------------------------------------------------
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 0.62% 0.56%
----- -----
Total Annual Fund Operating Expenses 1.90%* 2.46%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER AND THE
DISTRIBUTOR WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING
EXPENSES AT A SPECIFIED LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE
OF THIS PROSPECTUS, BUT THE ADVISER AND THE DISTRIBUTOR MAY DISCONTINUE ALL OR
PART OF THIS FEE WAIVER AT ANY TIME. WITH THESE FEE WAIVERS, THE FUND'S ACTUAL
TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
International Equity Index Fund - Investor Shares 1.49%
International Equity Index Fund - Flex Shares 2.14%
PROSPECTUS 15
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX 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 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 $561 $950 $1,363 $2,514
Flex Shares $449 $767 $1,311 $2,796
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 $249 $767 $1,311 $2,796
--------------------------------------------------------------------------------
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."
16 PROSPECTUS
--------------------------------------------------------------------------------
MID-CAP EQUITY FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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 Mid Cap 400 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.
[LIFE PRESERVER ICON 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 market has 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 market 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 ICON 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 TO FOLLOW:]
1995 30.57%
1996 14.93%
1997 20.67%
1998 5.98%
1999 15.69%
2000 -3.42%
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 1/1/01 TO 6/30/01 WAS 3.01%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE S&P MID CAP 400 INDEX.
INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Mid-Cap Equity Fund -7.07% 9.59% 10.69%*
--------------------------------------------------------------------------------
S&P Mid Cap 400 Index 17.50% 20.41% 17.90%*
--------------------------------------------------------------------------------
* SINCE 1/31/94
FLEX SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Mid-Cap Equity Fund -5.62% 9.75% 11.34%*
--------------------------------------------------------------------------------
S&P Mid Cap 400 Index 17.50% 20.41% 21.25%**
--------------------------------------------------------------------------------
* SINCE 6/5/95
** SINCE 5/31/95
PROSPECTUS 17
--------------------------------------------------------------------------------
MID-CAP EQUITY FUND
--------------------------------------------------------------------------------
[GRAPH ICON 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 Mid Cap 400 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 ICON 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. YOU MAY BUY
INVESTOR SHARES IN AMOUNTS OF $1,000,000 OR MORE AT NET ASSET VALUE (WITHOUT
AN INITIAL SALES CHARGE), BUT IF YOU REDEEM THOSE SHARES WITHIN ONE YEAR OF
YOUR PURCHASE, YOU WILL PAY A DEFERRED SALES CHARGE OF 1.00%. SEE "SALES
CHARGES."
** 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 "SALES CHARGES."
--------------------------------------------------------------------------------
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 0.28% 0.31%
----- -----
Total Annual Fund Operating Expenses 1.86%* 2.46%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER AND THE
DISTRIBUTOR WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING
EXPENSES AT A SPECIFIED LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE
OF THIS PROSPECTUS, BUT THE ADVISER AND THE DISTRIBUTOR MAY DISCONTINUE ALL OR
PART OF THIS FEE WAIVER AT ANY TIME. WITH THESE FEE WAIVERS, THE FUND'S ACTUAL
TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Mid-Cap Equity Fund - Investor Shares 1.68%
Mid-Cap Equity Fund - Flex Shares 2.28%
--------------------------------------------------------------------------------
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 $557 $938 $1,343 $2,473
Flex Shares $449 $767 $1,311 $2,796
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Investor Shares $557 $938 $1,343 $2,473
Flex Shares $249 $767 $1,311 $2,796
--------------------------------------------------------------------------------
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."
18 PROSPECTUS
--------------------------------------------------------------------------------
SMALL CAP GROWTH STOCK FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 market has 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 market 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 ICON 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 TO FOLLOW:]
1999 20.48%
2000 11.42%
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 1/1/01 TO 6/30/01 WAS 3.51%.
PROSPECTUS 19
--------------------------------------------------------------------------------
SMALL CAP GROWTH STOCK FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE S&P SMALL CAP 600 INDEX.
INVESTOR SHARES 1 YEAR SINCE INCEPTION
--------------------------------------------------------------------------------
Small Cap Growth Stock Fund 7.23% 33.07%*
--------------------------------------------------------------------------------
S&P Small Cap 600 Index 11.80% 18.96%**
--------------------------------------------------------------------------------
* SINCE 10/8/98
** SINCE 9/30/98
FLEX SHARES 1 YEAR SINCE INCEPTION
--------------------------------------------------------------------------------
Small Cap Growth Stock Fund 8.74% 34.27%*
--------------------------------------------------------------------------------
S&P Small Cap 600 Index 11.80% 18.96%**
--------------------------------------------------------------------------------
* SINCE 10/8/98
** SINCE 9/30/98
[GRAPH ICON 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 Small Cap 600 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 ICON 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. YOU MAY BUY
INVESTOR SHARES IN AMOUNTS OF $1,000,000 OR MORE AT NET ASSET VALUE (WITHOUT
AN INITIAL SALES CHARGE), BUT IF YOU REDEEM THOSE SHARES WITHIN ONE YEAR OF
YOUR PURCHASE, YOU WILL PAY A DEFERRED SALES CHARGE OF 1.00%. SEE "SALES
CHARGES."
** 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 "SALES CHARGES."
--------------------------------------------------------------------------------
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% 0.24%
----- -----
Total Annual Fund Operating Expenses 1.87%* 2.39%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE DISTRIBUTOR WAIVED
A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE DISTRIBUTOR MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT ANY TIME. WITH
THESE FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Small Cap Growth Stock Fund - Investor Shares 1.61%
Small Cap Growth Stock Fund - Flex Shares 2.31%
--------------------------------------------------------------------------------
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 $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
Flex Shares $558 $941 $1,348 $2,483
Investor 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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."
20 PROSPECTUS
--------------------------------------------------------------------------------
SMALL CAP VALUE EQUITY FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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 $2 billion) that it believes are undervalued in the market.
[LIFE PRESERVER ICON 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 the equity market or the equity market 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 ICON 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 TO FOLLOW:]
1995 30.99%
1996 34.25%
1997 31.79%
1998 -14.33%
1999 -3.67%
2000 16.68%
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 1/1/01 TO 6/30/01 WAS 14.26%.
PROSPECTUS 21
--------------------------------------------------------------------------------
SMALL CAP VALUE EQUITY FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE RUSSELL 2000 VALUE INDEX.
FLEX SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Small Cap Value
Equity Fund 14.68% 11.25% 13.64%*
--------------------------------------------------------------------------------
Russell 2000
Value Index 22.83% 12.60% 13.14%*
--------------------------------------------------------------------------------
* SINCE 8/31/94
[GRAPH ICON 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 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 ICON 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 0.51%
-----
Total Annual Fund Operating Expenses 2.66%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE DISTRIBUTOR WAIVED
A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE DISTRIBUTOR MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH
THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Small Cap Value Equity Fund - Flex Shares 2.31%
--------------------------------------------------------------------------------
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
$469 $826 $1,410 $2,993
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$269 $826 $1,410 $2,993
--------------------------------------------------------------------------------
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."
22 PROSPECTUS
--------------------------------------------------------------------------------
TAX SENSITIVE GROWTH STOCK FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON OMITTED] INVESTMENT STRATEGY
The Tax Sensitive Growth Stock Fund primarily invests 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.
[LIFE PRESERVER ICON 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 market 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 ICON 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 TO FOLLOW:]
1996 21.04%
1997 28.76%
1998 31.73%
1999 23.52%
2000 -13.06%
BEST QUARTER WORST QUARTER
27.74% -11.44%
(12/31/98) (12/31/00)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS -13.39%.
PROSPECTUS 23
--------------------------------------------------------------------------------
TAX SENSITIVE GROWTH STOCK FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE S&P 500 INDEX.
FLEX SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Tax Sensitive Growth
Stock Fund -14.80% 17.13% 17.13%*
--------------------------------------------------------------------------------
S&P 500 Index -9.11% 18.33% 18.33%*
--------------------------------------------------------------------------------
* SINCE 12/31/95
[GRAPH ICON 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 U.S. equity
market's industry weightings.
[COINS ICON 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 "SALES CHARGES."
--------------------------------------------------------------------------------
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 0.19%
-----
Total Annual Fund Operating Expenses 2.34%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE DISTRIBUTOR WAIVED
A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE DISTRIBUTOR MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH
THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Tax Sensitive Growth Stock Fund - Flex Shares 2.31%
--------------------------------------------------------------------------------
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
$437 $730 $1,250 $2,676
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$237 $730 $1,250 $2,676
--------------------------------------------------------------------------------
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."
24 PROSPECTUS
--------------------------------------------------------------------------------
VALUE INCOME STOCK FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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 dividend-paying stocks that trade below their historical value. The Adviser's
"bottom-up" approach to stock selection emphasizes individual stocks over
economic trends.
[LIFE PRESERVER ICON 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 market has 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 ICON OMITTED] PERFORMANCE INFORMATION
The bar chart and the performance table that follow 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 TO FOLLOW:]
1991 39.30%
1992 20.05%
1993 10.86%
1994 2.87%
1995 35.50%
1996 19.06%
1997 26.57%
1998 10.16%
1999 -3.31%
2000 10.38%
BEST QUARTER WORST QUARTER
18.56% -12.25%
(3/31/91) (9/30/99)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS 0.61%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE S&P 500/BARRA VALUE INDEX.
INVESTOR SHARES 1 YEAR 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Value Income
Stock Fund 6.25% 11.26% 15.99%
--------------------------------------------------------------------------------
S&P 500/BARRA
Value Index 6.08% 16.81% 16.87%
--------------------------------------------------------------------------------
FLEX SHARES 1 YEAR 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Value Income
Stock Fund 7.61% 11.31% 16.08%
--------------------------------------------------------------------------------
S&P 500/BARRA
Value Index 6.08% 16.81% 16.87%
--------------------------------------------------------------------------------
PROSPECTUS 25
--------------------------------------------------------------------------------
VALUE INCOME STOCK FUND
--------------------------------------------------------------------------------
[GRAPH ICON 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.
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 ICON 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. YOU MAY BUY
INVESTOR SHARES IN AMOUNTS OF $1,000,000 OR MORE AT NET ASSET VALUE (WITHOUT
AN INITIAL SALES CHARGE), BUT IF YOU REDEEM THOSE SHARES WITHIN ONE YEAR OF
YOUR PURCHASE, YOU WILL PAY A DEFERRED SALES CHARGE OF 1.00%. SEE "SALES
CHARGES."
** 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 "SALES CHARGES."
--------------------------------------------------------------------------------
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 0.18% 0.25%
----- -----
Total Annual Fund Operating Expenses 1.31%* 2.05%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE DISTRIBUTOR WAIVED
A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE DISTRIBUTOR MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH
THESE FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Value Income Stock Fund - Investor Shares 1.28%
Value Income Stock Fund - Flex Shares 2.02%
--------------------------------------------------------------------------------
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 $503 $775 $1,066 $1,895
Flex Shares $408 $643 $1,103 $2,379
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Investor Shares $503 $775 $1,066 $1,895
Flex Shares $208 $643 $1,103 $2,379
--------------------------------------------------------------------------------
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."
26 PROSPECTUS
--------------------------------------------------------------------------------
MORE INFORMATION ABOUT RISK
--------------------------------------------------------------------------------
[LIFE PRESERVER ICON 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
BALANCED 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 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
--------------------------------------------------------------------------------
[MOUNTAIN ICON 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 the 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.
[MAGNIFYING ICON OMITTED] INVESTMENT ADVISER
The investment adviser (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 or the Adviser), 50 Hurt Plaza, Suite
1400, Atlanta, Georgia 30303, serves as the Adviser to the Funds. As of June 30,
2001, Trusco had in excess of $45 billion in assets under management. For the
fiscal period ended May 31, 2001, the Adviser received advisory fees of:
BALANCED FUND 0.91%
CAPITAL APPRECIATION FUND 1.12%
GROWTH AND INCOME FUND 0.90%
INFORMATION AND TECHNOLOGY FUND 1.09%
INTERNATIONAL EQUITY FUND 1.25%
INTERNATIONAL EQUITY INDEX FUND 0.81%
MID-CAP EQUITY FUND 1.11%
SMALL CAP GROWTH STOCK FUND 1.14%
SMALL CAP VALUE EQUITY FUND 1.15%
TAX SENSITIVE GROWTH STOCK FUND 1.14%
VALUE INCOME STOCK FUND 0.80%
The Adviser may use its affiliates as brokers for Fund transactions.
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,
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 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 28 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
15 years of investment experience. In January 2000, Mr. Denney was named
Managing
28 PROSPECTUS
--------------------------------------------------------------------------------
PURCHASING, SELLING AND EXCHANGING FUND SHARES
--------------------------------------------------------------------------------
Director of SunTrust Bank and is now a Managing Director of Trusco. Mr.
Denney has more than 22 years of investment experience.
The Information and Technology Fund has been team managed since June 1, 2001,
with Mr. Alan S. Kelley serving as the Lead Portfolio Manager. He has served as
Vice President of Trusco and has managed the 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 18 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 served 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 7 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 28
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 12 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 14 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
17 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 16 years of investment
experience.
The Value Income Stock Fund is managed by Mr. Mills Riddick, CFA. 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 19 years of investment experience.
[HANDSHAKE ICON 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:
PROSPECTUS 29
--------------------------------------------------------------------------------
PURCHASING, SELLING AND EXCHANGING FUND SHARES
--------------------------------------------------------------------------------
o Mail
o Telephone (1-800-874-4770)
o Wire
o 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, generally a Fund
must receive your purchase order in proper form before 4:00 p.m., Eastern time.
The Fund will not accept orders that request a particular day or price for the
transaction or any other special conditions.
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.
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 IRA accounts)
--------------------------------------------------------------------------------
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
30 PROSPECTUS
--------------------------------------------------------------------------------
PURCHASING, SELLING AND EXCHANGING FUND SHARES
--------------------------------------------------------------------------------
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 ICON 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 NONE NONE
--------------------------------------------------------------------------------
*THE DISTRIBUTOR MAY PAY A PERCENTAGE OF THE OFFERING PRICE AS A COMMISSION TO
BROKER-DEALERS.
INVESTMENTS OF $1,000,000 OR MORE. You do not pay an initial sales charge when
you buy $1,000,000 or more of Investor Shares of a single Fund (Reduced Sales
Changes - Investor Shares" does not apply). However, if you redeem these
Investor Shares within one year of purchase, you will pay a deferred sales
charge of 1.00%.
WAIVER OF FRONT-END SALES CHARGE -- INVESTOR SHARES
The front-end sales charge will be waived on Investor Shares purchased:
o through reinvestment of dividends and distributions;
o through a SunTrust Securities, Inc. asset allocation account;
o by persons repurchasing shares they redeemed within the last 60 days (see
"Repurchase of Investor Shares");
o by employees, and members of their immediate family, of SunTrust and its
affiliates;
o 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;
o 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
o 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. Such repurchases may be subject to special
tax rules. See the section on Taxes in the SAI for more information. 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.
PROSPECTUS 31
--------------------------------------------------------------------------------
PURCHASING, SELLING AND EXCHANGING FUND 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 (CDSC) -- 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 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 CDSC will be waived if you sell your Flex Shares for the following reasons:
o to make certain withdrawals from a retirement plan (not including IRAs);
o because of death or disability;
o for certain payments under the Systematic Withdrawal Plan (which is
discussed later); or
o 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.
32 PROSPECTUS
--------------------------------------------------------------------------------
PURCHASING, SELLING AND EXCHANGING FUND SHARES
--------------------------------------------------------------------------------
OFFERING PRICE OF FUND SHARES
The offering price of Investor Shares is the NAV next calculated after the
transfer agent receives your request, plus any applicable 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 ($2,000 for IRA accounts)
--------------------------------------------------------------------------------
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.
PROSPECTUS 33
--------------------------------------------------------------------------------
PURCHASING, SELLING AND EXCHANGING FUND SHARES
--------------------------------------------------------------------------------
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.
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.
34 PROSPECTUS
--------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------
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 net investment income as follows:
QUARTERLY
--------------------------------------------------------------------------------
BALANCED FUND
CAPITAL APPRECIATION FUND
GROWTH AND INCOME FUND
INFORMATION AND TECHNOLOGY 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 its net realized 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 ADVISOR 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 net investment income and its
net realized capital gains, if any, at least annually. 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 MAY BE A TAXABLE EVENT. FOR TAX PURPOSES, AN EXCHANGE OF
FUND SHARES FOR SHARES OF A DIFFERENT STI CLASSIC FUND IS TREATED THE SAME AS A
SALE.
If you have a tax-advantaged or other retirement account you will generally not
be subject to federal taxation on income and capital gain distributions until
you begin receiving your distributions from your retirement account. You should
consult your tax advisor regarding the rules governing your own retirement plan.
The International Equity Fund and International Equity Index Fund may be able to
pass along a tax credit for foreign income taxes they pay. In such event, each
Fund will provide you with the information necessary to reflect such foreign
taxes on your federal income tax return.
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, has 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 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
NET REALIZED AND DISTRIBUTIONS NET NET
ASSET NET UNREALIZED DISTRIBUTIONS FROM ASSET ASSETS RATIO
VALUE INVESTMENT GAINS FROM NET REALIZED VALUE END OF EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD (LOSS) INVESTMENTS INCOME GAINS OF PERIOD RETURN(+) (000) NET ASSETS
--------- --------- ------------ ------------- ------------ --------- --------- -------- ------------
-------------
BALANCED FUND
-------------
Investor Shares
2001 ...... $13.43 $ 0.27 $ 0.11 $(0.27) $(0.30) $13.24 2.91% $ 7,834 1.32%
2000 ...... 13.32 0.29 0.31 (0.25) (0.24) 13.43 4.66 9,627 1.27
1999 ...... 13.14 0.24 1.10 (0.24) (0.92) 13.32 10.70 14,962 1.27
1998 ...... 11.99 0.28 2.19 (0.29) (1.03) 13.14 21.72 8,313 1.26
1997 ...... 11.60 0.29 1.48 (0.29) (1.09) 11.99 16.27 6,012 1.25
Flex Shares
2001 ...... $13.27 $ 0.16 $ 0.11 $(0.17) $(0.30) $13.07 2.11% $ 67,824 2.07%
2000 ...... 13.17 0.17 0.33 (0.16) (0.24) 13.27 3.88 64,322 2.03
1999 ...... 13.02 0.16 1.07 (0.16) (0.92) 13.17 9.84 73,526 2.03
1998 ...... 11.90 0.20 2.16 (0.21) (1.03) 13.02 20.85 27,625 2.02
1997 ...... 11.53 0.22 1.45 (0.21) (1.09) 11.90 15.40 6,067 2.01
-------------------------
CAPITAL APPRECIATION FUND
-------------------------
Investor Shares
2001 ...... $16.91 $(0.14) $(0.38) $ -- $(2.80) $13.59 (4.38)% $202,548 1.86%
2000 ...... 16.53 (0.11) 1.41 -- (0.92) 16.91 8.29 251,421 1.82
1999 ...... 16.43 (0.05) 2.70 -- (2.55) 16.53 17.20 311,120 1.82
1998 ...... 15.06 (0.01) 3.95 -- (2.57) 16.43 28.71 271,044 1.81
1997 ...... 14.89 0.03 3.10 (0.02) (2.94) 15.06 23.74 218,660 1.80
Flex Shares
2001 ...... $16.45 $(0.16) $(0.40) $ -- $(2.80) $13.09 (4.79)% $112,497 2.33%
2000 ...... 16.18 (0.24) 1.43 -- (0.92) 16.45 7.77 128,159 2.29
1999 ...... 16.22 (0.09) 2.60 -- (2.55) 16.18 16.50 162,100 2.29
1998 ...... 14.96 (0.04) 3.87 -- (2.57) 16.22 28.12 106,670 2.26
1997 ...... 14.84 (0.01) 3.07 -- (2.94) 14.96 23.24 36,753 2.27
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME (LOSS)
RATIO OF NET TO AVERAGE TO AVERAGE
INVESTMENT NET ASSETS NET ASSETS
INCOME (LOSS) (EXCLUDING (EXCLUDING PORTFOLIO
TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
------------ --------------- --------------- ----------
-------------
BALANCED FUND
-------------
Investor Shares
2001 ...... 1.93% 1.54% 1.71% 99%
2000 ...... 2.07 1.51 1.83 182
1999 ...... 1.89 1.43 1.73 179
1998 ...... 2.21 1.59 1.88 154
1997 ...... 2.58 1.64 2.19 197
Flex Shares
2001 ...... 1.18% 2.15% 1.10% 99%
2000 ...... 1.33 2.18 1.18 182
1999 ...... 1.13 2.15 1.01 179
1998 ...... 1.41 2.23 1.20 154
1997 ...... 1.84 2.45 1.40 197
-------------------------
CAPITAL APPRECIATION FUND
-------------------------
Investor Shares
2001 ...... (0.94)% 1.98% (1.06)% 75%
2000 ...... (0.55) 1.98 (0.71) 129
1999 ...... (0.30) 1.96 (0.44) 147
1998 ...... (0.03) 2.01 (0.23) 194
1997 ...... 0.19 2.02 (0.03) 141
Flex Shares
2001 ...... (1.41)% 2.39% (1.47)% 75%
2000 ...... (1.03) 2.39 (1.13) 129
1999 ...... (0.86) 2.38 (0.95) 147
1998 ...... (0.46) 2.37 (0.57) 194
1997 ...... (0.29) 2.43 (0.45) 141
(+) Returns are for the period indicated and have not been annualized. Total
return figures do not include applicable sales loads.
36 PROSPECTUS
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For the Periods Ended May 31, (unless otherwise indicated)
For a Share Outstanding Throughout the Periods
NET
NET REALIZED AND DISTRIBUTIONS NET NET
ASSET NET UNREALIZED DISTRIBUTIONS FROM ASSET ASSETS RATIO
VALUE INVESTMENT GAINS FROM NET REALIZED VALUE END OF EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD (LOSS) INVESTMENTS INCOME GAINS OF PERIOD RETURN(+) (000) NET ASSETS
--------- --------- ------------ ------------- ------------ --------- --------- -------- ------------
--------------------------
GROWTH AND INCOME FUND (A)
--------------------------
Investor Shares
2001 ...... $15.65 $ 0.04 $(0.04) $(0.05) $(0.43) $15.17 (0.07)% $40,174 1.18%
2000 ...... 16.21 0.09 0.55 (0.08) (1.12) 15.65 3.92 42,666 1.18
1999(1) ... 15.21 0.04 1.99 (0.03) (1.00) 16.21 14.31 36,958 1.08
For the years ended November 30:
1998 ...... 16.64 0.10 1.66 (0.10) (3.09) 15.21 13.69 34,434 1.03
1997 ...... 13.47 0.13 3.25 (0.14) (0.07) 16.64 25.42 28,112 1.03
1996 ...... 11.66 0.17 2.39 (0.16) (0.59) 13.47 22.63 17,997 1.03
Flex Shares
2001 ...... $15.49 $(0.05) $(0.05) $ -- $(0.43) $14.96 (0.77)% $78,376 1.93%
2000 ...... 16.10 -- 0.51 -- (1.12) 15.49 3.11 62,462 1.93
1999(1) ... 15.14 (0.01) 1.97 -- (1.00) 16.10 13.85 35,163 1.83
For the years ended November 30:
1998 ...... 16.59 (0.01) 1.64 -- (3.08) 15.14 12.78 25,656 1.78
1997 ...... 13.44 0.04 3.23 (0.05) (0.07) 16.59 24.63 13,269 1.73
1996 ...... 11.64 0.09 2.38 (0.08) (0.59) 13.44 21.81 5,131 1.68
-------------------------------
INFORMATION AND TECHNOLOGY FUND
-------------------------------
Flex Shares
2001 ...... $15.81 $(0.22) $(2.44) $ -- $ -- $13.15 (16.82)% $22,104 2.25%
2000(2) ... 18.20 (0.07) (2.32) -- -- 15.81 (13.13) 20,201 2.25
-------------------------
INTERNATIONAL EQUITY FUND
-------------------------
Investor Shares
2001 ...... $12.47 $(0.02) $(1.23) $ -- $(1.11) $10.11 (11.13)% $7,517 1.79%
2000 ...... 12.89 (0.11) 1.37 (0.02) (1.66) 12.47 10.15 10,462 1.83
1999 ...... 14.92 (0.09) (1.10) -- (0.84) 12.89 (7.82) 14,145 1.83
1998 ...... 13.58 0.02 2.64 -- (1.32) 14.92 21.39 17,383 1.82
1997 ...... 11.38 (0.01) 2.56 -- (0.35) 13.58 22.85 10,674 1.81
Flex Shares
2001 ...... $12.06 $(0.16) $(1.11) $ -- $(1.11) $9.68 (11.71)% $7,765 2.48%
2000 ...... 12.58 (0.32) 1.46 -- (1.66) 12.06 9.38 10,891 2.53
1999 ...... 14.68 (0.29) (0.97) -- (0.84) 12.58 (8.48) 17,103 2.53
1998 ...... 13.47 0.07 2.46 -- (1.32) 14.68 20.54 21,164 2.52
1997 ...... 11.37 (0.04) 2.49 -- (0.35) 13.47 21.98 8,375 2.51
-------------------------------
INTERNATIONAL EQUITY INDEX FUND
-------------------------------
Investor Shares
2001 ...... $13.80 $(0.01) $(2.65) $ -- $(0.09) $11.05 (19.31)% $ 3,451 1.46%
2000 ...... 11.70 (0.11) 2.32 -- (0.11) 13.80 18.86 4,563 1.47
1999 ...... 13.20 (0.11) 0.98 (0.18) (2.19) 11.70 7.33 4,909 1.47
1998 ...... 11.26 0.16 2.53 (0.07) (0.68) 13.20 25.25 7,141 1.46
1997 ...... 10.88 0.03 0.72 (0.07) (0.30) 11.26 7.12 5,592 1.45
Flex Shares
2001 ...... $13.74 $(0.06) $(2.66) $ -- $(0.09) $10.93 (19.84)% $ 4,731 2.10%
2000 ...... 11.73 0.08 2.04 -- (0.11) 13.74 18.04 5,853 2.12
1999 ...... 13.17 (0.15) 0.94 (0.04) (2.19) 11.73 6.68 1,465 2.12
1998 ...... 11.24 0.17 2.44 -- (0.68) 13.17 24.50 1,469 2.11
1997 ...... 10.87 (0.05) 0.72 -- (0.30) 11.24 6.41 900 2.10
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME (LOSS)
RATIO OF NET TO AVERAGE TO AVERAGE
INVESTMENT NET ASSETS NET ASSETS
INCOME (LOSS) (EXCLUDING (EXCLUDING PORTFOLIO
TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
------------ --------------- --------------- ----------
--------------------------
GROWTH AND INCOME FUND (A)
--------------------------
Investor Shares
2001 ...... 0.30% 1.35% 0.13% 73%
2000 ...... 0.58 1.31 0.45 53
1999(1) ... 0.54 1.17 0.45 31
For the years ended November 30:
1998 ...... 0.63 1.18 0.48 71
1997 ...... 0.89 1.18 0.74 100
1996 ...... 1.35 1.18 1.20 82
Flex Shares
2001 ...... (0.45)% 2.14% (0.66)% 73%
2000 ...... (0.14) 2.18 (0.39) 53
1999(1) ... (0.21) 1.97 (0.35) 31
For the years ended November 30:
1998 ...... (0.13) 2.03 (0.38) 71
1997 ...... 0.15 2.09 (0.20) 100
1996 ...... 0.71 2.03 0.36 82
-------------------------------
INFORMATION AND TECHNOLOGY FUND
-------------------------------
Flex Shares
2001 ...... (1.50)% 2.45% (1.70)% 750%
2000(2) ... (1.65) 2.40 (1.80) 250
-------------------------
INTERNATIONAL EQUITY FUND
-------------------------
Investor Shares
2001 ...... 0.18% 1.97% --% 68%
2000 ...... 0.33 1.95 0.21 179
1999 ...... 0.30 1.93 0.20 161
1998 ...... 0.24 1.91 0.15 108
1997 ...... 0.18 2.05 (0.06) 139
Flex Shares
2001 ...... (0.51)% 2.57% (0.60)% 68%
2000 ...... (0.38) 2.74 (0.59) 179
1999 ...... (0.40) 2.82 (0.69) 161
1998 ...... (0.46) 2.58 (0.52) 108
1997 ...... (0.27) 3.03 (0.79) 139
-------------------------------
INTERNATIONAL EQUITY INDEX FUND
-------------------------------
Investor Shares
2001 ...... 0.05% 1.83% (0.32)% 13%
2000 ...... 0.07 1.79 (0.25) 9
1999 ...... 0.25 1.71 0.01 32
1998 ...... 0.50 1.84 0.12 1
1997 ...... 0.28 1.88 (0.15) 2
Flex Shares
2001 ...... (0.61)% 2.15% (0.66)% 13%
2000 ...... (0.36) 2.61 (0.85) 9
1999 ...... (0.30) 2.92 (1.10) 32
1998 ...... (0.03) 3.52 (1.44) 1
1997 ...... (0.39) 3.69 (1.98) 2
(+) 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 January 24, 2000. All ratios for the period 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 rounded to $0.
PROSPECTUS 37
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For the Periods Ended May 31
For a Share Outstanding Throughout the Periods
NET
NET REALIZED AND DISTRIBUTIONS NET NET
ASSET NET UNREALIZED DISTRIBUTIONS FROM ASSET ASSETS RATIO
VALUE INVESTMENT GAINS FROM NET REALIZED VALUE END OF EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD (LOSS) INVESTMENTS INCOME GAINS OF PERIOD RETURN(+) (000) NET ASSETS
--------- --------- ------------ ------------- ------------ --------- --------- -------- ------------
-------------------
MID-CAP EQUITY FUND
-------------------
Investor Shares
2001 ....... $13.82 $(0.05) $(0.62) $ -- $(2.51) $10.64 (7.34)% $ 12,316 1.66%
2000 ....... 12.50 (0.19) 2.37 -- (0.86) 13.82 18.55 14,513 1.62
1999 ....... 13.67 (0.06) 0.08 -- (1.19) 12.50 1.17 19,230 1.62
1998 ....... 13.17 (0.03) 2.49 -- (1.96) 13.67 20.56 24,930 1.61
1997 ....... 12.74 (0.03) 1.69 (0.01) (1.22) 13.17 13.76 20,245 1.60
Flex Shares
2001 ....... $13.35 $(0.07) $(0.63) $ -- $(2.51) $10.14 (7.88)% $ 12,910 2.26%
2000 ....... 12.17 (0.22) 2.26 -- (0.86) 13.35 17.87 14,588 2.22
1999 ....... 13.42 (0.14) 0.08 -- (1.19) 12.17 0.56 15,804 2.22
1998 ....... 13.04 (0.04) 2.38 -- (1.96) 13.42 19.80 19,042 2.21
1997 ....... 12.69 (0.07) 1.64 -- (1.22) 13.04 13.06 10,120 2.20
---------------------------
SMALL CAP GROWTH STOCK FUND
---------------------------
Investor Shares
2001 ....... $18.27 $(0.59) $ 2.04 $ -- $(1.46) $18.26 7.89% $ 28,933 1.60%
2000(1) .... 16.46 (0.07) 1.88 -- -- 18.27 11.00 39,865 1.55
Flex Shares
2001 ....... $18.00 $(0.25) $ 1.56 $ -- $(1.46) $17.85 7.19% $ 26,941 2.29%
2000 ....... 14.46 (0.04) 3.77 -- (0.19) 18.00 25.95 23,228 2.25
1999(2) .... 10.00 (0.19) 4.67 -- (0.02) 14.46 44.78 6,158 2.25
---------------------------
SMALL CAP VALUE EQUITY FUND
---------------------------
Flex Shares
2001 ....... $ 9.10 $0.07 $3.04 $(0.06) $ -- $12.15 34.30% $ 11,167 2.30%
2000 ....... 9.65 -- (0.54) (0.01) -- 9.10 (5.65) 8,596 2.27
1999 ....... 12.80 0.01 (2.53) (0.02) (0.61) 9.65 (19.52) 19,465 2.27
1998(3) .... 11.28 0.03 2.17 (0.06) (0.62) 12.80 22.29 40,613 2.06
-------------------------------
TAX SENSITIVE GROWTH STOCK FUND
-------------------------------
Flex Shares
2001 ....... $32.65 $(0.36) $(6.19) $ -- $ -- $26.10 (20.06)% $233,496 2.30%
2000 ....... 29.85 (0.16) 2.96 -- -- 32.65 9.38 290,595 2.25
1999(4) .... 25.52 (0.04) 4.37 -- -- 29.85 16.97 75,875 2.25
-----------------------
VALUE INCOME STOCK FUND
-----------------------
Investor Shares
2001 ....... $10.35 $ 0.14 $1.25 $(0.16) $ -- $11.58 13.63% $ 85,584 1.28%
2000 ....... 12.81 0.19 (1.48) (0.18) (0.99) 10.35 (10.83) 104,178 1.28
1999 ....... 13.87 0.19 1.02 (0.20) (2.07) 12.81 10.71 194,312 1.28
1998 ....... 13.68 0.20 2.62 (0.21) (2.42) 13.87 22.71 210,591 1.27
1997 ....... 13.13 0.25 2.32 (0.26) (1.76) 13.68 21.69 165,999 1.30
Flex Shares
2001 ....... $10.24 $ 0.04 $1.26 $(0.08) $ -- $11.46 12.85% $ 65,895 2.01%
2000 ....... 12.68 0.08 (1.44) (0.09) (0.99) 10.24 (11.50) 84,563 2.02
1999 ....... 13.75 0.10 1.01 (0.11) (2.07) 12.68 9.91 167,000 2.02
1998 ....... 13.61 0.12 2.57 (0.13) (2.42) 13.75 21.76 180,530 2.01
1997 ....... 13.08 0.18 2.29 (0.18) (1.76) 13.61 20.91 73,466 2.00
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME (LOSS)
RATIO OF NET TO AVERAGE TO AVERAGE
INVESTMENT NET ASSETS NET ASSETS
INCOME (LOSS) (EXCLUDING (EXCLUDING PORTFOLIO
TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
------------ --------------- --------------- ----------
-------------------
MID-CAP EQUITY FUND
-------------------
Investor Shares
2001 ....... (0.69)% 1.86% (0.89)% 100%
2000 ....... (0.43) 1.81 (0.62) 131
1999 ....... (0.90) 1.76 (1.04) 76
1998 ....... (0.75) 1.84 (0.98) 129
1997 ....... (0.21) 1.85 (0.46) 152
Flex Shares
2001 ....... (1.29)% 2.46% (1.49)% 100%
2000 ....... (1.05) 2.44 (1.27) 131
1999 ....... (1.52) 2.48 (1.78) 76
1998 ....... (1.37) 2.47 (1.63) 129
1997 ....... (0.85) 2.58 (1.23) 152
---------------------------
SMALL CAP GROWTH STOCK FUND
---------------------------
Investor Shares
2001 ....... (1.33)% 1.87% (1.60)% 112%
2000(1) .... (1.26) 1.79 (1.50) 110
Flex Shares
2001 ....... (2.01)% 2.39% (2.11)% 112%
2000 ....... (1.92) 2.42 (2.09) 110
1999(2) .... (1.50) 3.19 (2.44) 75
---------------------------
SMALL CAP VALUE EQUITY FUND
---------------------------
Flex Shares
2001 ....... 0.63% 2.66% 0.27% 86%
2000 ....... 0.21 2.56 (0.08) 65
1999 ....... 0.21 2.55 (0.07) 63
1998(3) .... 0.01 2.35 (0.28) 55
-------------------------------
TAX SENSITIVE GROWTH STOCK FUND
-------------------------------
Flex Shares
2001 ....... (1.15)% 2.34% (1.19)% 103%
2000 ....... (0.91) 2.35 (1.01) 30
1999(4) .... (0.80) 2.48 (1.03) 18
-----------------------
VALUE INCOME STOCK FUND
-----------------------
Investor Shares
2001 ....... 1.31% 1.31% 1.28% 77%
2000 ....... 1.64 1.28 1.64 62
1999 ....... 1.55 1.28 1.55 69
1998 ....... 1.47 1.27 1.47 99
1997 ....... 2.01 1.31 2.00 105
Flex Shares
2001 ....... 0.59% 2.05% 0.55% 77%
2000 ....... 0.91 2.03 0.90 62
1999 ....... 0.81 2.03 0.80 69
1998 ....... 0.78 2.01 0.78 99
1997 ....... 1.33 2.03 1.30 105
(+) 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 12, 1999. All ratios for the period have
been annualized.
(2) Commenced operations on October 8, 1998. All ratios for the period have been
annualized.
(3) Commenced operations on June 5, 1997. All ratios for the period have been
annualized.
(4) Commenced operations on December 15, 1998. All ratios for the period have
been annualized.
Amounts designated as "--" are either $0 or rounded to $0.
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, 2001, 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.
STI-PS-007-0200
[STI SUNDIAL IMAGE OMITTED]
100486/10-01
STI CLASSIC FUNDS-BOND AND MONEY
MARKET FUNDS-TRUST SHARES
PROSPECTUS
OCTOBER 1, 2001
BOND FUNDS
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
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
INVESTMENT ADVISER
TO THE FUNDS:
TRUSCO CAPITAL MANAGEMENT, INC.
(the "Adviser")
[STI CLASSIC FUNDS 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 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 PRIME QUALITY MONEY MARKET FUND
28 TAX-EXEMPT MONEY MARKET FUND
30 U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
32 U.S. TREASURY MONEY MARKET FUND
34 VIRGINIA TAX-FREE MONEY MARKET FUND
36 MORE INFORMATION ABOUT RISK
37 MORE INFORMATION ABOUT FUND INVESTMENTS
37 INVESTMENT ADVISER
38 PORTFOLIO MANAGERS
39 PURCHASING AND SELLING FUND SHARES
41 DIVIDENDS AND DISTRIBUTIONS
42 TAXES
43 FINANCIAL HIGHLIGHTS
46 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS
--------------------------------------------------------------------------------
[BRIEFCASE ICON OMITTED] FUND SUMMARY
[TELESCOPE ICON OMITTED] INVESTMENT STRATEGY
[LIFE PRESERVER ICON OMITTED] WHAT ARE THE RISKS OF INVESTING?
[BULLSEYE ICON OMITTED] PERFORMANCE INFORMATION
[GRAPH ICON OMITTED] WHAT IS AN INDEX?
[COINS ICON OMITTED] FUND FEES AND EXPENSES
[MOUNTAIN ICON OMITTED] MORE INFORMATION ABOUT FUND INVESTMENTS
[MAGNIFING ICON OMITTED] INVESTMENT ADVISER
[HANDSHAKE ICON OMITTED] PURCHASING AND SELLING FUND SHARES
--------------------------------------------------------------------------------
OCTOBER 1, 2001
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 ICON 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 Low
--------------------------------------------------------------------------------
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 ICON 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.
[LIFE PRESERVER ICON 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 ICON OMITTED]
PERFORMANCE INFORMATION
The bar chart and the performance table that follow 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.*
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
1995 15.85%
1996 3.94%
1997 7.82%
1998 6.24%
1999 -2.31%
2000 11.64%
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 1/1/01 TO 6/30/01 WAS 2.37%.
PROSPECTUS 3
--------------------------------------------------------------------------------
FLORIDA TAX-EXEMPT BOND FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, 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 11.64% 5.36% 5.87%*
--------------------------------------------------------------------------------
Lehman Brothers 10-Year
Municipal Bond Index 10.75% 5.92% 5.72%**
--------------------------------------------------------------------------------
Lipper Florida Municipal
Debt Funds Average 10.55% 4.59% 4.58%**
--------------------------------------------------------------------------------
* SINCE 1/25/94
** SINCE 1/31/94
[GRAPH ICON 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 ICON 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%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Florida Tax-Exempt Bond Fund -- Trust Shares 0.71%
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser."
4 PROSPECTUS
--------------------------------------------------------------------------------
GEORGIA TAX-EXEMPT BOND FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 ICON OMITTED]
PERFORMANCE INFORMATION
The bar chart and the performance table that follow 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.*
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
1995 13.51%
1996 3.53%
1997 8.17%
1998 5.79%
1999 -2.26%
2000 9.43%
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 1/1/01 TO 6/30/01 WAS 2.58%.
PROSPECTUS 5
--------------------------------------------------------------------------------
GEORGIA TAX-EXEMPT BOND FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, 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 9.43% 4.85% 4.59%*
--------------------------------------------------------------------------------
Lehman Brothers 10-Year
Municipal Bond Index 10.75% 5.92% 5.72%**
--------------------------------------------------------------------------------
Lipper Georgia Municipal
Debt Funds Average 11.30% 4.78% 4.53%**
--------------------------------------------------------------------------------
* SINCE 1/18/94
** SINCE 1/31/94
[GRAPH ICON 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 ICON 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%*
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Georgia Tax-Exempt Bond Fund -- Trust Shares 0.72%
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser."
6 PROSPECTUS
--------------------------------------------------------------------------------
HIGH INCOME FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON OMITTED]
FUND SUMMARY
INVESTMENT GOAL
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 ICON 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.
[LIFE PRESERVER ICON 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.
PROSPECTUS 7
--------------------------------------------------------------------------------
HIGH INCOME FUND
--------------------------------------------------------------------------------
[BULLSEYE ICON OMITTED]
PERFORMANCE INFORMATION
The bar chart and the performance table that follow 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. SINCE FLEX SHARES ARE INVESTED IN THE SAME PORTFOLIO OF
SECURITIES, RETURNS FOR TRUST SHARES WILL BE SUBSTANTIALLY SIMILAR TO THOSE
OF THE FLEX SHARES, SHOWN HERE, AND DIFFER ONLY TO THE EXTENT THAT TRUST SHARE
EXPENSES ARE LOWER AND THEREFORE, PERFORMANCE WOULD BE HIGHER THAN THAT OF FLEX
SHARES.*
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
1995 14.91%
1996 5.84%
1997 5.05%
1998 4.43%
1999 1.28%
2000 -9.46%
BEST QUARTER WORST QUARTER
6.79% -9.92%
( 3/31/95) (3/31/00)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS 3.15%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE LEHMAN BROTHERS U.S. CORPORATE HIGH
YIELD BOND INDEX.
FLEX SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
High Income Fund -11.15% -1.26% 2.86%*
--------------------------------------------------------------------------------
Lehman Brothers U.S.
Corporate High Yield
Bond Index -5.86% 4.28% 6.20%**
--------------------------------------------------------------------------------
* SINCE 5/4/94
** SINCE 4/30/94
[GRAPH ICON 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 ICON 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 0.15%
-----
Total Annual Fund Operating Expenses 0.95%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES SHOULD BE LESS THAN THE
AMOUNT SHOWN ABOVE BECAUSE THE ADVISER HAS VOLUNTARILY AGREED TO WAIVE A PORTION
OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED LEVEL.
THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT THE
ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE FEE
WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE EXPECTED TO BE AS
FOLLOWS:
High Income Fund -- Trust Shares 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.
The Example also assumes that each year your investment has a 5% return and Fund
operating 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
$97 $303 $525 $1,166
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser."
8 PROSPECTUS
--------------------------------------------------------------------------------
INVESTMENT GRADE BOND FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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 U.S. Brothers 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.
[LIFE PRESERVER ICON 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 ICON 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.*
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
1993 10.84%
1994 -3.32%
1995 17.80%
1996 2.34%
1997 9.08%
1998 9.19%
1999 -1.53%
2000 6.57%
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 1/1/01 TO 6/30/01 WAS 5.36%.
PROSPECTUS 9
--------------------------------------------------------------------------------
INVESTMENT GRADE BOND FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, 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 6.57% 5.05% 6.13%*
--------------------------------------------------------------------------------
Lehman Brothers U.S.
Government/Credit
Index 11.84% 6.23% 7.01%**
--------------------------------------------------------------------------------
Lehman Brothers U.S.
Aggregate Bond Index 11.63% 6.46% 7.01%**
--------------------------------------------------------------------------------
Lipper Intermediate
Investment Grade
Debt Funds Average 9.78% 5.47% 6.36%**
--------------------------------------------------------------------------------
* SINCE 7/16/92
** SINCE 7/31/92
[GRAPH ICON 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 ICON 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%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Investment Grade Bond Fund -- Trust Shares 0.82%
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser."
10 PROSPECTUS
--------------------------------------------------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 ICON 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.*
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
1994 -0.32%
1995 14.97%
1996 5.52%
1997 7.79%
1998 7.06%
1999 -0.26%
2000 10.87%
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 1/1/01 TO 6/30/01 WAS 2.71%.
PROSPECTUS 11
--------------------------------------------------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE TOTAL RETURNS FOR THE PERIODS ENDED
DECEMBER 31, 2000, 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 10.87% 6.13% 6.28%*
--------------------------------------------------------------------------------
Lehman Brothers
5-Year Municipal
Bond Index 7.70% 4.95% 4.94%**
--------------------------------------------------------------------------------
Lipper Intermediate
Municipal Debt Funds
Average 8.55% 4.66% 4.83%**
--------------------------------------------------------------------------------
* SINCE 10/21/93
** SINCE 10/31/93
[GRAPH ICON 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 ICON 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 0.11%
-----
Total Annual Fund Operating Expenses 0.85%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Investment Grade Tax-Exempt Bond Fund -- Trust Shares 0.82%
--------------------------------------------------------------------------------
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
$87 $271 $471 $1,049
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser."
12 PROSPECTUS
--------------------------------------------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON OMITTED]
FUND SUMMARY
INVESTMENT GOAL High current income, while preserving capital
--------------------------------------------------------------------------------
INVESTMENT FOCUS Mortgage-backed securities
--------------------------------------------------------------------------------
SHARE PRICE VOLATILITY Low
--------------------------------------------------------------------------------
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 ICON 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.
[LIFE PRESERVER ICON 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
market 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 ICON 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.*
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
1995 12.14%
1996 4.53%
1997 6.74%
1998 6.90%
1999 1.25%
2000 8.60%
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 1/1/01 TO 6/30/01 WAS 2.80%.
PROSPECTUS 13
--------------------------------------------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE MERRILL LYNCH 1-5 YEAR U.S.
TREASURIES/AGENCIES INDEX AND THE MERRILL LYNCH 1-5 YEAR U.S. TREASURIES INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Limited-Term Federal
Mortgage Securities
Fund 8.60% 5.57% 6.10%*
--------------------------------------------------------------------------------
Merrill Lynch 1-5 Year
U.S. Treasuries/Agencies
Index 9.00% 6.06% 6.64%**
--------------------------------------------------------------------------------
Merrill Lynch 1-5 Year
U.S. Treasuries Index 8.87% 6.02% 6.61%**
--------------------------------------------------------------------------------
* SINCE 6/6/94
** SINCE 5/31/94
[GRAPH ICON 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 ICON 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%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Limited-Term Federal Mortgage Securities Fund -- Trust Shares 0.71%
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser."
14 PROSPECTUS
--------------------------------------------------------------------------------
MARYLAND MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 ICON 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.*
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
1997 8.78%
1998 5.87%
1999 -3.33%
2000 11.31%
BEST QUARTER WORST QUARTER
4.08% -1.52%
(12/31/00) (9/30/99)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS 2.71%.
PROSPECTUS 15
--------------------------------------------------------------------------------
MARYLAND MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE LEHMAN BROTHERS GENERAL OBLIGATION BOND
INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION
--------------------------------------------------------------------------------
Maryland Municipal
Bond Fund 11.31% 4.54%*
--------------------------------------------------------------------------------
Lehman Brothers General
Obligation Bond Index 10.96% 5.95%**
--------------------------------------------------------------------------------
* SINCE 3/1/96
** SINCE 2/29/96
[GRAPH ICON 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 ICON 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%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Maryland Municipal Bond Fund -- Trust Shares 0.72%
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser."
16 PROSPECTUS
--------------------------------------------------------------------------------
SHORT-TERM BOND FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 ICON 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.*
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
1994 -0.07%
1995 11.77%
1996 3.90%
1997 6.78%
1998 6.84%
1999 0.92%
2000 7.64%
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 1/1/01 TO 6/30/01 WAS 4.32%.
PROSPECTUS 17
--------------------------------------------------------------------------------
SHORT-TERM BOND FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, 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 7.64% 5.19% 5.31%*
--------------------------------------------------------------------------------
Salomon 1-3 Year
Treasury/Government
Sponsored/Corporate
Index 8.15% 6.03% 5.75%**
--------------------------------------------------------------------------------
* SINCE 3/15/93
** SINCE 2/28/93
[GRAPH ICON 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 ICON 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%*
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Short-Term Bond Fund -- Trust Shares 0.71%
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser."
18 PROSPECTUS
--------------------------------------------------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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
market 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 ICON 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.*
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
1994 1.41%
1995 8.58%
1996 4.52%
1997 5.86%
1998 6.24%
1999 2.71%
2000 6.65%
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 1/1/01 TO 6/30/01 WAS 3.35%.
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, 2000, 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 6.65% 5.18% 4.96%*
--------------------------------------------------------------------------------
Salomon 1-3 Year
Treasury Index 8.01% 5.95% 5.65%**
--------------------------------------------------------------------------------
Salomon 6 Month
Treasury Bill Index 6.07% 5.39% 5.08%**
--------------------------------------------------------------------------------
* SINCE 3/15/93
** SINCE 2/28/93
[GRAPH ICON 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 ICON 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%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Short-Term U.S. Treasury Securities Fund -- Trust Shares 0.71%
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser."
20 PROSPECTUS
--------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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
market 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 ICON 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.*
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
1995 17.33%
1996 2.55%
1997 8.94%
1998 8.16%
1999 -0.97%
2000 10.98%
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 1/1/01 TO 6/30/01 WAS 2.40%.
PROSPECTUS 21
--------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE TOTAL RETURNS FOR THE PERIODS ENDED
DECEMBER 31, 2000, 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 10.98% 5.84% 6.89%*
--------------------------------------------------------------------------------
Merrill Lynch Government/
Mortgage Index 12.35% 6.63% 7.73%**
--------------------------------------------------------------------------------
Lehman Brothers Intermediate
U.S. Government
Bond Index 10.47% 6.18% 6.90%**
--------------------------------------------------------------------------------
* SINCE 8/1/94
** SINCE 7/31/94
[GRAPH ICON 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 ICON 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 0.11%
-----
Total Annual Fund Operating Expenses 0.85%*
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
U.S. Government Securities Fund -- Trust Shares 0.82%
--------------------------------------------------------------------------------
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
$87 $271 $471 $1,049
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser."
22 PROSPECTUS
--------------------------------------------------------------------------------
VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 ICON 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.*
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
1994 -6.45%
1995 14.25%
1996 2.95%
1997 7.25%
1998 5.22%
1999 -2.34%
2000 9.39%
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 1/1/01 TO 6/30/01 WAS 2.58%.
PROSPECTUS 23
--------------------------------------------------------------------------------
VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, 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 9.39% 4.41% 4.80%*
--------------------------------------------------------------------------------
Lehman Brothers
5-Year General
Obligation Bond Index 7.68% 5.04% 5.44%**
--------------------------------------------------------------------------------
Lehman Brothers
General Obligation
Bond Index 10.96% 5.85% 6.41%**
--------------------------------------------------------------------------------
* SINCE 1/11/93
** SINCE 12/31/92
[GRAPH ICON 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 ICON 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. For more information about these
fees, see "Investment Adviser."
24 PROSPECTUS
--------------------------------------------------------------------------------
VIRGINIA MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 ICON 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.*
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
1996 1.68%
1997 8.82%
1998 5.85%
1999 -4.86%
2000 11.65%
BEST QUARTER WORST QUARTER
4.36% -2.73%
(12/31/00) (3/31/96)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS 2.40%.
PROSPECTUS 25
--------------------------------------------------------------------------------
VIRGINIA MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE LEHMAN BROTHERS GENERAL OBLIGATION BOND
INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Virginia Municipal
Bond Fund 11.65% 4.47% 5.42%*
--------------------------------------------------------------------------------
Lehman Brothers General
Obligation Bond Index 10.96% 5.85% 6.67%**
--------------------------------------------------------------------------------
* SINCE 4/4/95
** SINCE 3/31/95
[GRAPH ICON 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 ICON 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. For more information about these
fees, see "Investment Adviser."
26 PROSPECTUS
--------------------------------------------------------------------------------
PRIME QUALITY MONEY MARKET FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 ICON 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.*
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
1993 2.77%
1994 3.77%
1995 5.47%
1996 4.99%
1997 5.15%
1998 5.10%
1999 4.74%
2000 6.04%
BEST QUARTER WORST QUARTER
1.55% 0.68%
(9/30/00) (6/30/93)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS 2.35%.
PROSPECTUS 27
--------------------------------------------------------------------------------
PRIME QUALITY MONEY MARKET FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE IMONEYNET, INC. FIRST TIER AVERAGE.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Prime Quality Money
Market Fund 6.04% 5.20% 4.63%*
--------------------------------------------------------------------------------
iMoneyNet, Inc.
First Tier Average 5.80% 5.04% 4.50%**
--------------------------------------------------------------------------------
* SINCE 6/8/92
** SINCE 5/31/92
To obtain more information about the Fund's current yield, call 1-800-814-3397.
[GRAPH ICON 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. The number of funds in the Average varies.
[COINS ICON 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%*
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Prime Quality Money Market Fund -- Trust Shares 0.64%
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser."
28 PROSPECTUS
--------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 ICON 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.*
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
1993 2.02%
1994 2.47%
1995 3.48%
1996 3.06%
1997 3.23%
1998 3.02%
1999 2.80%
2000 3.69%
BEST QUARTER WORST QUARTER
0.98% 0.45%
(6/30/00) (3/31/93)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS 1.43%.
PROSPECTUS 29
--------------------------------------------------------------------------------
TAX-EXEMPT MONEY MARKET FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, 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 3.69% 3.16% 2.93%*
--------------------------------------------------------------------------------
iMoneyNet Inc.
Tax-Free Stockbroker
& General Purpose
Average 3.56% 3.04% 2.81%**
--------------------------------------------------------------------------------
* SINCE 6/8/92
** SINCE 5/31/92
To obtain more information about the Fund's current yield, call 1-800-814-3397.
[GRAPH ICON 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. The
number of funds in the Average varies.
[COINS ICON 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 0.10%
-----
Total Annual Fund Operating Expenses 0.65%*
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Tax-Exempt Money Market Fund -- Trust Shares 0.55%
--------------------------------------------------------------------------------
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
$66 $208 $362 $810
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser."
30 PROSPECTUS
--------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 ICON 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.*
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
1993 2.67%
1994 3.64%
1995 5.39%
1996 4.81%
1997 4.99%
1998 4.88%
1999 4.41%
2000 5.71%
BEST QUARTER WORST QUARTER
1.49% 0.65%
(12/31/00) (6/30/93)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS 2.34%.
PROSPECTUS 31
--------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE IMONEYNET, INC. U.S. GOVERNMENT &
AGENCY AVERAGE.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
U.S. Government
Securities Money
Market Fund 5.71% 4.96% 4.45%*
--------------------------------------------------------------------------------
iMoneyNet, Inc.
U.S. Government
& Agency Average 5.65% 4.91% 4.40%**
--------------------------------------------------------------------------------
* SINCE 6/8/92
** SINCE 5/31/92
To obtain more information about the Fund's yield, call 1-800-814-3397.
[GRAPH ICON OMITTED]
--------------------------------------------------------------------------------
WHAT IS AN AVERAGE?
--------------------------------------------------------------------------------
An average is a composite of mutual funds with similar investment goals. 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.
The number of funds in the Average varies.
[COINS ICON 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%*
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
U.S. Government Securities Money Market Fund -- Trust Shares 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
$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. For more information about these
fees, see "Investment Adviser."
32 PROSPECTUS
--------------------------------------------------------------------------------
U.S. TREASURY MONEY MARKET FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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). As a money market
fund, the Fund follows strict rules about credit risk, maturity and
diversification of its investments.
[LIFE PRESERVER ICON 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 ICON 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.*
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
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%
2000 5.63%
BEST QUARTER WORST QUARTER
1.63% 0.61%
(3/31/91) (12/31/93)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS 2.15%.
PROSPECTUS 33
--------------------------------------------------------------------------------
U.S. TREASURY MONEY MARKET FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE IMONEYNET, INC. U.S. TREASURY & REPO
AVERAGE.
TRUST SHARES 1 YEAR 5 YEARS 10 YEARS
----------------------------------------------
U.S. Treasury
Money Market
Fund 5.63% 4.91% 4.50%
----------------------------------------------
iMoneyNet, Inc.
U.S. Treasury &
Repo Average 5.58% 4.88% N/A
----------------------------------------------
To obtain more information about the Fund's current yield, call 1-800-814-3397.
[GRAPH ICON 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. The number of funds in the Average
varies.
[COINS ICON 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%*
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
U.S. Treasury Money Market Fund -- Trust Shares 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
$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. For more information about these
fees, see "Investment Adviser."
34 PROSPECTUS
--------------------------------------------------------------------------------
VIRGINIA TAX-FREE MONEY MARKET FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 ICON 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.*
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
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%
2000 3.71%
BEST QUARTER WORST QUARTER
1.26% 0.43%
(3/31/91) (3/31/94)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS 1.46%.
PROSPECTUS 35
--------------------------------------------------------------------------------
VIRGINIA TAX-FREE MONEY MARKET FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE IMONEYNET, INC. TAX-FREE STOCKBROKER &
GENERAL PURPOSE AVERAGE.
TRUST SHARES 1 YEAR 5 YEARS 10 YEARS
---------------------------------------------
Virginia Tax-Free
Money Market
Fund 3.71% 3.13% 3.03%
---------------------------------------------
iMoneyNet, Inc.
Tax-Free
Stockbroker &
General Purpose
Average 3.56% 3.04% 2.95%
---------------------------------------------
To obtain more information about the Fund's current yield, call 1-800-814-3397.
[GRAPH ICON 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. The
number of funds in the Average varies.
[COINS ICON 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 0.10%
-----
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. For more information about these
fees, see "Investment Adviser."
36 PROSPECTUS
--------------------------------------------------------------------------------
MORE INFORMATION ABOUT RISK
--------------------------------------------------------------------------------
[LIFE PRESERVER ICON OMITTED]
MORE INFORMATION ABOUT RISK
FIXED INCOME RISK
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
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
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.
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
PROSPECTUS 37
--------------------------------------------------------------------------------
MORE INFORMATION ABOUT FUND INVESTMENTS
--------------------------------------------------------------------------------
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.
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.
[MOUNTAIN ICON 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. Of
course, a Fund cannot guarantee that it will achieve its investment goal.
[MAGNIFYING ICON OMITTED]
INVESTMENT ADVISER
The investment adviser (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 or the Adviser), 50 Hurt Plaza, Suite
1400, Atlanta, Georgia 30303, serves as the Adviser to the Funds. As of
38 PROSPECTUS
--------------------------------------------------------------------------------
PORTFOLIO MANAGERS
--------------------------------------------------------------------------------
June 30, 2001, Trusco had in excess of $45 billion in assets under management.
For the fiscal period ended May 31, 2001, the Adviser received advisory fees of:
FLORIDA TAX-EXEMPT BOND FUND 0.60%
GEORGIA TAX-EXEMPT BOND FUND 0.59%
HIGH INCOME FUND 0.65%
INVESTMENT GRADE BOND FUND 0.71%
INVESTMENT GRADE TAX-EXEMPT BOND FUND 0.70%
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND 0.59%
MARYLAND MUNICIPAL BOND FUND 0.55%
SHORT-TERM BOND FUND 0.59%
SHORT-TERM U.S. TREASURY SECURITIES FUND 0.58%
U.S. GOVERNMENT SECURITIES FUND 0.70%
VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND 0.62%
VIRGINIA MUNICIPAL BOND FUND 0.64%
PRIME QUALITY MONEY MARKET FUND 0.53%
TAX-EXEMPT MONEY MARKET FUND 0.44%
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND 0.55%
U.S. TREASURY MONEY MARKET FUND 0.55%
VIRGINIA TAX-FREE MONEY MARKET FUND 0.40%
The Adviser may use its affiliates as brokers for fund transactions.
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,
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
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 and June 1992.
He has more than 20 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 22 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. In
January 2000, Mr. Denney was named Managing Director of SunTrust Bank and is now
Managing Director of Trusco, after serving as Managing Director of STI since
1983. 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 22 years of
investment experience. In January 2000, Mr. West was named Managing Director of
SunTrust Bank and is now Managing Director of Trusco, after working at STI since
1985. 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 15
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
PROSPECTUS 39
--------------------------------------------------------------------------------
PURCHASING AND SELLING FUND SHARES
--------------------------------------------------------------------------------
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 28 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 1983 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.
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 16 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 17 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 7 years of
investment experience.
[HANDSHAKE ICON 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 a Fund must receive
40 PROSPECTUS
--------------------------------------------------------------------------------
PURCHASING AND SELLING FUND SHARES
--------------------------------------------------------------------------------
your purchase order in proper form before 4:00 p.m., Eastern time. The Fund will
not accept orders that request a particular day or price for the transaction or
any other special conditions.
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 10:30 a.m., Eastern time for the
Tax-Exempt Money Market Fund and Virginia Tax-Free Money Market Fund or before
2:00 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.
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 10:30 a.m., Eastern time for the Tax-Exempt Money Market Fund Virginia
Tax-Free Money Market Fund or 2:00 p.m., Eastern time
PROSPECTUS 41
--------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
--------------------------------------------------------------------------------
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 a Fund 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 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 (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.
DIVIDENDS AND DISTRIBUTIONS
Each Fund declares dividends daily and pays these dividends monthly. Each Fund
makes distributions of its net realized 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.
42 PROSPECTUS
--------------------------------------------------------------------------------
TAXES
--------------------------------------------------------------------------------
TAXES
PLEASE CONSULT YOUR TAX ADVISOR 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 net investment income and its
net realized capital gains, if any, at least annually. 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 MAY BE A TAXABLE EVENT. FOR TAX PURPOSES, AN EXCHANGE OF
YOUR FUND SHARES FOR SHARES OF ANOTHER STI FUND IS TREATED THE SAME AS A SALE.
Shareholders of the Money Market Funds, however, should be aware that because
the Funds each expect to maintain a stable $1.00 net asset value per share, they
should not expect to realize any gain or loss on the sale or exchange of Money
Market Fund shares.
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. While shareholders of state specific
Funds may receive distributions that are exempt from that particular state's
income tax, such distributions may be taxable in other states where the
shareholder files tax returns.
If you have a tax-advantaged or other retirement account you will generally not
be subject to federal taxation on income and capital gain distributions until
you begin receiving your distributions from your retirement account. You should
consult your tax advisor regarding the rules governing your own retirement plan.
Except for those certain Funds that expect to distribute federally tax-exempt
income (described above), the Funds expect to distribute primarily ordinary
income dividends.
The Short-Term U.S. Treasury Securities Fund, the U.S. Government Securities
Fund, the U.S. Government Securities Money Market Fund and the U.S. Treasury
Money Market Fund each expect that a substantial portion of Fund distributions
will represent interest earned on U.S. obligations, while the Investment Grade
Bond Fund, the Short-Term Bond Fund, and the Prime Quality Money Market Fund
expect that some portion of each Funds' distribution will be so derived. Many
states grant tax-free status to dividends paid from interest earned on direct
obligations of the U.S. government, subject to certain limitations.
MORE INFORMATION ABOUT TAXES IS IN THE SAI.
PROSPECTUS 43
--------------------------------------------------------------------------------
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,
For a Share Outstanding Throughout the Periods.
NET REALIZED
NET ASSET AND DISTRIBUTIONS RATIO OF
VALUE NET UNREALIZED FROM NET DISTRIBUTIONS NET ASSET NET ASSETS EXPENSES
BEGINNING INVESTMENT GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL END OF TO AVERAGE
OF PERIOD INCOME ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN(+) PERIOD(000) NET ASSETS
--------- ---------- -------------- ------------- ------------- --------- --------- ----------- ----------
----------------------------
FLORIDA TAX-EXEMPT BOND FUND
----------------------------
Trust Shares
2001 ...... $10.06 $0.44 $ 0.73 $(0.44) $ -- $10.79 11.84% $ 107,867 0.71%
2000 ...... 10.59 0.44 (0.49) (0.44) (0.04) 10.06 (0.48) 93,040 0.67
1999 ...... 10.72 0.42 (0.02) (0.42) (0.11) 10.59 3.72 118,609 0.67
1998 ...... 10.28 0.44 0.45 (0.44) (0.01) 10.72 8.77 93,939 0.66
1997 ...... 10.06 0.46 0.25 (0.46) (0.03) 10.28 7.22 50,487 0.65
----------------------------
GEORGIA TAX-EXEMPT BOND FUND
----------------------------
Trust Shares
2001 ...... $ 9.50 $0.40 $ 0.60 $(0.40) $ -- $10.10 10.67% $ 85,880 0.71%
2000 ...... 10.03 0.40 (0.49) (0.40) (0.04) 9.50 (0.90) 81,160 0.67
1999 ...... 10.11 0.39 (0.06) (0.39) (0.02) 10.03 3.33 87,452 0.67
1998 ...... 9.73 0.41 0.39 (0.41) (0.01) 10.11 8.37 62,363 0.66
1997 ...... 9.56 0.42 0.22 (0.42) (0.05) 9.73 6.79 39,732 0.65
--------------------------
INVESTMENT GRADE BOND FUND
--------------------------
Trust Shares
2001 ...... $ 9.58 $0.61 $ 0.65 $(0.61) $ -- $10.23 13.55% $ 860,073 0.81%
2000 ...... 10.36 0.61 (0.78) (0.61) -- 9.58 (1.76) 998,596 0.77
1999 ...... 10.65 0.56 (0.11) (0.56) (0.18) 10.36 4.25 1,149,068 0.77
1998 ...... 10.16 0.60 0.49 (0.60) -- 10.65 10.92 793,488 0.76
1997 ...... 10.07 0.60 0.09 (0.60) -- 10.16 6.99 633,646 0.75
-------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
-------------------------------------
Trust Shares
2001 ...... $10.67 $0.44 $ 0.71 $(0.44) $ -- $11.38 10.93% $ 134,139 0.81%
2000 ...... 11.10 0.43 (0.29) (0.43) (0.14) 10.67 1.41 117,384 0.77
1999 ...... 11.40 0.43 0.10 (0.43) (0.40) 11.10 4.67 154,123 0.77
1998 ...... 11.22 0.44 0.50 (0.44) (0.32) 11.40 8.57 146,606 0.76
1997 ...... 11.10 0.44 0.33 (0.44) (0.21) 11.22 7.13 139,144 0.75
---------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
---------------------------------------------
Trust Shares
2001 ...... $ 9.62 $0.55 $ 0.39 $(0.55) $ -- $10.01 10.02% $ 107,674 0.70%
2000 ...... 9.94 0.55 (0.32) (0.55) -- 9.62 2.33 125,355 0.67
1999 ...... 10.12 0.54 (0.06) (0.54) (0.12) 9.94 4.75 135,256 0.67
1998 ...... 10.02 0.58 0.11 (0.58) (0.01) 10.12 7.12 137,488 0.66
1997 ...... 9.99 0.58 0.04 (0.58) (0.01) 10.02 6.43 123,903 0.65
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME TO
INVESTMENT AVERAGE NET AVERAGE NET
INCOME ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO
TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
---------- ----------------- ----------------- ---------
----------------------------
FLORIDA TAX-EXEMPT BOND FUND
----------------------------
Trust Shares
2001 ...... 4.19% 0.76% 4.14% 59%
2000 ...... 4.25 0.78 4.14 88
1999 ...... 3.90 0.77 3.80 72
1998 ...... 4.16 0.80 4.02 69
1997 ...... 4.48 0.80 4.33 135
----------------------------
GEORGIA TAX-EXEMPT BOND FUND
----------------------------
Trust Shares
2001 ...... $ 4.03% 0.77% 3.97% 21%
2000 ...... 4.13 0.77 4.03 19
1999 ...... 3.87 0.78 3.76 12
1998 ...... 4.09 0.81 3.94 7
1997 ...... 4.31 0.81 4.15 15
--------------------------
INVESTMENT GRADE BOND FUND
--------------------------
Trust Shares
2001 ...... 6.17% 0.84% 6.14% 131%
2000 ...... 6.05 0.84 5.98 202
1999 ...... 5.25 0.85 5.17 221
1998 ...... 5.67 0.86 5.57 109
1997 ...... 5.89 0.85 5.79 298
-------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
-------------------------------------
Trust Shares
2001 ...... 3.93% 0.85% 3.89% 285%
2000 ...... 3.98 0.83 3.92 226
1999 ...... 3.75 0.87 3.65 224
1998 ...... 3.83 0.88 3.71 378
1997 ...... 3.96 0.86 3.85 489
---------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
---------------------------------------------
Trust Shares
2001 ...... 5.62% 0.76% 5.56% 532%
2000 ...... 5.60 0.79 5.48 384
1999 ...... 5.28 0.77 5.18 379
1998 ...... 5.75 0.77 5.64 163
1997 ...... 5.81 0.78 5.68 133
(+) Returns are for the period indicated and have not been annualized.
Amounts designated as "--" are either $0 or round to $0.
44 PROSPECTUS
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For the Periods Ended May 31, (Unless Otherwise Noted) For a Share Outstanding Throughout the Periods
NET REALIZED
NET ASSET AND DISTRIBUTIONS RATIO OF
VALUE NET UNREALIZED FROM NET DISTRIBUTIONS NET ASSET NET ASSETS EXPENSES
BEGINNING INVESTMENT GAINS (LOSSES) INVESTMENT FROM REALIZED VALUE END TOTAL END OF TO AVERAGE
OF PERIOD INCOME ON INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN(+) PERIOD(000) NET ASSETS
--------- ---------- -------------- ------------- ------------- --------- --------- ----------- ----------
--------------------------------
MARYLAND MUNICIPAL BOND FUND (A)
--------------------------------
Trust Shares
2001 ...... $ 9.46 $0.42 $ 0.66 $(0.42) $ -- $10.12 11.59% $ 26,526 0.72%
2000 ...... 10.06 0.42 (0.60) (0.42) -- 9.46 (1.78) 26,176 0.68
1999(1) ... 10.22 0.20 (0.15) (0.20) (0.01) 10.06 0.48 29,658 0.70
For the years ended November 30:
1998 ...... 9.95 0.42 0.27 (0.42) -- 10.22 7.03 19,115 0.62
1997 ...... 9.76 0.43 0.19 (0.43) -- 9.95 6.50 11,461 0.63
1996(2).... 10.00 0.31 (0.24) (0.31) -- 9.76 1.07 5,808 0.71
--------------------
SHORT-TERM BOND FUND
--------------------
Trust Shares
2001 ...... $ 9.65 $0.56 $ 0.39 $(0.56) $ -- $10.04 10.13% $215,458 0.70%
2000 ...... 9.91 0.53 (0.25) (0.53) (0.01) 9.65 2.87 180,402 0.67
1999 ...... 10.05 0.51 (0.10) (0.52) (0.03) 9.91 4.06 209,904 0.67
1998 ...... 9.90 0.55 0.16 (0.55) (0.01) 10.05 7.31 120,422 0.66
1997 ...... 9.86 0.53 0.07 (0.53) (0.03) 9.90 6.30 89,701 0.65
----------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
----------------------------------------
Trust Shares
2001 ...... $ 9.85 $0.49 $ 0.28 $(0.49) $ -- $10.13 8.02% $ 88,398 0.71%
2000 ...... 9.95 0.46 (0.10) (0.46) -- 9.85 3.75 72,570 0.67
1999 ...... 9.97 0.47 (0.02) (0.47) -- 9.95 4.59 56,027 0.67
1998 ...... 9.88 0.51 0.10 (0.52) -- 9.97 6.30 46,920 0.66
1997 ...... 9.84 0.51 0.04 (0.51) -- 9.88 5.76 21,988 0.65
-------------------------------
U.S. GOVERNMENT SECURITIES FUND
-------------------------------
Trust Shares
2001 ...... $ 9.86 $0.58 $ 0.52 $(0.58) $ -- $10.38 11.41% $148,666 0.81%
2000 ...... 10.28 0.58 (0.42) (0.58) -- 9.86 1.63 85,420 0.77
1999 ...... 10.46 0.59 (0.18) (0.59) -- 10.28 3.90 102,167 0.77
1998 ...... 10.02 0.61 0.44 (0.61) -- 10.46 10.76 34,899 0.76
1997 ...... 9.91 0.62 0.11 (0.62) -- 10.02 7.54 19,471 0.75
---------------------------------------------
VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND (A)
---------------------------------------------
Trust Shares
2001 ...... $ 9.58 $0.42 $ 0.56 $(0.42) $ -- $10.14 10.39% $194,849 0.73%
2000 ...... 10.20 0.43 (0.57) (0.43) (0.05) 9.58 (1.31) 202,209 0.76
1999(1) ... 10.44 0.21 (0.17) (0.21) (0.07) 10.20 0.42 240,083 0.84
For years ended November 30:
1998 ...... 10.31 0.45 0.17 (0.45) (0.04) 10.44 6.10 243,606 0.79
1997 ...... 10.22 0.46 0.09 (0.46) -- 10.31 5.55 237,096 0.78
1996 ...... 10.24 0.42 (0.02) (0.42) -- 10.22 4.01 243,137 0.78
--------------------------------
VIRGINIA MUNICIPAL BOND FUND (A)
--------------------------------
Trust Shares
2001 ...... $ 9.64 $0.45 $ 0.65 $(0.45) $ -- $10.29 11.51% $ 56,573 0.77%
2000 ...... 10.43 0.45 (0.78) (0.45) (0.01) 9.64 (3.18) 48,980 0.74
1999(1) ... 10.68 0.22 (0.19) (0.22) (0.06) 10.43 0.27 31,939 0.76
For years ended November 30:
1998 ...... 10.44 0.47 0.27 (0.47) (0.03) 10.68 7.19 29,252 0.69
1997 ...... 10.28 0.48 0.17 (0.48) (0.01) 10.44 6.46 20,044 0.69
1996 ...... 10.40 0.47 (0.12) (0.47) -- 10.28 3.48 15,911 0.71
RATIO OF NET
RATIO OF RATIO OF INVESTMENT
NET EXPENSES TO INCOME TO
INVESTMENT AVERAGE NET AVERAGE NET
INCOME ASSETS (EXCLUDING ASSETS (EXCLUDING PORTFOLIO
TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
---------- ----------------- ----------------- ---------
--------------------------------
MARYLAND MUNICIPAL BOND FUND (A)
--------------------------------
Trust Shares
2001 ...... 4.16% 0.82% 4.06% 42%
2000 ...... 4.24 0.80 4.12 14
1999(1) ... 3.83 1.37 3.16 19
For the years ended November 30:
1998 ...... 4.11 1.15 3.58 12
1997 ...... 4.38 1.16 3.85 5
1996(2).... 4.30 1.36 3.65 9
--------------------
SHORT-TERM BOND FUND
--------------------
Trust Shares
2001 ...... 5.71% 0.76% 5.65% 87%
2000 ...... 5.40 0.76 5.31 70
1999 ...... 5.12 0.77 5.02 108
1998 ...... 5.47 0.79 5.34 87
1997 ...... 5.37 0.78 5.24 118
----------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
----------------------------------------
Trust Shares
2001 ...... 4.95% 0.78% 4.88% 87%
2000 ...... 4.70 0.79 4.58 50
1999 ...... 4.69 0.78 4.58 57
1998 ...... 5.19 0.84 5.01 39
1997 ...... 5.23 0.92 4.96 93
-------------------------------
U.S. GOVERNMENT SECURITIES FUND
-------------------------------
Trust Shares
2001 ...... 5.66% 0.85% 5.62% 207%
2000 ...... 5.77 0.84 5.70 29
1999 ...... 5.58 0.88 5.47 19
1998 ...... 5.93 0.92 5.77 14
1997 ...... 6.19 1.02 5.92 21
---------------------------------------------
VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND (A)
---------------------------------------------
Trust Shares
2001 ...... 4.23% 0.75% 4.21% 32%
2000 ...... 4.35 0.76 4.35 18
1999(1) ... 4.12 1.18 3.78 19
For years ended November 30:
1998 ...... 4.33 0.97 4.15 24
1997 ...... 4.57 0.93 4.42 30
1996 ...... 4.35 0.93 4.20 25
--------------------------------
VIRGINIA MUNICIPAL BOND FUND (A)
--------------------------------
Trust Shares
2001 ...... 4.40% 0.78% 4.39% 60%
2000 ...... 4.53 0.79 4.48 19
1999(1) ... 4.20 1.30 3.66 7
For years ended November 30:
1998 ...... 4.41 1.10 4.00 28
1997 ...... 4.65 1.09 4.25 39
1996 ...... 4.61 1.11 4.21 24
(+) Returns are for the period indicated and have not been annualized.
(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 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 45
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For the Periods Ended May 31, (Unless Otherwise Noted) For a Share Outstanding Throughout the Periods
RATIO OF
NET
NET ASSET DISTRIBUTIONS RATIO OF INVESTMENT
VALUE NET FROM NET NET ASSET NET ASSETS EXPENSES TO INCOME ASSETS
BEGINNING INVESTMENT INVESTMENT VALUE END TOTAL END OF AVERAGE TO AVERAGE
OF PERIOD INCOME INCOME OF PERIOD RETURN(+) PERIOD(000) NET ASSETS NET ASSETS
--------- ---------- ------------- --------- --------- ----------- ----------- --------------
-------------------------------
PRIME QUALITY MONEY MARKET FUND
-------------------------------
Trust Shares
2001 ...... $1.00 $0.06 $(0.06) $1.00 5.75% $3,728,371 0.63% 5.57%
2000 ...... 1.00 0.05 (0.05) 1.00 5.20 3,311,229 0.60 5.06
1999 ...... 1.00 0.05 (0.05) 1.00 4.83 3,903,232 0.60 4.69
1998 ...... 1.00 0.05 (0.05) 1.00 5.22 1,880,229 0.59 5.10
1997 ...... 1.00 0.05 (0.05) 1.00 5.01 1,086,555 0.58 4.90
----------------------------
TAX-EXEMPT MONEY MARKET FUND
----------------------------
Trust Shares
2001 ...... $1.00 $0.03 $(0.03) $1.00 3.47% $1,080,362 0.54% 3.40%
2000 ...... 1.00 0.03 (0.03) 1.00 3.19 755,858 0.52 3.16
1999 ...... 1.00 0.03 (0.03) 1.00 2.81 641,640 0.52 2.75
1998 ...... 1.00 0.03 (0.03) 1.00 3.21 448,023 0.51 3.14
1997 ...... 1.00 0.03 (0.03) 1.00 3.09 333,006 0.50 3.04
--------------------------------------------
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
--------------------------------------------
Trust Shares
2001 ...... $1.00 $0.05 $(0.05) $1.00 5.56% $ 805,285 0.65% 5.29%
2000 ...... 1.00 0.05 (0.05) 1.00 4.86 468,568 0.63 4.80
1999 ...... 1.00 0.04 (0.04) 1.00 4.57 404,459 0.63 4.47
1998 ...... 1.00 0.05 (0.05) 1.00 5.04 377,490 0.62 4.92
1997 ...... 1.00 0.05 (0.05) 1.00 4.83 344,350 0.61 4.73
-----------------------------------
U.S. TREASURY MONEY MARKET FUND (A)
-----------------------------------
Trust Shares
2001 ...... $1.00 $0.05 $(0.05) $1.00 5.36% $ 733,768 0.66% 5.23%
2000 ...... 1.00 0.05 (0.05) 1.00 4.81 723,277 0.63 4.71
1999* ..... 1.00 0.02 (0.02) 1.00 2.08 760,833 0.68 4.10
For the Year Ended November 30:
1998 ...... 1.00 0.05 (0.05) 1.00 4.89 699,923 0.66 4.77
1997 ...... 1.00 0.05 (0.05) 1.00 4.91 632,381 0.65 4.82
---------------------------------------
VIRGINIA TAX-FREE MONEY MARKET FUND (B)
---------------------------------------
Trust Shares
2001 ...... $1.00 $ 0.03 $(0.03) $1.00 3.51% $ 226,188 0.50% 3.45%
2000 ...... 1.00 0.03 (0.03) 1.00 3.23 245,243 0.51 3.19
1999* ..... 1.00 0.01 (0.01) 1.00 1.27 270,431 0.67 2.51
For the Year Ended November 30:
1998 ...... 1.00 0.03 (0.03) 1.00 2.97% 270,899 0.66 2.92
1997 ...... 1.00 0.03 (0.03) 1.00 3.06 226,837 0.66 3.02
1996 ...... 1.00 0.83 (0.03) 1.00 3.14 182,320 0.66 2.88
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES TO INCOME TO
AVERAGE NET AVERAGE NET
(EXCLUDING ASSETS (EXCLUDING
WAIVERS AND WAIVERS AND
REIMBURSEMENTS) REIMBURSEMENTS)
--------------- -----------------
-------------------------------
PRIME QUALITY MONEY MARKET FUND
-------------------------------
Trust Shares
2001 ...... 0.75% 5.45%
2000 ...... 0.75 4.91
1999 ...... 0.77 4.52
1998 ...... 0.77 4.92
1997 ...... 0.76 4.72
----------------------------
TAX-EXEMPT MONEY MARKET FUND
----------------------------
Trust Shares
2001 ...... 0.65% 3.29%
2000 ...... 0.66 3.02
1999 ...... 0.66 2.61
1998 ...... 0.67 2.98
1997 ...... 0.66 2.88
--------------------------------------------
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
--------------------------------------------
Trust Shares
2001 ...... 0.75% 5.19%
2000 ...... 0.74 4.69
1999 ...... 0.76 4.34
1998 ...... 0.78 4.76
1997 ...... 0.76 4.58
-----------------------------------
U.S. TREASURY MONEY MARKET FUND (B)
-----------------------------------
Trust Shares
2001 ...... 0.76% 5.13%
2000 ...... 0.74 4.60
1999* ..... 0.83 3.95
For the Year Ended November 30:
1998 ...... 0.81 4.62
1997 ...... 0.80 4.67
---------------------------------------
VIRGINIA TAX-FREE MONEY MARKET FUND (B)
---------------------------------------
Trust Shares
2001 ...... 0.50% 3.45%
2000 ...... 0.51 3.19
1999* ..... 0.82 2.36
For the Year Ended November 30:
1998 ...... 0.81 2.77
1997 ...... 0.81 2.87
1996 ...... 0.81 2.73
(+) Returns are for the period indicated and have not been annualized.
* For the period December 1, 1998 to May 31, 1999. All ratios for the period
have been annualized.
(A) On May 24, 1999, the CrestFund U.S Treasury Money and CrestFund 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
(formerly the Tax Free Money Market Fund) Funds, respectively. 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.
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, 2001, 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.
[PHOTO OMITTED]
STI CLASSIC FUNDS-BOND FUNDS
FLEX AND INVESTOR SHARES
PROSPECTUS
OCTOBER 1, 2001
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 CLASSIC FUNDS
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
o Front-end sales charge
o 12b-1 fees
o $2,000 minimum initial investment
FLEX SHARES
o Contingent deferred sales charge
o Higher 12b-1 fees
o $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
5 GEORGIA TAX-EXEMPT BOND FUND
8 HIGH INCOME FUND
11 INVESTMENT GRADE BOND FUND
14 INVESTMENT GRADE TAX-EXEMPT BOND FUND
17 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
20 MARYLAND MUNICIPAL BOND FUND
23 SHORT-TERM BOND FUND
26 SHORT-TERM U.S. TREASURY SECURITIES FUND
29 U.S. GOVERNMENT SECURITIES FUND
32 VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND
35 VIRGINIA MUNICIPAL BOND FUND
38 MORE INFORMATION ABOUT RISK
39 MORE INFORMATION ABOUT FUND INVESTMENTS
39 INVESTMENT ADVISER
40 PORTFOLIO MANAGERS
40 PURCHASING, SELLING AND EXCHANGING FUND SHARES
46 DIVIDENDS AND DISTRIBUTIONS
46 TAXES
47 FINANCIAL HIGHLIGHTS
54 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS
--------------------------------------------------------------------------------
[BRIEFCASE ICON OMITTED] FUND SUMMARY
[TELESCOPE ICON OMITTED] INVESTMENT STRATEGY
[lIFE PRESERVER ICON OMITTED] WHAT ARE THE RISKS OF INVESTING?
[BULLSEYE ICON OMITTED] PERFORMANCE INFORMATION
[GRAPH ICON OMITTED] WHAT IS AN INDEX?
[COINS ICON OMITTED] FUND FEES AND EXPENSES
[MOUNTAIN ICON OMITTED] MORE INFORMATION ABOUT FUND INVESTMENTS
[MAGNIFYING ICON OMITTED] INVESTMENT ADVISER
[HANDSHAKE ICON OMITTED] PURCHASING, SELLING AND EXCHANGING FUND SHARES
[DOLLAR ICON OMITTED] SALES CHARGES
--------------------------------------------------------------------------------
OCTOBER 1, 2001
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 ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 of Florida.
[BULLSEYE ICON 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 TO FOLLOW:]
1995 15.70%
1996 3.73%
1997 7.60%
1998 5.94%
1999 -2.41%
2000 11.30%
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 1/1/01 TO 6/30/01 WAS 2.27%.
PROSPECTUS 3
--------------------------------------------------------------------------------
FLORIDA TAX-EXEMPT BOND FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND
INDEX AND THE LIPPER FLORIDA MUNICIPAL DEBT FUNDS AVERAGE.
INVESTOR SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Florida Tax-Exempt
Bond Fund 7.17% 4.33% 5.07%*
--------------------------------------------------------------------------------
Lehman Brothers 10-Year
Municipal Bond Index 10.75% 5.92% 5.72%**
--------------------------------------------------------------------------------
Lipper Florida Municipal
Debt Funds Average 10.55% 4.59% 4.58%**
--------------------------------------------------------------------------------
* SINCE 1/18/94
** SINCE 1/31/94
FLEX SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Florida Tax-Exempt
Bond Fund 8.85% 4.65% 5.17%*
--------------------------------------------------------------------------------
Lehman Brothers 10-Year
Municipal Bond Index 10.75% 5.92% 6.41%**
--------------------------------------------------------------------------------
Lipper Florida Municipal
Debt Funds Average 10.55% 4.59% 5.26%**
--------------------------------------------------------------------------------
* SINCE 6/1/95
** SINCE 5/31/95
[GRAPH ICON 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 ICON 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. YOU MAY BUY
INVESTOR SHARES IN AMOUNTS OF $1,000,000 OR MORE AT NET ASSET VALUE (WITHOUT
AN INITIAL SALES CHARGE), BUT IF YOU REDEEM THOSE SHARES WITHIN ONE YEAR OF
YOUR PURCHASE, YOU WILL PAY A DEFERRED SALES CHARGE OF 1.00%. SEE "SALES
CHARGES."
** 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 "SALES CHARGES."
--------------------------------------------------------------------------------
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 0.55% 0.24%
----- -----
Total Annual Fund Operating Expenses 1.38%* 1.89%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER AND THE
DISTRIBUTOR WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING
EXPENSES AT A SPECIFIED LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE
OF THIS PROSPECTUS, BUT THE ADVISER AND THE DISTRIBUTOR MAY DISCONTINUE ALL OR
PART OF THESE WAIVERS AT ANY TIME. WITH THESE FEE WAIVERS, THE FUND'S ACTUAL
TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Florida Tax-Exempt Bond Fund - Investor Shares 0.92%
Florida Tax-Exempt Bond Fund - Flex Shares 1.42%
4 PROSPECTUS
--------------------------------------------------------------------------------
FLORIDA TAX-EXEMPT BOND 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, 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 $392 $594 $1,021 $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 $510 $796 $1,102 $1,970
Flex Shares $192 $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. For more information about these
fees, see "Investment Adviser" and "Distribution of Fund Shares."
PROSPECTUS 5
--------------------------------------------------------------------------------
GEORGIA TAX-EXEMPT BOND FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 conditions and government policies within
Georgia.
[BULLSEYE ICON 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 TO FOLLOW:]
1995 13.13%
1996 3.43%
1997 7.96%
1998 5.47%
1999 -2.49%
2000 9.30%
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 1/1/01 TO 6/30/01 WAS 2.48%.
6 PROSPECTUS
--------------------------------------------------------------------------------
GEORGIA TAX-EXEMPT BOND FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, 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 5.25% 3.84%* 3.83%*
--------------------------------------------------------------------------------
Lehman Brothers 10-Year
Municipal Bond Index 10.75% 5.92% 5.72%**
--------------------------------------------------------------------------------
Lipper Georgia Municipal
Debt Funds Average 11.30% 4.78% 4.53%**
--------------------------------------------------------------------------------
* SINCE 1/19/94
** SINCE 1/31/94
FLEX SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Georgia Tax-Exempt
Bond Fund 6.78% 4.15% 4.47%*
--------------------------------------------------------------------------------
Lehman Brothers 10-Year
Municipal Bond Index 10.75% 5.92% 6.41%**
--------------------------------------------------------------------------------
Lipper Georgia Municipal
Debt Funds Average 11.30% 4.78% 5.52%**
--------------------------------------------------------------------------------
* SINCE 6/6/95
** SINCE 5/31/95
[GRAPH ICON 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 ICON 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. YOU MAY BUY
INVESTOR SHARES IN AMOUNTS OF $1,000,000 OR MORE AT NET ASSET VALUE (WITHOUT
AN INITIAL SALES CHARGE), BUT IF YOU REDEEM THOSE SHARES WITHIN ONE YEAR OF
YOUR PURCHASE, YOU WILL PAY A DEFERRED SALES CHARGE OF 1.00%. SEE "SALES
CHARGES."
** 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 "SALES CHARGES."
--------------------------------------------------------------------------------
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 0.59% 0.24%
----- -----
Total Annual Fund Operating Expenses 1.42%* 1.89%*
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER AND THE
DISTRIBUTOR WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING
EXPENSES AT A SPECIFIED LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE
DATE OF THIS PROSPECTUS, BUT THE ADVISER AND THE DISTRIBUTOR MAY DISCONTINUE
ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE FEE WAIVERS, THE FUND'S
ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Georgia Tax-Exempt Bond Fund - Investor Shares 0.92%
Georgia Tax-Exempt Bond Fund - Flex Shares 1.42%
PROSPECTUS 7
--------------------------------------------------------------------------------
GEORGIA TAX-EXEMPT BOND 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, 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 $514 $807 $1,122 $2,013
Flex Shares $392 $594 $1,021 $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 $514 $807 $1,122 $2,013
Flex Shares $192 $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. For more information about these
fees, see "Investment Adviser" and "Distribution of Fund Shares."
8 PROSPECTUS
--------------------------------------------------------------------------------
HIGH INCOME FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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.
PROSPECTUS 9
--------------------------------------------------------------------------------
HIGH INCOME FUND
--------------------------------------------------------------------------------
[BULLSEYE ICON 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 CHART OMITTED]
[PLOT POINTS TO FOLLOW:]
1995 14.91%
1996 5.84%
1997 5.05%
1998 4.43%
1999 1.28%
2000 -9.46%
BEST QUARTER WORST QUARTER
6.79% -9.92%
(3/31/95) (3/31/00)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS 3.15%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE LEHMAN BROTHERS
U.S. CORPORATE HIGH YIELD BOND INDEX.
FLEX SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
High Income Fund -11.15% 1.26% 2.86%*
--------------------------------------------------------------------------------
Lehman Brothers
U.S. Corporate High
Yield Bond Index -5.86% 4.28% 6.20%**
--------------------------------------------------------------------------------
*SINCE 5/4/94
**SINCE 4/30/94
[GRAPH ICON 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.
10 PROSPECTUS
--------------------------------------------------------------------------------
HIGH INCOME FUND
--------------------------------------------------------------------------------
[COINS ICON 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 "SALES CHARGES."
--------------------------------------------------------------------------------
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 0.33%
----
Total Annual Fund Operating Expenses 2.13%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER AND THE
DISTRIBUTOR WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING
EXPENSES AT A SPECIFIED LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE
OF THIS PROSPECTUS, BUT THE ADVISER AND THE DISTRIBUTOR MAY DISCONTINUE ALL OR
PART OF THESE WAIVERS AT ANY TIME. WITH THESE FEE WAIVERS, THE FUND'S ACTUAL
TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
High Income Fund - Flex Shares 1.40%
--------------------------------------------------------------------------------
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.
The Example also assumes that each year your investment has a 5% return and Fund
operating 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 $416 $667 $1,144 $2,462
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Flex Shares $216 $667 $1,144 $2,462
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser" and "Distribution of Fund Shares."
PROSPECTUS 11
--------------------------------------------------------------------------------
INVESTMENT GRADE BOND FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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.
12 PROSPECTUS
--------------------------------------------------------------------------------
INVESTMENT GRADE BOND FUND
--------------------------------------------------------------------------------
[BULLSEYE ICON 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 TO FOLLOW:]
1993 10.42%
1994 -3.57%
1995 17.26%
1996 1.93%
1997 8.64%
1998 8.79%
1999 -1.93%
2000 6.13%
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 1/1/01 TO 6/30/01 WAS 5.16%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, 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 2.15% 3.84% 5.33%*
--------------------------------------------------------------------------------
Lehman Brothers U.S.
Government/Credit Index 11.84% 6.23% 7.37%**
--------------------------------------------------------------------------------
Lehman Brothers
U.S. Aggregate Bond Index 11.63% 6.46% 7.29%**
--------------------------------------------------------------------------------
Lipper Intermediate Investment
Grade Debt Funds Average 9.78% 5.47% 6.73%**
--------------------------------------------------------------------------------
*SINCE 6/11/92
**SINCE 5/31/92
SINCE
FLEX SHARES 1 YEAR 5 YEARS INCEPTION
--------------------------------------------------------------------------------
Investment Grade Bond Fund 3.62% 4.10% 4.79%*
--------------------------------------------------------------------------------
Lehman Brothers U.S.
Government/Credit Index 11.84% 6.23% 6.94%**
--------------------------------------------------------------------------------
Lehman Brothers
U.S. Aggregate Bond Index 11.63% 6.46% 7.07%**
--------------------------------------------------------------------------------
Lipper Intermediate Investment
Grade Debt Funds Average 9.78% 5.47% 6.17%**
--------------------------------------------------------------------------------
*SINCE 6/7/95
**SINCE 5/31/95
[GRAPH ICON 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.
PROSPECTUS 13
--------------------------------------------------------------------------------
INVESTMENT GRADE BOND FUND
--------------------------------------------------------------------------------
[COINS ICON 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. YOU MAY BUY
INVESTOR SHARES IN AMOUNTS OF $1,000,000 OR MORE AT NET ASSET VALUE (WITHOUT
AN INITIAL SALES CHARGE), BUT IF YOU REDEEM THOSE SHARES WITHIN ONE YEAR OF
YOUR PURCHASE, YOU WILL PAY A DEFERRED SALES CHARGE OF 1.00%. SEE "SALES
CHARGES."
** 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 "SALES CHARGES."
--------------------------------------------------------------------------------
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 0.25% 0.25%
----- -----
Total Annual Fund Operating Expenses 1.42%* 1.99%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER AND THE
DISTRIBUTOR WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING
EXPENSES AT A SPECIFIED LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE
OF THIS PROSPECTUS, BUT THE ADVISER AND THE DISTRIBUTOR MAY DISCONTINUE ALL OR
PART OF THESE WAIVERS AT ANY TIME. WITH THESE FEE WAIVERS, THE FUND'S ACTUAL
TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Investment Grade Bond Fund - Investor Shares 1.22%
Investment Grade Bond Fund - Flex Shares 1.71%
--------------------------------------------------------------------------------
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 $514 $807 $1,122 $2,013
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 $514 $807 $1,122 $2,013
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. For more information about these
fees, see "Investment Adviser" and "Distribution of Fund Shares."
14 PROSPECTUS
--------------------------------------------------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 ICON 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 TO FOLLOW:]
1993 14.35%
1994 -0.60%
1995 14.51%
1996 4.99%
1997 7.36%
1998 6.73%
1999 -0.75%
2000 10.41%
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 1/1/01 TO 6/30/01 WAS 2.51%.
PROSPECTUS 15
--------------------------------------------------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE TOTAL RETURNS FOR THE PERIODS ENDED
DECEMBER 31, 2000, 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 6.23% 4.88% 6.60%*
--------------------------------------------------------------------------------
Lehman Brothers 5-Year
Municipal Bond Index 7.70% 4.95% 5.68%**
--------------------------------------------------------------------------------
Lipper Intermediate Municipal
Debt Funds Average 8.55% 4.66% 5.72%**
--------------------------------------------------------------------------------
*SINCE 6/9/92
**SINCE 5/31/92
SINCE
FLEX SHARES 1 YEAR 5 YEARS INCEPTION
--------------------------------------------------------------------------------
Investment Grade Tax-
Exempt Bond Fund 7.79% 5.17% 5.55%*
--------------------------------------------------------------------------------
Lehman Brothers 5-Year
Municipal Bond Index 7.70% 4.95% 5.28%**
--------------------------------------------------------------------------------
Lipper Intermediate Municipal
Debt Funds Average 8.55% 4.66% 5.10%**
--------------------------------------------------------------------------------
*SINCE 6/1/95
**SINCE 5/31/95
[GRAPH ICON 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 in 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 ICON 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. YOU MAY BUY
INVESTOR SHARES IN AMOUNTS OF $1,000,000 OR MORE AT NET ASSET VALUE (WITHOUT
AN INITIAL SALES CHARGE), BUT IF YOU REDEEM THOSE SHARES WITHIN ONE YEAR OF
YOUR PURCHASE, YOU WILL PAY A DEFERRED SALES CHARGE OF 1.00%. SEE "SALES
CHARGES."
** 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 "SALES CHARGES."
--------------------------------------------------------------------------------
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% 0.22%
----- -----
Total Annual Fund Operating Expenses 1.37%* 1.96%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER AND THE
DISTRIBUTOR WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING
EXPENSES AT A SPECIFIED LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE
OF THIS PROSPECTUS, BUT THE ADVISER AND THE DISTRIBUTOR MAY DISCONTINUE ALL OR
PART OF THESE WAIVERS AT ANY TIME. WITH THESE FEE WAIVERS, THE FUND'S ACTUAL
TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Investment Grade Tax-Exempt Bond Fund - Investor Shares 1.22%
Investment Grade Tax-Exempt Bond Fund - Flex Shares 1.70%
16 PROSPECTUS
--------------------------------------------------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND 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, 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 $399 $615 $1,057 $2,285
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 $199 $615 $1,057 $2,285
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser" and "Distribution of Fund Shares."
PROSPECTUS 17
--------------------------------------------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON OMITTED] FUND SUMMARY
INVESTMENT GOAL High current income, while
preserving capital
--------------------------------------------------------------------------------
INVESTMENT FOCUS Mortgage-backed securities
--------------------------------------------------------------------------------
SHARE PRICE VOLATILITY Low
--------------------------------------------------------------------------------
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 ICON 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.
[LIFE PRESERVER ICON 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
market 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 ICON 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 TO FOLLOW:]
1995 12.02%
1996 4.29%
1997 6.37%
1998 6.73%
1999 0.96%
2000 8.29%
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 1/1/01 TO 6/30/01 WAS 2.66%.
18 PROSPECTUS
--------------------------------------------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, 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 5.57% 4.77% 5.56%*
--------------------------------------------------------------------------------
Merrill Lynch 1-5 Year
U.S. Treasuries/Agencies
Index 9.00% 6.06% 6.62%**
--------------------------------------------------------------------------------
Merrill Lynch 1-5 Year
U.S. Treasury Index 8.87% 6.02% 6.59%**
--------------------------------------------------------------------------------
* SINCE 7/18/94
** SINCE 7/31/94
SINCE
FLEX SHARES 1 YEAR 5 YEARS INCEPTION
--------------------------------------------------------------------------------
Limited-Term Federal
Mortgage Securities Fund 5.92% 4.95% 5.19%*
--------------------------------------------------------------------------------
Merrill Lynch 1-5 Year U.S.
Treasuries/Agencies Index 9.00% 6.06% 6.35%**
--------------------------------------------------------------------------------
Merrill Lynch 1-5 Year
U.S. Treasury Index 8.87% 6.02% 6.32%**
--------------------------------------------------------------------------------
* SINCE 6/7/95
** SINCE 5/31/95
[GRAPH ICON 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 a
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 ICON 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. YOU MAY BUY
INVESTOR SHARES IN AMOUNTS OF $1,000,000 OR MORE AT NET ASSET VALUE (WITHOUT AN
INITIAL SALES CHARGE), BUT IF YOU REDEEM THOSE SHARES WITHIN ONE YEAR OF YOUR
PURCHASE, YOU WILL PAY A DEFERRED SALES CHARGE OF 1.00%. SEE "SALES CHARGES."
** 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
"SALES CHARGES."
--------------------------------------------------------------------------------
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 1.40% 0.95%
----- -----
Total Annual Fund Operating Expenses 2.28%* 2.60%*
*THE FUND'S ACTUAL TOTAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER AND THE
DISTRIBUTOR WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING
EXPENSES AT A SPECIFIED LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE
OF THIS PROSPECTUS, BUT THE ADVISER AND THE DISTRIBUTOR MAY DISCONTINUE ALL OR
PART OF THESE WAIVERS AT ANY TIME. WITH THESE FEE WAIVERS, THE FUND'S ACTUAL
TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Limited-Term Federal Mortgage Securities Fund - Investor Shares 0.96%
Limited Term Federal Mortgage Securities Fund - Flex Shares 1.31%
PROSPECTUS 19
--------------------------------------------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES 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, 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 $475 $945 $1,440 $2,800
Flex Shares $463 $808 $1,380 $2,934
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Investor Shares $475 $945 $1,440 $2,800
Flex Shares $263 $808 $1,380 $2,934
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser" and "Distribution of Fund Shares."
20 PROSPECTUS
--------------------------------------------------------------------------------
MARYLAND MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 ICON 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 TO FOLLOW:]
1997 7.90%
1998 4.91%
1999 -4.17%
2000 10.29%
BEST QUARTER WORST QUARTER
3.84% -1.74%
(12/31/00) (9/30/99)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS 2.27%.
PROSPECTUS 21
--------------------------------------------------------------------------------
MARYLAND MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE LEHMAN BROTHERS
GENERAL OBLIGATION BOND INDEX.
FLEX SHARES 1 YEAR SINCE INCEPTION
--------------------------------------------------------------------------------
Maryland Municipal Bond Fund 8.29% 4.73%*
--------------------------------------------------------------------------------
Lehman Brothers General
Obligation Bond Index 10.96% 6.50%**
--------------------------------------------------------------------------------
* SINCE 4/25/96
** SINCE 4/30/96
[GRAPH ICON 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 ICON 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
"SALES CHARGES."
--------------------------------------------------------------------------------
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 0.32%
-----
Total Annual Fund Operating Expenses 1.97%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER AND THE
DISTRIBUTOR WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING
EXPENSES AT A SPECIFIED LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE
OF THIS PROSPECTUS, BUT THE ADVISER AND THE DISTRIBUTOR MAY DISCONTINUE ALL OR
PART OF THESE WAIVERS AT ANY TIME. WITH THESE FEE WAIVERS, THE FUND'S ACTUAL
TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Maryland Municipal Bond Fund - Flex Shares 1.64%
22 PROSPECTUS
--------------------------------------------------------------------------------
MARYLAND MUNICIPAL BOND 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, 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 $400 $618 $1,062 $2,296
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Flex Shares $200 $618 $1,062 $2,296
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser" and "Distribution of Fund Shares."
PROSPECTUS 23
--------------------------------------------------------------------------------
SHORT-TERM BOND FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 ICON 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 TO FOLLOW:]
1994 -0.33%
1995 11.68%
1996 3.66%
1997 6.46%
1998 6.73%
1999 0.76%
2000 7.39%
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 1/1/01 TO 6/30/01 WAS 4.21%.
24 PROSPECTUS
--------------------------------------------------------------------------------
SHORT-TERM BOND FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, 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 5.23% 4.54% 4.76%**
--------------------------------------------------------------------------------
Salomon 1-3 Year Treasury/
Government Sponsored/
Corporate Index 8.15% 6.03% 5.77%**
--------------------------------------------------------------------------------
*SINCE 3/22/93
**SINCE 3/31/93
SINCE
FLEX SHARES 1 YEAR 5 YEARS INCEPTION
--------------------------------------------------------------------------------
Short-Term Bond Fund 5.04% 4.62% 4.95%**
--------------------------------------------------------------------------------
Salomon 1-3 Year Treasury/
Government Sponsored/
Corporate Index 8.15% 6.03% 6.22%**
--------------------------------------------------------------------------------
*SINCE 6/20/95
**SINCE 6/30/95
[GRAPH ICON 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 ICON 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. YOU MAY BUY
INVESTOR SHARES IN AMOUNTS OF $1,000,000 OR MORE AT NET ASSET VALUE (WITHOUT
AN INITIAL SALES CHARGE), BUT IF YOU REDEEM THOSE SHARES WITHIN ONE YEAR OF
YOUR PURCHASE, YOU WILL PAY A DEFERRED SALES CHARGE OF 1.00%. SEE "SALES
CHARGES."
** 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 "SALES CHARGES."
--------------------------------------------------------------------------------
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 0.83% 0.52%
----- -----
Total Annual Fund Operating Expenses 1.71%* 2.17%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER AND THE
DISTRIBUTOR WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING
EXPENSES AT A SPECIFIED LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE
OF THIS PROSPECTUS, BUT THE ADVISER AND THE DISTRIBUTOR MAY DISCONTINUE ALL OR
PART OF THESE WAIVERS AT ANY TIME. WITH THESE FEE WAIVERS, THE FUND'S ACTUAL
TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Short-Term Bond Fund - Investor Shares 0.91%
Short-Term Bond Fund - Flex Shares 1.26%
PROSPECTUS 25
--------------------------------------------------------------------------------
SHORT-TERM BOND 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, 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 $370 $728 $1,110 $2,179
Flex Shares $420 $679 $1,164 $2,503
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Investor Shares $370 $728 $1,110 $2,179
Flex Shares $220 $679 $1,164 $2,503
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser" and "Distribution of Fund Shares."
26 PROSPECTUS
--------------------------------------------------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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
market 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 ICON 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 TO FOLLOW:]
1994 1.28%
1995 8.39%
1996 4.38%
1997 5.70%
1998 6.09%
1999 2.55%
2000 6.48%
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 1/1/01 TO 6/30/01 WAS 3.27%.
PROSPECTUS 27
--------------------------------------------------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, 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 5.41% 4.82% 4.67%*
--------------------------------------------------------------------------------
Salomon 1-3 Year Treasury Index 8.01% 5.95% 5.67%**
--------------------------------------------------------------------------------
Salomon 6 Month Treasury
Bill Index 6.07% 5.39% 5.10%**
--------------------------------------------------------------------------------
*SINCE 3/18/93
**SINCE 3/31/93
SINCE
FLEX SHARES 1 YEAR 5 YEARS INCEPTION
--------------------------------------------------------------------------------
Short-Term U.S. Treasury
Securities Fund 4.23% 4.78% 4.86%*
--------------------------------------------------------------------------------
Salomon 1-3 Year Treasury Index 8.01% 5.95% 6.14%**
--------------------------------------------------------------------------------
Salomon 6 Month Treasury
Bill Index 6.07% 5.39% 5.40%**
--------------------------------------------------------------------------------
*SINCE 6/22/95
**SINCE 6/30/95
[GRAPH ICON 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 ICON 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. YOU MAY BUY
INVESTOR SHARES IN AMOUNTS OF $1,000,000 OR MORE AT NET ASSET VALUE (WITHOUT
AN INITIAL SALES CHARGE), BUT IF YOU REDEEM THOSE SHARES WITHIN ONE YEAR OF
YOUR PURCHASE, YOU WILL PAY A DEFERRED SALES CHARGE OF 1.00%. SEE "SALES
CHARGES."
** 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 "SALES CHARGES."
--------------------------------------------------------------------------------
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 0.73% 0.31%
----- -----
Total Annual Fund Operating Expenses 1.56%* 1.96%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER AND THE
DISTRIBUTOR WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING
EXPENSES AT A SPECIFIED LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE
OF THIS PROSPECTUS, BUT THE ADVISER AND THE DISTRIBUTOR MAY DISCONTINUE ALL OR
PART OF THESE WAIVERS AT ANY TIME. WITH THESE FEE WAIVERS, THE FUND'S ACTUAL
TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Short-Term U.S. Treasury Securities Fund - Investor Shares 0.86
Short-Term U.S. Treasury Securities Fund - Flex Shares 1.11%
28 PROSPECTUS
--------------------------------------------------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES 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, 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 $257 $588 $941 $1,938
Flex Shares $399 $615 $1,057 $2,285
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Investor Shares $257 $588 $941 $1,938
Flex Shares $199 $615 $1,057 $2,285
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser" and "Distribution of Fund Shares."
PROSPECTUS 29
--------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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
market 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 ICON 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 TO FOLLOW:]
1995 16.95%
1996 2.08%
1997 8.60%
1998 7.74%
1999 -1.49%
2000 10.50%
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 1/1/01 TO 6/30/01 WAS 2.20%.
30 PROSPECTUS
--------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE TOTAL RETURNS FOR THE PERIODS ENDED
DECEMBER 31, 2000, 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 6.33% 4.59% 5.74%*
--------------------------------------------------------------------------------
Merrill Lynch Government/
Mortgage Index 12.35% 6.63% 7.79%**
--------------------------------------------------------------------------------
Lehman Brothers Intermediate
U.S. Government Bond Index 10.47% 6.18% 6.94%**
--------------------------------------------------------------------------------
* SINCE 6/6/94
** SINCE 5/31/94
SINCE
FLEX SHARES 1 YEAR 5 YEARS INCEPTION
--------------------------------------------------------------------------------
U.S. Government
Securities Fund 7.96% 4.89% 5.34%*
--------------------------------------------------------------------------------
Merrill Lynch Government/
Mortgage Index 12.35% 6.63% 7.19%**
--------------------------------------------------------------------------------
Lehman Brothers Intermediate
U.S. Government Bond Index 10.47% 6.18% 6.56%**
--------------------------------------------------------------------------------
* SINCE 6/7/95
** SINCE 5/31/95
[GRAPH ICON 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 ICON 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. YOU MAY BUY
INVESTOR SHARES IN AMOUNTS OF $1,000,000 OR MORE AT NET ASSET VALUE (WITHOUT
AN INITIAL SALES CHARGE), BUT IF YOU REDEEM THOSE SHARES WITHIN ONE YEAR OF
YOUR PURCHASE, YOU WILL PAY A DEFERRED SALES CHARGE OF 1.00%. SEE "SALES
CHARGES."
** 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 "SALES CHARGES."
--------------------------------------------------------------------------------
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 0.71% 0.30%
----- -----
Total Annual Fund Operating Expenses 1.83%* 2.04%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER AND THE
DISTRIBUTOR WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING
EXPENSES AT A SPECIFIED LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE
OF THIS PROSPECTUS, BUT THE ADVISER AND THE DISTRIBUTOR MAY DISCONTINUE ALL OR
PART OF THESE WAIVERS AT ANY TIME. WITH THESE FEE WAIVERS, THE FUND'S ACTUAL
TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
U.S. Government Securities Fund - Investor Shares 1.22%
U.S. Government Securities Fund - Flex Shares 1.73%
PROSPECTUS 31
--------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES 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, 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 $554 $929 $1,328 $2,442
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 $554 $929 $1,328 $2,442
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. For more information about these
fees, see "Investment Adviser" and "Distribution of Fund Shares."
32 PROSPECTUS
--------------------------------------------------------------------------------
VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 ICON 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 TO FOLLOW:]
1994 -6.47%
1995 14.37%
1996 2.94%
1997 7.24%
1998 5.32%
1999 -2.43%
2000 9.35%
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 1/1/01 TO 6/30/01 WAS 2.66%.
PROSPECTUS 33
--------------------------------------------------------------------------------
VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE LEHMAN BROTHERS 5-YEAR GENERAL
OBLIGATION BOND INDEX AND THE LEHMAN BROTHERS GENERAL OBLIGATION BOND INDEX.
SINCE
INVESTOR SHARES 1 YEAR 5 YEARS INCEPTION
--------------------------------------------------------------------------------
Virginia Intermediate
Municipal Bond Fund 5.21% 3.61% 3.98%*
--------------------------------------------------------------------------------
Lehman Brothers 5-Year
General Obligation
Bond Index 7.68% 5.04% 5.25%**
--------------------------------------------------------------------------------
Lehman Brothers General
Obligation Bond Index 10.96% 5.85% 6.10%**
--------------------------------------------------------------------------------
*SINCE 5/5/93
**SINCE 4/30/93
[GRAPH ICON 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 ICON 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. YOU MAY BUY
INVESTOR SHARES IN AMOUNTS OF $1,000,000 OR MORE AT NET ASSET VALUE (WITHOUT
AN INITIAL SALES CHARGE), BUT IF YOU REDEEM THOSE SHARES WITHIN ONE YEAR OF
YOUR PURCHASE, YOU WILL PAY A DEFERRED SALES CHARGE OF 1.00%. SEE "SALES
CHARGES."
--------------------------------------------------------------------------------
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 0.31%
-----
Total Annual Fund Operating Expenses 1.11%*
* THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE DISTRIBUTOR
WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A
SPECIFIED LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS
PROSPECTUS, BUT THE DISTRIBUTOR MAY DISCONTINUE ALL OR PART OF THESE WAIVERS
AT ANY TIME. WITH THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES
ARE AS FOLLOWS:
Virginia Intermediate Municipal Bond Fund - Investor Shares 0.79%
34 PROSPECTUS
--------------------------------------------------------------------------------
VIRGINIA INTERMEDIATE MUNICIPAL BOND 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 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
$484 $715 $964 $1,676
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser" and "Distribution of Fund Shares."
PROSPECTUS 35
--------------------------------------------------------------------------------
VIRGINIA MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 conditions and government
policies of Virginia.
[BULLSEYE ICON 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 TO FOLLOW:]
1996 0.81%
1997 7.91%
1998 4.83%
1999 -5.68%
2000 10.72%
BEST QUARTER WORST QUARTER
4.21% -2.93%
(12/31/00) (3/31/96)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS 1.94%.
36 PROSPECTUS
--------------------------------------------------------------------------------
VIRGINIA MUNICIPAL BOND FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE LEHMAN BROTHERS GENERAL OBLIGATION BOND
INDEX.
SINCE
INVESTOR SHARES 1 YEAR 5 YEARS INCEPTION
--------------------------------------------------------------------------------
Virginia Municipal Bond Fund 8.72% 3.56% 4.43%*
--------------------------------------------------------------------------------
Lehman Brothers General
Obligation Bond Index 10.96% 5.85% 6.67%**
--------------------------------------------------------------------------------
* SINCE 4/14/95
** SINCE 3/31/95
[GRAPH ICON 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 ICON 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 "SALE CHARGES."
--------------------------------------------------------------------------------
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 0.35%
-----
Total Annual Fund Operating Expenses 2.00%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE DISTRIBUTOR
WAIVED A PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A
SPECIFIED LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS
PROSPECTUS, BUT THE DISTRIBUTOR MAY DISCONTINUE ALL OR PART OF THESE WAIVERS
AT ANY TIME. WITH THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES
ARE AS FOLLOWS:
Virginia Municipal Bond Fund - Flex Shares 1.70%
PROSPECTUS 37
--------------------------------------------------------------------------------
VIRGINIA MUNICIPAL BOND 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, 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 $403 $627 $1,078 $2,327
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Flex Shares $203 $627 $1,078 $2,327
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser" and "Distribution of Fund Shares."
38 PROSPECTUS
--------------------------------------------------------------------------------
MORE INFORMATION ABOUT RISK
--------------------------------------------------------------------------------
[LIFE PRESERVER ICON 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
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 39
--------------------------------------------------------------------------------
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.
[MOUNTAIN ICON 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.
[MAGNIFYING ICON OMITTED] INVESTMENT ADVISER
The investment adviser (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 or the Adviser), 50 Hurt Plaza, Suite
1400, Atlanta, Georgia 30303, serves as the Adviser to the Funds. As of June
30, 2001, Trusco had in excess of $45 billion in assets under management.
For the fiscal period ended May 31, 2001, the Adviser received advisory fees
of:
FLORIDA TAX-EXEMPT BOND FUND 0.60%
GEORGIA TAX-EXEMPT BOND FUND 0.59%
HIGH INCOME FUND 0.65%
INVESTMENT GRADE BOND FUND 0.71%
INVESTMENT GRADE TAX-EXEMPT BOND FUND 0.70%
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND 0.59%
MARYLAND MUNICIPAL BOND FUND 0.55%
SHORT-TERM BOND FUND 0.59%
SHORT-TERM U.S. TREASURY SECURITIES FUND 0.58%
U.S. GOVERNMENT SECURITIES FUND 0.70%
VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND 0.62%
VIRGINIA MUNICIPAL BOND FUND 0.64%
The Adviser may use its affiliates as brokers for Fund transactions.
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,
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.
40 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 20 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 22 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. In
January 2000 he was named Managing Director of SunTrust Bank and is now Managing
Director of Trusco, after serving as Managing Director of STI since 1983. Mr.
Denney 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. Denney has more than 22 years of
investment experience. In January 2000, Mr. West was named Managing Director of
SunTrust Bank, and is now a Managing Director of Trusco, after serving as
Managing Director of STI since 1985. 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 15 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 28 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, and the High Income Fund
since April 2000. She has more than 19 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 16 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 17 years of investment experience.
[HANDSHAKE ICON 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:
o Mail
o Telephone (1-800-874-4770)
o Wire
o Automated Clearing House (ACH)
PROSPECTUS 41
--------------------------------------------------------------------------------
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, and potentially unknown the investor's Advantage Account (an asset
allocation account available through SunTrust Securities, Inc.). 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, generally a Fund
must receive your purchase order in proper form before 4:00 p.m., Eastern time.
The Fund will not accept orders that request a particular day or price for the
transaction or any other special conditions.
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 IRA accounts)
--------------------------------------------------------------------------------
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 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.
42 PROSPECTUS
--------------------------------------------------------------------------------
PURCHASING, SELLING AND EXCHANGING FUND SHARES
--------------------------------------------------------------------------------
[DOLLAR ICON 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 None None
--------------------------------------------------------------------------------
* THE DISTRIBUTOR MAY PAY A PERCENTAGE OF THE OFFERING PRICE AS A COMMISSION TO
BROKER-DEALERS.
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
--------------------------------------------------------------------------------
* THE DISTRIBUTOR MAY PAY A PERCENTAGE OF THE OFFERING PRICE AS A COMMISSION TO
BROKER-DEALERS.
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
--------------------------------------------------------------------------------
* THE DISTRIBUTOR MAY PAY A PERCENTAGE OF THE OFFERING PRICE AS A COMMISSION TO
BROKER-DEALERS.
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
--------------------------------------------------------------------------------
* THE DISTRIBUTOR MAY PAY A PERCENTAGE OF THE OFFERING PRICE AS A COMMISSION TO
BROKER-DEALERS.
INVESTMENTS OF $1,000,000 OR MORE. You do not pay an initial sales charge when
you buy $1,000,000 or more of Investor Shares of a single Fund ("Reduced Sales
Charges - Investor Shares" does not apply). However, if you redeem these
Investor Shares within one year of purchase, you will pay a deferred sales
charge of 1.00%.
WAIVER OF FRONT-END SALES CHARGE -- INVESTOR SHARES
The front-end sales charge will be waived on Investor Shares purchased:
o through reinvestment of dividends and distributions;
o through a SunTrust Securities, Inc. asset allocation account;
o by persons repurchasing shares they redeemed within the last 60 days (see
"Repurchase of Investor Shares");
o by employees, and members of their immediate family, of SunTrust and its
affiliates;
PROSPECTUS 43
--------------------------------------------------------------------------------
PURCHASING, SELLING AND EXCHANGING FUND SHARES
--------------------------------------------------------------------------------
o 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;
o 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
o 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. Such repurchases may be subject to special
tax rules. See the section on Taxes in the SAI for more information. 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.
44 PROSPECTUS
--------------------------------------------------------------------------------
PURCHASING, SELLING AND EXCHANGING FUND SHARES
--------------------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGES (CDSC) -- 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 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 CDSC will be waived if you sell your Flex Shares for the following reasons:
o to make certain withdrawals from a retirement plan (not including IRAs);
o because of death or disability;
o for certain payments under the Systematic Withdrawal Plan (which is discussed
later); or
o 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 any applicable 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
a Fund receives your request, but may take up to seven days. 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.
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:
PROSPECTUS 45
--------------------------------------------------------------------------------
PURCHASING, SELLING AND EXCHANGING FUND SHARES
--------------------------------------------------------------------------------
CLASS DOLLAR AMOUNT
--------------------------------------------------------------------------------
Investor Shares $2,000
Flex Shares $5,000 ($2,000 for IRA accounts)
--------------------------------------------------------------------------------
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.
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.
46 PROSPECTUS
--------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------
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 declares dividends daily and pays these dividends monthly. Each Fund
makes distributions of its net realized 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 ADVISOR 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 net investment income and its
net realized capital gains, if any, at least annually. 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 MAY BE A TAXABLE EVENT. FOR TAX PURPOSES, AN EXCHANGE OF
YOUR FUND SHARES FOR SHARES OF ANOTHER STI CLASSIC FUND IS THE SAME AS A SALE.
If you have a tax-advantaged or other retirement account you will generally not
be subject to federal taxation on income and capital gain distributions until
you begin receiving your distributions from your retirement account. You should
consult your tax advisor regarding the rules governing your own retirement plan.
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. While shareholders of state specific Funds may receive distributions
that are exempt from that particular state's income tax, such distributions may
be taxable in other states where the shareholder files tax returns.
Except for those certain Funds that expect to distribute federally tax-exempt
income (described above), the Funds expect to distribute primarily ordinary
income dividends.
The Short-Term U.S. Treasury Securities Fund, the U.S. Government Securities
Fund, the U.S. Government Securities Money Market Fund and the U.S. Treasury
Money Market Fund each expect that a substantial portion of Fund distributions
will represent interest earned on U.S. obligations, while the Investment Grade
Bond Fund, the Short-Term Bond Fund, and the Prime Quality Money Market Fund
expect that some portion of each Funds' distribution will be so derived. Many
states grant tax-free status to dividends paid from interest earned on direct
obligations of the U.S. government, subject to certain limitations.
MORE INFORMATION ABOUT TAXES IS IN THE SAI.
PROSPECTUS 47
--------------------------------------------------------------------------------
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
NET REALIZED AND DISTRIBUTIONS NET NET
ASSET NET UNREALIZED DISTRIBUTIONS TAX FROM ASSET ASSETS RATIO
VALUE INVESTMENT GAINS FROM NET RETURN REALIZED VALUE END OF EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT OF CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD (LOSS) SECURITIES INCOME CAPITAL GAINS OF PERIOD RETURN(+) (000) NET ASSETS
--------- --------- ------------ ------------- ------- ---------- --------- --------- -------- -----------
----------------------------
FLORIDA TAX-EXEMPT BOND FUND
----------------------------
Investor Shares
2001 ... $10.07 $0.42 $0.72 $(0.42) $ -- $ -- $10.79 11.50% $ 2,747 0.91%
2000 ... 10.60 0.42 (0.49) (0.42) (0.04) -- 10.07 (0.68) 2,875 0.87
1999 ... 10.72 0.40 (0.01) (0.40) (0.11) -- 10.60 3.62 3,799 0.87
1998 ... 10.29 0.42 0.44 (0.42) (0.01) -- 10.72 8.46 3,381 0.86
1997 ... 10.07 0.44 0.25 (0.44) (0.03) -- 10.29 7.00 3,226 0.85
Flex Shares
2001 ... $10.09 $0.37 $0.72 $(0.37) $ -- $ -- $10.81 10.95% $12,806 1.41%
2000 ... 10.62 0.36 (0.49) (0.36) (0.04) -- 10.09 (1.17) 9,791 1.37
1999 ... 10.74 0.35 (0.01) (0.35) (0.11) -- 10.62 3.13 14,762 1.37
1998 ... 10.30 0.37 0.45 (0.37) (0.01) -- 10.74 8.04 8,160 1.36
1997 ... 10.08 0.39 0.25 (0.39) (0.03) -- 10.30 6.48 3,000 1.35
----------------------------
GEORGIA TAX-EXEMPT BOND FUND
----------------------------
Investor Shares
2001 ... $9.51 $0.38 $0.61 $(0.38) $ -- $ -- $ 10.12 10.56% $ 2,901 0.91%
2000 ... 10.05 0.38 (0.50) (0.38) (0.04) -- 9.51 (1.26) 2,458 0.87
1999 ... 10.13 0.37 (0.06) (0.37) (0.02) -- 10.05 3.13 3,676 0.87
1998 ... 9.74 0.39 0.40 (0.39) (0.01) -- 10.13 8.26 3,975 0.86
1997 ... 9.58 0.40 0.21 (0.40) (0.05) -- 9.74 6.47 3,511 0.85
Flex Shares
2001 ... $9.51 $0.33 $0.60 $(0.33) $ -- $ -- $10.11 9.92% $14,079 1.41%
2000 ... 10.04 0.33 (0.49) (0.33) (0.04) -- 9.51 (1.59) 8,827 1.37
1999 ... 10.12 0.32 (0.06) (0.32) (0.02) -- 10.04 2.63 13,358 1.37
1998 ... 9.73 0.34 0.40 (0.34) (0.01) -- 10.12 7.74 8,264 1.36
1997 ... 9.56 0.35 0.22 (0.35) (0.05) -- 9.73 6.06 4,662 1.35
--------------------
HIGH INCOME FUND (A)
--------------------
Flex Shares
2001 ... $7.88 $0.55 $(0.19) $(0.55) $ -- $ -- $ 7.69 4.74% $19,875 1.40%
2000(1) . 7.98 0.09 (0.10) (0.09) -- -- 7.88 (0.13) 3,075 1.40
For the years ended March 31:
2000 ... $9.77 $0.87 $(1.85) $(0.81) $ -- $ -- $ 7.98 (10.84)% $ 2,032 1.73%
1999 ... 9.99 0.51(++) 0.04 (0.57) (0.15) (0.05) 9.77 5.64 7,230 1.91
1998 ... 9.73 0.34 0.44 (0.52) -- -- 9.99 8.18 24,413 1.87
1997 ... 9.89 0.60 (0.16) (0.60) -- -- 9.73 3.91 32,506 1.65
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME (LOSS)
RATIO OF NET TO AVERAGE TO AVERAGE
INVESTMENT NET ASSETS NET ASSETS
INCOME (LOSS) (EXCLUDING (EXCLUDING PORTFOLIO
TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
------------ --------------- --------------- ---------
----------------------------
FLORIDA TAX-EXEMPT BOND FUND
----------------------------
Investor Shares
2001 ... 4.00% 1.38% 3.53% 59%
2000 ... 4.05 1.36 3.56 88
1999 ... 3.71 1.31 3.27 72
1998 ... 3.98 1.34 3.50 69
1997 ... 4.28 1.31 3.82 135
Flex Shares
2001 ... 3.49% 1.89% 3.01% 59%
2000 ... 3.54 1.89 3.02 88
1999 ... 3.21 1.88 2.70 72
1998 ... 3.45 2.01 2.80 69
1997 ... 3.78 2.28 2.85 135
----------------------------
GEORGIA TAX-EXEMPT BOND FUND
----------------------------
Investor Shares
2001 ... 3.83% 1.42% 3.32% 21%
2000 ... 3.93 1.40 3.40 19
1999 ... 3.67 1.25 3.29 12
1998 ... 3.89 1.30 3.45 7
1997 ... 4.10 1.33 3.62 15
Flex Shares
2001 ... 3.33% 1.89% 2.85% 21%
2000 ... 3.43 1.95 2.85 19
1999 ... 3.19 1.89 2.67 12
1998 ... 3.39 2.02 2.73 7
1997 ... 3.60 2.07 2.88 15
--------------------
HIGH INCOME FUND (A)
--------------------
Flex Shares
2001 ... 6.88% 2.13% 6.15% 10%
2000(1)... 6.57 2.83 5.14 --
For the years ended March 31:
2000 ... 8.94% 2.95% 7.72% 24%
1999 ... 5.09 2.22 4.78 95
1998 ... 5.27 1.87 5.27 130
1997 ... 5.49 1.70 5.44 123
(+) 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) For the two month period ended May 31, 2000. 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.
48 PROSPECTUS
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For the Periods Ended May 31, (unless otherwise indicated)
For a Share Outstanding Throughout the Periods
NET
NET REALIZED AND DISTRIBUTIONS NET NET
ASSET NET UNREALIZED DISTRIBUTIONS FROM ASSET ASSETS RATIO
VALUE INVESTMENT GAINS FROM NET REALIZED VALUE END OF EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD (LOSS) SECURITIES INCOME GAINS OF PERIOD RETURN(+) (000) NET ASSETS
--------- --------- ------------ ------------- ----------- --------- --------- -------- -----------
--------------------------
INVESTMENT GRADE BOND FUND
--------------------------
Investor Shares
2001 ... $9.58 $0.57 $0.65 $(0.57) $ -- $10.23 13.09% $21,244 1.21%
2000 ... 10.36 0.57 (0.78) (0.57) -- 9.58 (2.17) 22,553 1.17
1999 ... 10.65 0.52 (0.11) (0.52) (0.18) 10.36 3.86 34,913 1.17
1998 ... 10.16 0.55 0.49 (0.55) -- 10.65 10.49 33,269 1.14
1997 ... 10.06 0.56 0.10 (0.56) -- 10.16 6.66 33,165 1.15
Flex Shares
2001 ... $9.59 $0.53 $0.65 $(0.53) $ -- $10.24 12.54% $25,791 1.70%
2000 ... 10.37 0.52 (0.78) (0.52) -- 9.59 (2.63) 20,056 1.66
1999 ... 10.66 0.47 (0.11) (0.47) (0.18) 10.37 3.35 26,020 1.66
1998 ... 10.17 0.51 0.49 (0.51) -- 10.66 9.99 13,111 1.65
1997 ... 10.07 0.51 0.10 (0.51) -- 10.17 6.16 5,763 1.64
-------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
-------------------------------------
Investor Shares
2001 ... $10.68 $0.40 $0.71 $(0.40) $ -- $11.39 10.48% $18,601 1.21%
2000 ... 11.12 0.39 (0.30) (0.39) (0.14) 10.68 0.90 19,443 1.17
1999 ... 11.41 0.38 0.11 (0.38) (0.40) 11.12 4.35 25,195 1.17
1998 ... 11.24 0.39 0.49 (0.39) (0.32) 11.41 8.05 28,159 1.16
1997 ... 11.12 0.40 0.33 (0.40) (0.21) 11.24 6.69 31,857 1.15
Flex Shares
2001 ... $10.67 $0.34 $0.71 $(0.34) $ -- $11.38 9.97% $20,010 1.69%
2000 ... 11.10 0.34 (0.29) (0.34) (0.14) 10.67 0.52 14,678 1.65
1999 ... 11.40 0.33 0.10 (0.33) (0.40) 11.10 3.78 16,518 1.65
1998 ... 11.23 0.33 0.49 (0.33) (0.32) 11.40 7.50 8,399 1.64
1997 ... 11.11 0.35 0.33 (0.35) (0.21) 11.23 6.19 4,681 1.63
---------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
---------------------------------------------
Investor Shares
2001 ... $ 9.60 $0.53 $0.40 $(0.53) $ -- $10.00 9.84% $ 849 0.95%
2000 ... 9.93 0.52 (0.33) (0.52) -- 9.60 1.93 1,194 0.92
1999 ... 10.11 0.51 (0.06) (0.51) (0.12) 9.93 4.47 2,214 0.92
1998 ... 10.00 0.56 0.12 (0.56) (0.01) 10.11 6.95 2,705 0.91
1997 ... 9.97 0.56 0.04 (0.56) (0.01) 10.00 6.17 2,426 0.90
Flex Shares
2001 ... $ 9.62 $0.50 $0.40 $(0.50) $ -- $10.02 9.50% $ 3,452 1.30%
2000 ... 9.94 0.49 (0.32) (0.49) -- 9.62 1.71 1,706 1.27
1999 ... 10.12 0.48 (0.06) (0.48) (0.12) 9.94 4.14 2,119 1.27
1998 ... 10.02 0.52 0.11 (0.52) (0.01) 10.12 6.49 1,543 1.26
1997 ... 9.99 0.52 0.04 (0.52) (0.01) 10.02 5.80 1,409 1.25
--------------------------------
MARYLAND MUNICIPAL BOND FUND (A)
--------------------------------
Flex Shares
2001 ... $9.48 $0.33 $0.66 $(0.33) $ -- $10.14 10.59% $12,090 1.63%
2000 ... 10.08 0.33 (0.60) (0.33) -- 9.48 (2.66) 6,212 1.59
1999(1) 10.24 0.15 (0.15) (0.15) (0.01) 10.08 0.05 7,723 1.59
For the years ended November 30:
1998 ... 9.96 0.33 0.28 (0.33) -- 10.24 6.17 3,246 1.57
1997 ... 9.76 0.34 0.20 (0.34) -- 9.96 5.64 561 1.54
1996(2) 9.53 0.20 0.23 (0.20) -- 9.76 7.67 113 1.55
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME (LOSS)
RATIO OF NET TO AVERAGE TO AVERAGE
INVESTMENT NET ASSETS NET ASSETS
INCOME (LOSS) (EXCLUDING (EXCLUDING PORTFOLIO
TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
------------ --------------- --------------- ---------
--------------------------
INVESTMENT GRADE BOND FUND
--------------------------
Investor Shares
2001 ... 5.77% 1.42% 5.56% 131%
2000 ... 5.60 1.37 5.40 202
1999 ... 4.87 1.36 4.68 221
1998 ... 5.29 1.38 5.05 109
1997 ... 5.48 1.41 5.22 298
Flex Shares
2001 ... 5.24% 1.99% 4.95% 131%
2000 ... 5.14 1.99 4.81 202
1999 ... 4.40 2.00 4.06 221
1998 ... 4.76 2.11 4.30 109
1997 ... 5.00 2.20 4.44 298
-------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND
-------------------------------------
Investor Shares
2001 ... 3.54% 1.37% 3.38% 285%
2000 ... 3.59 1.33 3.43 226
1999 ... 3.36 1.32 3.21 224
1998 ... 3.43 1.43 3.16 378
1997 ... 3.56 1.38 3.33 489
Flex Shares
2001 ... 3.04% 1.96% 2.77% 285%
2000 ... 3.11 1.95 2.81 226
1999 ... 2.86 2.03 2.48 224
1998 ... 2.95 2.10 2.49 378
1997 ... 3.08 2.15 2.56 489
---------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
---------------------------------------------
Investor Shares
2001 ... 5.39% 2.28% 4.06% 532%
2000 ... 5.31 1.09 5.14 384
1999 ... 5.03 1.52 4.43 379
1998 ... 5.50 1.51 4.90 163
1997 ... 5.55 1.48 4.97 133
Flex Shares
2001 ... 4.99% 2.60% 3.69% 532%
2000 ... 4.97 2.38 3.86 384
1999 ... 4.69 2.42 3.54 379
1998 ... 5.16 2.72 3.70 163
1997 ... 5.20 2.66 3.79 133
--------------------------------
MARYLAND MUNICIPAL BOND FUND (A)
--------------------------------
Flex Shares
2001 ... 3.24% 1.97% 2.90% 42%
2000 ... 3.34 1.95 2.98 14
1999(1) 2.94 1.98 2.55 19
For the years ended November 30:
1998 ... 3.16 1.96 2.77 12
1997 ... 3.43 2.00 2.97 5
1996(2) 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.
(1) For the six month period ended May 31, 1999. All ratios for the period have
been annualized.
(2) Commenced operations on April 25, 1996. 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 round to $0.
PROSPECTUS 49
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For the Periods Ended May 31, (unless otherwise indicated)
For a Share Outstanding Throughout the Periods
NET
NET REALIZED AND DISTRIBUTIONS NET NET
ASSET NET UNREALIZED DISTRIBUTIONS FROM ASSET ASSETS RATIO
VALUE INVESTMENT GAINS FROM NET REALIZED VALUE END OF EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD (LOSS) SECURITIES INCOME GAINS OF PERIOD RETURN(+) (000) NET ASSETS
--------- --------- ------------ ------------- ----------- --------- --------- -------- -----------
--------------------
SHORT-TERM BOND FUND
--------------------
Investor Shares
2001 ... $ 9.67 $ 0.54 $0.39 $(0.54) $ -- $10.06 9.90% $ 4,176 0.90%
2000 ... 9.93 0.51 (0.25) (0.51) (0.01) 9.67 2.67 1,446 0.87
1999 ... 10.07 0.49 (0.10) (0.50) (0.03) 9.93 3.88 1,825 0.87
1998 ... 9.91 0.53 0.17 (0.53) (0.01) 10.07 7.19 1,949 0.86
1997 ... 9.88 0.51 0.06 (0.51) (0.03) 9.91 5.97 2,182 0.85
Flex Shares
2001 ... $ 9.67 $ 0.52 $0.39 $(0.52) $ -- $10.06 9.60% $10,682 1.25%
2000 ... 9.93 0.48 (0.25) (0.48) (0.01) 9.67 2.31 2,065 1.22
1999 ... 10.07 0.47 (0.11) (0.47) (0.03) 9.93 3.50 2,341 1.22
1998 ... 9.91 0.50 0.17 (0.50) (0.01) 10.07 6.84 2,110 1.21
1997 ... 9.88 0.48 0.06 (0.48) (0.03) 9.91 5.62 1,073 1.20
----------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
----------------------------------------
Investor Shares
2001 ... $ 9.85 $ 0.48 $0.28 $(0.48) $ -- $10.13 7.87% $ 2,179 0.85%
2000 ... 9.95 0.45 (0.10) (0.45) -- 9.85 3.58 2,066 0.82
1999 ... 9.96 0.46 (0.01) (0.46) -- 9.95 4.54 2,799 0.82
1998 ... 9.88 0.49 0.09 (0.50) -- 9.96 6.04 3,277 0.81
1997 ... 9.84 0.50 0.04 (0.50) -- 9.88 5.59 3,921 0.80
Flex Shares
2001 ... $ 9.83 $ 0.46 $0.28 $(0.46) $ -- $10.11 7.67% $27,861 1.10%
2000 ... 9.93 0.42 (0.10) (0.42) -- 9.83 3.34 5,391 1.07
1999 ... 9.94 0.44 (0.02) (0.43) -- 9.93 4.32 4,931 1.07
1998 ... 9.85 0.47 0.10 (0.48) -- 9.94 5.90 1,413 1.06
1997 ... 9.82 0.47 0.03 (0.47) -- 9.85 5.19 1,091 1.05
-------------------------------
U.S. GOVERNMENT SECURITIES FUND
-------------------------------
Investor Shares
2001 ...$ 9.86 $ 0.54 $0.52 $(0.54) $ -- $10.38 10.95% $ 6,617 1.21%
2000 ... 10.28 0.54 (0.42) (0.54) -- 9.86 1.19 1,407 1.17
1999 ... 10.45 0.54 (0.17) (0.54) -- 10.28 3.56 2,534 1.17
1998 ... 10.02 0.57 0.43 (0.57) -- 10.45 10.23 3,225 1.16
1997 ... 9.90 0.58 0.12 (0.58) -- 10.02 7.21 2,243 1.15
Flex Shares
2001 ...$ 9.86 $ 0.49 $0.52 $(0.49) $ -- $10.38 10.45% $21,617 1.72%
2000 ... 10.28 0.49 (0.42) (0.49) -- 9.86 0.70 7,750 1.68
1999 ... 10.46 0.49 (0.18) (0.49) -- 10.28 2.99 11,520 1.68
1998 ... 10.02 0.52 0.44 (0.52) -- 10.46 9.78 4,022 1.67
1997 ... 9.91 0.53 0.11 (0.53) -- 10.02 6.57 2,801 1.66
---------------------------------------------
VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND (A)
---------------------------------------------
Investor Shares
2001 ...$ 9.59 $0.42 $0.55 $(0.42) $ -- $10.14 10.23% $ 6,197 0.76%
2000 ... 10.20 0.42 (0.56) (0.42) (0.05) 9.59 (1.24) 6,808 0.79
1999(1) 10.45 0.22 (0.18) (0.22) (0.07) 10.20 0.35 7,706 0.79
For years ended November 30:
1998 ... 10.31 0.46 0.17 (0.45) (0.04) 10.45 6.19 7,899 0.79
1997 ... 10.21 0.47 0.09 (0.46) -- 10.31 5.65 7,826 0.79
1996 ... 10.23 0.42 (0.02) (0.42) -- 10.21 4.01 8,185 0.79
--------------------------------
VIRGINIA MUNICIPAL BOND FUND (A)
--------------------------------
Flex Shares
2001 ...$ 9.68 $ 0.35 $0.66 $(0.35) $ -- $10.34 10.58% $ 7,983 1.69%
2000 ... 10.48 0.36 (0.79) (0.36) (0.01) 9.68 (4.13) 5,367 1.65
1999 ... 10.73 0.17 (0.18) (0.18) (0.06) 10.48 (0.16) 6,939 1.65
For years ended November 30:
1998 ... 10.48 0.37 0.28 (0.37) (0.03) 10.73 6.24 3,697 1.64
1997 ... 10.31 0.39 0.18 (0.39) (0.01) 10.48 5.58 1,476 1.60
1996 ... 10.43 0.38 (0.12) (0.38) -- 10.31 2.58 787 1.57
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME (LOSS)
RATIO OF NET TO AVERAGE TO AVERAGE
INVESTMENT NET ASSETS NET ASSETS
INCOME (LOSS) (EXCLUDING (EXCLUDING PORTFOLIO
TO AVERAGE WAIVERS AND WAIVERS AND TURNOVER
NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE
------------ --------------- --------------- ---------
--------------------
SHORT-TERM BOND FUND
--------------------
Investor Shares
2001 ... 5.47% 1.71% 4.66% 87%
2000 ... 5.20 1.75 4.32 70
1999 ... 4.92 1.59 4.20 108
1998 ... 5.27 1.71 4.42 87
1997 ... 5.16 1.58 4.43 118
Flex Shares
2001 ... 5.09% 2.17% 4.17% 87%
2000 ... 4.85 2.41 3.66 70
1999 ... 4.55 2.33 3.44 108
1998 ... 4.93 2.85 3.29 87
1997 ... 4.82 3.02 3.00 118
----------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
----------------------------------------
Investor Shares
2001 ... 4.81% 1.56% 4.10% 87%
2000 ... 4.50 1.44 3.88 50
1999 ... 4.54 1.34 4.02 57
1998 ... 5.07 1.33 4.55 39
1997 ... 5.05 1.35 4.50 93
Flex Shares
2001 ... 4.45% 1.96% 3.59% 87%
2000 ... 4.26 2.04 3.29 50
1999 ... 4.22 2.25 3.04 57
1998 ... 4.81 2.87 3.00 39
1997 ... 4.75 2.51 3.29 93
-------------------------------
U.S. GOVERNMENT SECURITIES FUND
-------------------------------
Investor Shares
2001 ... 5.21% 1.83% 4.59% 207%
2000 ... 5.34 2.14 4.37 29
1999 ... 5.17 1.60 4.74 19
1998 ... 5.53 1.76 4.93 14
1997 ... 5.76 1.79 5.12 21
Flex Shares
2001 ... 4.71% 2.04% 4.39% 207%
2000 ... 4.85 2.28 4.25 29
1999 ... 4.66 2.08 4.26 19
1998 ... 5.02 2.32 4.37 14
1997 ... 5.26 2.42 4.50 21
---------------------------------------------
VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND (A)
---------------------------------------------
Investor Shares
2001 ... 4.20% 1.11% 3.85% 32%
2000 ... 4.33 0.94 4.18 18
1999(1) 4.17 0.93 4.03 19
For years ended November 30:
1998 ... 4.33 0.94 4.18 24
1997 ... 4.56 0.94 4.41 30
1996 ... 4.12 0.94 3.97 25
--------------------------------
VIRGINIA MUNICIPAL BOND FUND (A)
--------------------------------
Flex Shares
2001 ... 3.47% 2.00% 3.16% 60%
2000 ... 3.61 2.08 3.18 19
1999 ... 3.32 1.91 3.06 7
For years ended November 30:
1998 ... 3.46 1.92 3.18 28
1997 ... 3.73 2.00 3.33 39
1996 ... 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.
(1) For the six month period ended May 31, 1999. All ratios for the period have
been annualized.
(A) On May 24, 1999, the CrestFund Virginia Intermediate Municipal Bond and
CrestFund Virginia Municipal Bond Funds exchanged all of their assets and
certain liabilities for shares of the Virginia Intermediate Municipal Bond
and Virginia Municipal Bond Funds, respectively. The 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.
50 PROSPECTUS
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
PROSPECTUS 51
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
52 PROSPECTUS
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
PROSPECTUS 53
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
54 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, 2001, 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.
STI-PS-008-0200
[PHOTO OMITTED]
STI CLASSIC FUNDS-FOR PARTICIPANTS
OF SUNTRUST BANKS SPONSORED
RETIREMENT PLANS
PROSPECTUS
OCTOBER 1, 2001
BALANCED FUND
CAPITAL APPRECIATION FUND
GROWTH AND INCOME FUND
INFORMATION AND TECHNOLOGY FUND
(FORMERLY, E-COMMERCE OPPORTUNITY 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
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
LIFE VISION GROWTH AND INCOME FUND
LIFE VISION MODERATE GROWTH FUND
INVESTMENT ADVISER TO THE FUNDS:
TRUSCO CAPITAL MANAGEMENT, INC.
(the "Adviser")
STI CLASSIC FUNDS
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 GROWTH AND INCOME FUND
8 INFORMATION AND TECHNOLOGY FUND
10 INTERNATIONAL EQUITY FUND
13 INTERNATIONAL EQUITY INDEX FUND
15 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
43 LIFE VISION AGGRESSIVE GROWTH FUND
46 LIFE VISION GROWTH AND INCOME FUND
49 LIFE VISION MODERATE GROWTH FUND
52 MORE INFORMATION ABOUT RISK
54 MORE INFORMATION ABOUT FUND INVESTMENTS
54 INVESTMENT ADVISER
55 PORTFOLIO MANAGERS
57 PURCHASING AND SELLING FUND SHARES
59 DIVIDENDS AND DISTRIBUTIONS
59 TAXES
60 FINANCIAL HIGHLIGHTS
66 HOW TO OBTAIN MORE INFORMATION ABOUT
THE STI CLASSIC FUNDS
--------------------------------------------------------------------------------
[SUITCASE ICON OMITTED] FUND SUMMARY
[TELESCOPE ICON OMITTED] INVESTMENT STRATEGY
[LIFE PRESERVER ICON OMITTED] WHAT ARE THE RISKS OF INVESTING?
[BULLSEYE ICON OMITTED] PERFORMANCE INFORMATION
[INDEX ICON OMITTED] WHAT IS AN INDEX?
[COINS ICON OMITTED] FUND FEES AND EXPENSES
[MOUNTAIN PEAK ICON OMITTED] MORE INFORMATION ABOUT FUND INVESTMENTS
[MAGNIFYING GLASS ICON OMITTED] INVESTMENT ADVISER
[HANDSHAKE ICON OMITTED] PURCHASING AND SELLING FUND SHARES
--------------------------------------------------------------------------------
OCTOBER 1, 2001
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 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
--------------------------------------------------------------------------------
[SUITCASE ICON 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 ICON 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 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 for taxable investors.
[LIFE PRESERVER ICON 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 market has 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 ICON 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 TO FOLLOW:]
1995 25.51%
1996 12.13%
1997 21.14%
1998 19.55%
1999 4.66%
2000 4.79%
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 1/1/01 TO 6/30/01 WAS 0.61%.
PROSPECTUS 3
--------------------------------------------------------------------------------
BALANCED FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, 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 4.79% 12.24% 11.48%*
--------------------------------------------------------------------------------
Lehman Brothers
U.S. Government/
Credit Index 11.84% 6.23% 6.53%**
--------------------------------------------------------------------------------
S&P 500 Index -9.11% 18.33% 18.25%**
--------------------------------------------------------------------------------
* SINCE 1/3/94
** SINCE 12/31/93
[INDEX ICON 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 U.S. equity market's industry weightings.
[COINS ICON 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 0.10%
-----
Total Annual Fund Operating Expenses 1.05%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT ANY TIME. WITH
THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Balanced Fund 1.02%
--------------------------------------------------------------------------------
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
$107 $334 $579 $1,283
--------------------------------------------------------------------------------
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
4 PROSPECTUS
--------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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 uses a "bottom-up" process based on individual
company earnings trends and fundamentals to determine the weighting of the
Fund's investments in various equity market sectors. The Adviser's strategy
focuses primarily on large-cap stocks, but will also utilize mid-cap stocks. 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 for taxable investors.
[LIFE PRESERVER ICON 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 market has 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 ICON 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 TO FOLLOW:]
1993 9.89%
1994 -7.41%
1995 31.15%
1996 20.31%
1997 31.13%
1998 28.06%
1999 9.71%
2000 1.62%
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 1/1/01 TO 6/30/01 WAS -2.63%.
PROSPECTUS 5
--------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDING DECEMBER 31, 2000 TO THOSE OF THE S&P 500 INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Capital Appreciation
Fund 1.62% 17.63% 15.45%*
--------------------------------------------------------------------------------
S&P 500 Index -9.11% 18.33% 17.20%**
--------------------------------------------------------------------------------
* SINCE 7/1/92
** SINCE 6/30/92
[INDEX ICON 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 U.S. equity
market's industry weightings.
[COINS ICON 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%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT ANY TIME. WITH
THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Capital Appreciation Fund 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
$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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
6 PROSPECTUS
--------------------------------------------------------------------------------
GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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
some income with less volatility
than the equity markets as a whole
--------------------------------------------------------------------------------
[TELESCOPE ICON OMITTED] INVESTMENT STRATEGY
The Growth and Income Fund invests primarily in equity securities, including
common stocks of domestic companies and listed American Depositary Receipts
(ADRs) of foreign companies, all 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 potential to secure the best relative values in each economic sector.
[LIFE PRESERVER ICON 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 market has 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 ICON 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 TO FOLLOW:]
1993 10.20%
1994 -0.81%
1995 29.38%
1996 19.06%
1997 27.69%
1998 18.20%
1999 14.17%
2000 1.43%
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 1/1/01 TO 6/30/01 WAS -3.12%.
PROSPECTUS 7
--------------------------------------------------------------------------------
GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE S&P 500/BARRA VALUE INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Growth and Income
Fund 1.43% 15.79% 14.86%*
--------------------------------------------------------------------------------
S&P 500/BARRA
Value Index 6.08% 16.81% 16.96%**
--------------------------------------------------------------------------------
* SINCE 9/26/92
** SINCE 9/30/92
[INDEX ICON 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 stocks in the S&P 500 Index that have lower price-to-book ratios. 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 U.S. equity market's industry weightings.
[COINS ICON 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 0.09%
-----
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
8 PROSPECTUS
--------------------------------------------------------------------------------
INFORMATION AND TECHNOLOGY FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON OMITTED] FUND SUMMARY
INVESTMENT GOAL Long-term capital growth
--------------------------------------------------------------------------------
INVESTMENT FOCUS Common stocks of companies
benefiting from information and
technology
--------------------------------------------------------------------------------
SHARE PRICE VOLATILITY Very high
--------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGY Attempts to identify companies
benefiting from technology and
information 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 ICON OMITTED] INVESTMENT STRATEGY
The Information and Technology Fund invests primarily in common stocks of U.S.
companies that are expected to benefit substantially from information and
technology and achieve above average growth. The Fund believes that
information-oriented companies and technology-oriented companies offer the
potential for significant long-term growth. 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
information-related or technology-related market. The second segment consists of
established technology companies that provide the infrastructure to support the
transfer of information. The third segment includes established, non-tech
corporations from multiple industries that are harnessing the power of
information to drive company growth. In selecting investments for the Fund, the
Adviser uses 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 for taxable investors.
[LIFE PRESERVER ICON 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 market has 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 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 ICON 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 TO FOLLOW:]
2000 -16.75%
BEST QUARTER WORST QUARTER
11.44% -25.18%
(3/31/00) (12/31/00)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS -14.22%.
PROSPECTUS 9
--------------------------------------------------------------------------------
INFORMATION AND TECHNOLOGY FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE GOLDMAN SACHS E-COMMERCE INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION
--------------------------------------------------------------------------------
Information and
Technology Fund -16.75% 35.06%*
--------------------------------------------------------------------------------
Goldman Sachs
E-Commerce Index -41.32% -7.40%*
--------------------------------------------------------------------------------
* SINCE 9/30/99
[INDEX ICON 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. Developed jointly by the Goldman Sachs E-Commerce
research team and Goldman Sachs Index Services, the Goldman Sachs E-Commerce
Index is built from a universe of 39 stocks. To be included in the index, firms
must generate a majority of their revenues online, operate as virtual companies
outside the traditional "bricks and mortar" framework or be key e-commerce
infrastructure providers.
[COINS ICON 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 0.11%%
------
Total Annual Fund Operating Expenses 1.21%
--------------------------------------------------------------------------------
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
$123 $384 $665 $1,466
--------------------------------------------------------------------------------
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
10 PROSPECTUS
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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 for taxable investors.
[LIFE PRESERVER ICON 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 market has 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 market 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.
PROSPECTUS 11
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
[BULLSEYE ICON 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.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES
FROM YEAR TO YEAR.*
[BAR CHART OMITTED]
[PLOT POINTS TO FOLLOW:]
1996 22.08%
1997 13.35%
1998 11.22%
1999 9.47%
2000 -3.46%
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 1/1/01 TO 6/30/01 WAS -10.72%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL
EUROPE, AUSTRALASIA, AND FAR EAST (MSCI EAFE) INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
International
Equity Fund -3.46% 10.22% 14.69%*
--------------------------------------------------------------------------------
MSCI EAFE Index -14.17% 7.14% 8.64%*
--------------------------------------------------------------------------------
* SINCE 1/31/95
[INDEX ICON 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 ICON 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 0.20%
-----
Total Annual Fund Operating Expenses 1.45%
12 PROSPECTUS
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY 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 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
$148 $459 $792 $1,735
--------------------------------------------------------------------------------
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
PROSPECTUS 13
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 market or the equity market 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 ICON 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 TO FOLLOW:]
1995 10.73%
1996 6.04%
1997 8.99%
1998 30.02%
1999 30.66%
2000 -17.06%
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 1/1/01 TO 6/30/01 WAS -13.39%.
14 PROSPECTUS
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, 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 -17.06% 10.24% 8.97%*
--------------------------------------------------------------------------------
MSCI EAFE-GDP
Weighted Index
(Price Return) -16.45% 8.42% 7.60%**
--------------------------------------------------------------------------------
* SINCE 6/6/94
** SINCE 5/31/94
[INDEX ICON 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 ICON 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 0.25%
-----
Total Annual Fund Operating Expenses 1.15%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT ANY TIME. WITH
THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
International Equity Index Fund 1.06%
--------------------------------------------------------------------------------
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
$117 $365 $633 $1,398
--------------------------------------------------------------------------------
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
PROSPECTUS 15
--------------------------------------------------------------------------------
INVESTMENT GRADE BOND FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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 for taxable investors.
[LIFE PRESERVER ICON 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.
16 PROSPECTUS
--------------------------------------------------------------------------------
INVESTMENT GRADE BOND FUND
--------------------------------------------------------------------------------
[BULLSEYE ICON 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 TO FOLLOW:]
1993 10.84%
1994 -3.32%
1995 17.80%
1996 2.34%
1997 9.08%
1998 9.19%
1999 -1.53%
2000 6.57%
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 1/1/01 TO 6/30/01 WAS 5.36%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, 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 6.57% 5.05% 6.13%*
--------------------------------------------------------------------------------
Lehman Brothers U.S.
Government/Credit
Index 11.84% 6.23% 7.01%**
--------------------------------------------------------------------------------
Lehman Brothers U.S.
Aggregate Bond Index 11.63% 6.46% 7.01%**
--------------------------------------------------------------------------------
Lipper Intermediate
Investment Grade
Debt Funds Average 9.78% 5.47% 6.36%**
--------------------------------------------------------------------------------
* SINCE 7/16/92
** SINCE 7/31/92
[INDEX ICON 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.
PROSPECTUS 17
--------------------------------------------------------------------------------
INVESTMENT GRADE BOND FUND
--------------------------------------------------------------------------------
[COINS ICON 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%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Investment Grade Bond Fund 0.82%
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser."
18 PROSPECTUS
--------------------------------------------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON OMITTED] FUND SUMMARY
INVESTMENT GOAL High current income, while
preserving capital
--------------------------------------------------------------------------------
INVESTMENT FOCUS Mortgage-backed securities
--------------------------------------------------------------------------------
SHARE PRICE VOLATILITY Low
--------------------------------------------------------------------------------
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 ICON 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
for taxable investors.
[LIFE PRESERVER ICON 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 ICON 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 TO FOLLOW:]
1995 12.14%
1996 4.53%
1997 6.74%
1998 6.90%
1999 1.25%
2000 8.60%
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 1/1/01 TO 6/30/01 WAS 2.80%.
PROSPECTUS 19
--------------------------------------------------------------------------------
LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, 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 8.60% 5.57% 6.10%*
--------------------------------------------------------------------------------
Merrill Lynch 1-5 Year
U.S. Treasuries/Agencies
Index 9.00% 6.06% 6.64%**
--------------------------------------------------------------------------------
Merrill Lynch 1-5 Year
U.S. Treasury Index 8.87% 6.02% 6.61%**
--------------------------------------------------------------------------------
* SINCE 6/6/94
** SINCE 5/31/94
[INDEX ICON 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 (companies with larger market capitalizations have more influence than
those with smaller market capitalizations) index of U.S. Treasury securities
with maturities 1 year or greater and no more than 5 years.
[COINS ICON 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%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Limited-Term Federal Mortgage Securities Fund 0.71%
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser."
20 PROSPECTUS
--------------------------------------------------------------------------------
MID-CAP EQUITY FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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 Mid Cap 400 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.
[LIFE PRESERVER ICON 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 market has 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 market 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 ICON 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 TO FOLLOW:]
1995 31.22%
1996 15.42%
1997 21.23%
1998 6.48%
1999 16.14%
2000 -2.97%
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 1/1/01 TO 6/30/01 WAS 3.29%.
PROSPECTUS 21
--------------------------------------------------------------------------------
MID-CAP EQUITY FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE S&P MID CAP 400 INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Mid-Cap
Equity Fund -2.97% 10.92% 11.85%*
--------------------------------------------------------------------------------
S&P Mid Cap
400 Index 17.50% 20.41% 17.90%**
--------------------------------------------------------------------------------
* SINCE 2/2/94
** SINCE 1/31/94
[INDEX ICON 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 Mid Cap 400 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 ICON 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%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT ANY TIME. WITH
THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Mid-Cap Equity Fund 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
$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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
22 PROSPECTUS
--------------------------------------------------------------------------------
SHORT-TERM BOND FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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 for taxable investors.
[LIFE PRESERVER ICON 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 ICON 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 TO FOLLOW:]
1994 -0.07%
1995 11.77%
1996 3.90%
1997 6.78%
1998 6.84%
1999 0.92%
2000 7.64%
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 1/1/01 TO 6/30/01 WAS 4.32%.
PROSPECTUS 23
--------------------------------------------------------------------------------
SHORT-TERM BOND FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, 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 7.64% 5.19% 5.31%*
--------------------------------------------------------------------------------
Salomon 1-3 Year
Treasury/Government
Sponsored/Corporate
Index 8.15% 6.03% 5.75%**
--------------------------------------------------------------------------------
* SINCE 3/15/93
** SINCE 2/28/93
[INDEX ICON 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 ICON 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%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Short-Term Bond Fund 0.71%
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser."
24 PROSPECTUS
--------------------------------------------------------------------------------
SHORT-TERM U.S. TREASURY SECURITIES FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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
market 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 ICON 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 TO FOLLOW:]
1994 1.41%
1995 8.58%
1996 4.52%
1997 5.86%
1998 6.24%
1999 2.71%
2000 6.65%
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 1/1/01 TO 6/30/01 WAS 3.35%.
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, 2000, 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 6.65% 5.18% 4.96%*
--------------------------------------------------------------------------------
Salomon 1-3 Year
Treasury Index 8.01% 5.95% 5.65%**
--------------------------------------------------------------------------------
Salomon 6 Month
Treasury Bill Index 6.07% 5.39% 5.08%**
--------------------------------------------------------------------------------
* SINCE 3/15/93
** SINCE 2/28/93
[INDEX ICON 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 ICON 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%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Short-Term U.S. Treasury Securities Fund 0.71%
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser."
26 PROSPECTUS
--------------------------------------------------------------------------------
SMALL CAP GROWTH STOCK FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 market 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 ICON 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 TO FOLLOW:]
1999 20.55%
2000 11.76%
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 1/1/01 TO 6/30/01 WAS 3.72%.
PROSPECTUS 27
--------------------------------------------------------------------------------
SMALL CAP GROWTH STOCK FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE S&P SMALL CAP 600 INDEX.
TRUST SHARES 1 YEAR SINCE INCEPTION
--------------------------------------------------------------------------------
Small Cap Growth
Stock Fund 11.76% 35.60%*
--------------------------------------------------------------------------------
S&P Small Cap 600 Index 11.80% 18.96%**
--------------------------------------------------------------------------------
* SINCE 10/8/98
** SINCE 9/30/98
[INDEX ICON 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 Small Cap 600 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 ICON OMITTED] PERFORMANCE 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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
28 PROSPECTUS
--------------------------------------------------------------------------------
SMALL CAP VALUE EQUITY FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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 $2 billion) that it believes are undervalued in the market.
[LIFE PRESERVER ICON 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 the equity market or the equity market 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 ICON 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 TO FOLLOW:]
1995 30.99%
1996 34.25%
1997 32.59%
1998 -13.45%
1999 -2.72%
2000 17.96%
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 1/1/01 TO 6/30/01 WAS 14.84%.
PROSPECTUS 29
--------------------------------------------------------------------------------
SMALL CAP VALUE EQUITY FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE TO THOSE OF RUSSELL 2000 VALUE INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Small Cap Value
Equity Fund 17.96% 12.07% 14.31%*
--------------------------------------------------------------------------------
Russell 2000
Value Index 22.83% 12.60% 13.14%*
--------------------------------------------------------------------------------
* SINCE 8/31/94
[INDEX ICON 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 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 ICON 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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
30 PROSPECTUS
--------------------------------------------------------------------------------
TAX SENSITIVE GROWTH STOCK FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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 for
taxable investors.
[LIFE PRESERVER ICON 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 market 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 ICON 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 TO FOLLOW:]
1996 21.04%
1997 28.76%
1998 31.73%
1999 24.74%
2000 -12.15%
BEST QUARTER WORST QUARTER
27.74% -11.19%
(12/31/98) (12/31/00)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS -12.93%.
PROSPECTUS 31
--------------------------------------------------------------------------------
TAX SENSITIVE GROWTH STOCK FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE S&P 500 INDEX.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Tax Sensitive
Growth Stock Fund -12.15% 17.61%* 17.61%*
--------------------------------------------------------------------------------
S&P 500 Index -9.11% 18.33%* 18.33%*
--------------------------------------------------------------------------------
* SINCE 12/31/95
[INDEX ICON 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 U.S. equity
market's industry weightings.
[COINS ICON 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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
32 PROSPECTUS
--------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 ICON 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 TO FOLLOW:]
1995 17.33%
1996 2.55%
1997 8.94%
1998 8.16%
1999 -0.97%
2000 10.98%
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 1/1/01 TO 6/30/01 WAS 2.40%.
PROSPECTUS 33
--------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE TOTAL RETURNS FOR THE PERIODS ENDED
DECEMBER 31, 2000, 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 10.98% 5.84% 6.89%*
--------------------------------------------------------------------------------
Merrill Lynch Government/
Mortgage Index 12.35% 6.63% 7.73%**
--------------------------------------------------------------------------------
Lehman Brothers Intermediate
U.S. Government
Bond Index 10.47% 6.18% 6.90%**
--------------------------------------------------------------------------------
* SINCE 8/1/94
** SINCE 7/31/94
[INDEX ICON 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 ICON 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 0.11%
-----
Total Annual Fund Operating Expenses 0.85%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
U.S. Government Securities Fund 0.82%
--------------------------------------------------------------------------------
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
$87 $271 $471 $1,049
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser."
34 PROSPECTUS
--------------------------------------------------------------------------------
VALUE INCOME STOCK FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 market has 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 ICON 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 TO FOLLOW:]
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%
2000 10.85%
BEST QUARTER WORST QUARTER
18.56% -12.14%
(3/31/91) (9/30/99)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS 0.78%.
PROSPECTUS 35
--------------------------------------------------------------------------------
VALUE INCOME STOCK FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE S&P 500/BARRA VALUE INDEX.
TRUST SHARES 1 YEAR 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Value Income
Stock Fund 10.85% 12.55% 16.80%
--------------------------------------------------------------------------------
S&P 500/
BARRA Value
Index 6.08% 16.81% 16.87%
--------------------------------------------------------------------------------
[INDEX ICON 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.
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 U.S. equity market's industry weightings.
[COINS ICON 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 0.10%
-----
Total Annual Fund Operating Expenses 0.90%
--------------------------------------------------------------------------------
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
operating 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
$92 $287 $498 $1,108
--------------------------------------------------------------------------------
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. In addition, the Fund may enter
into arrangements with broker-dealers who have agreed to pay certain Fund
expenses in return for executing Fund transactions through that broker-dealer.
For more information about these fees, see "Investment Adviser."
36 PROSPECTUS
--------------------------------------------------------------------------------
PRIME QUALITY MONEY MARKET FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 ICON 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 TO FOLLOW:]
1993 2.77%
1994 3.77%
1995 5.47%
1996 4.99%
1997 5.15%
1998 5.10%
1999 4.74%
2000 6.04%
BEST QUARTER WORST QUARTER
1.55% 0.68%
(9/30/00) (6/30/93)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS 2.35%.
PROSPECTUS 37
--------------------------------------------------------------------------------
PRIME QUALITY MONEY MARKET FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE IMONEYNET, INC. FIRST TIER AVERAGE.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Prime Quality Money
Market Fund 6.04% 5.20% 4.63%*
--------------------------------------------------------------------------------
iMoneyNet, Inc.
First Tier Average 5.80% 5.04% 4.50%**
--------------------------------------------------------------------------------
* SINCE 6/8/92
** SINCE 5/31/92
To obtain more information about the Fund's yield, call 1-800-814-3397.
[INDEX ICON 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. The number of funds in the Average varies.
[COINS ICON 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%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Prime Quality Money Market Fund 0.64%
--------------------------------------------------------------------------------
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. For more information about these
fees, see "Investment Adviser."
38 PROSPECTUS
--------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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.
[LIFE PRESERVER ICON 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 ICON 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 TO FOLLOW:]
1993 2.67%
1994 3.64%
1995 5.39%
1996 4.81%
1997 4.99%
1998 4.88%
1999 4.41%
2000 5.71%
BEST QUARTER WORST QUARTER
1.49% 0.65%
(12/31/00) (6/30/93)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS 2.34%.
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, 2000, TO THOSE OF THE IMONEYNET, INC. U.S. GOVERNMENT &
AGENCY AVERAGE.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
U.S. Government
Securities Money
Market Fund 5.71% 4.96% 4.45%*
--------------------------------------------------------------------------------
iMoneyNet, Inc.
U.S. Government
& Agency Average 5.65% 4.91% 4.39%**
--------------------------------------------------------------------------------
* SINCE 6/8/92
** SINCE 5/31/92
To obtain more information about the Fund's yield, call 1-800-814-3397.
[INDEX ICON OMITTED]
--------------------------------------------------------------------------------
WHAT IS AN AVERAGE?
--------------------------------------------------------------------------------
An average is a composite of mutual funds with similar investment goals. 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.
The number of funds in the Average varies.
[COINS ICON 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%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
U.S. Government Securities Money Market Fund 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
$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. For more information about these
fees, see "Investment Adviser."
40 PROSPECTUS
--------------------------------------------------------------------------------
U.S. TREASURY MONEY MARKET FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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). As a money market
fund, the Fund follows strict rules about credit risk, maturity and
diversification of its investments.
[LIFE PRESERVER ICON 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 ICON 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 TO FOLLOW:]
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%
2000 5.63%
BEST QUARTER WORST QUARTER
1.63% 0.61%
(3/31/91) (12/31/93)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE
FUND'S TOTAL RETURN FROM 1/1/01 TO 6/30/01 WAS 2.15%.
PROSPECTUS 41
--------------------------------------------------------------------------------
U.S. TREASURY MONEY MARKET FUND
--------------------------------------------------------------------------------
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 2000, TO THOSE OF THE IMONEYNET, INC. U.S. TREASURY & REPO
AVERAGE.
TRUST SHARES 1 YEAR 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
U.S. Treasury
Money Market
Fund 5.63% 4.91% 4.50%
--------------------------------------------------------------------------------
iMoneyNet, Inc.
U.S. Treasury &
Repo Average 5.58% 4.88% N/A
--------------------------------------------------------------------------------
To obtain more information about the Fund's current yield, call 1-800-814-3397.
[INDEX ICON 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. The number of funds in the Average
varies.
[COINS ICON 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%*
THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THESE FEE WAIVERS REMAIN IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THESE WAIVERS AT ANY TIME. WITH THESE
FEE WAIVERS, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
U.S. Treasury Money Market Fund Trust Shares 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
$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. 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, may be
greater or lesser depending on the types of securities the underlying STI
Classic Fund owns and the markets in which they 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 discussed in
this STI Classic prospectus, the Adviser has the discretion to change the
particular underlying STI Classic Funds used as investments by 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, if it determines
that doing so is in the best interest of the Fund. Before investing, make sure
that the Life Vision Fund's goal matches your own.
PROSPECTUS 43
--------------------------------------------------------------------------------
LIFE VISION AGGRESSIVE GROWTH FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON OMITTED] 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 ICON 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 GROWTH
ASSET CLASS FUND'S ASSETS)
--------------------------------------------------------------------------------
Equity Funds 80-100%
Capital Appreciation 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 for taxable investors.
[LIFE PRESERVER ICON OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS 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 market has 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.
(CONTINUED)
44 PROSPECTUS
--------------------------------------------------------------------------------
LIFE VISION AGGRESSIVE GROWTH FUND
--------------------------------------------------------------------------------
[BULLSEYE ICON 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 CHART OMITTED]
[PLOT POINTS TO FOLLOW:]
1993 12.14%
1994 -4.30%
1995 25.12%
1996 16.62%
1997 22.53%
1998 12.31%
1999 10.31%
2000 6.30%
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 1/1/01 TO 6/30/01 WAS -2.63%.
THIS TABLE COMPARES THIS LIFE VISION FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE
PERIODS ENDING DECEMBER 31, 2000, 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.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Life Vision Aggressive
Growth Fund 6.30% 13.48% 12.29%*
--------------------------------------------------------------------------------
Hybrid 61/15/12/10/2
Blend of the Following
Market Indices -6.18% 14.48% 14.41%*
--------------------------------------------------------------------------------
Russell 1000 Index -7.79% 18.16% 16.99%*
--------------------------------------------------------------------------------
MSCI EAFE Index -14.17% 7.14% 10.62%*
--------------------------------------------------------------------------------
Russell 2000 Index -3.02% 10.32% 11.85%*
--------------------------------------------------------------------------------
Salomon 3-Month
Treasury Bill Index 5.97% 5.25% 4.91%*
--------------------------------------------------------------------------------
Russell Mid-Cap Index 8.25% 16.68% 15.89%*
--------------------------------------------------------------------------------
* SINCE 12/31/92
--------------------------------------------------------------------------------
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 ICON 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 FUND ASSETS)
--------------------------------------------------------------------------------
TRUST SHARES
Investment Advisory Fees 0.25%
Other Expenses 0.18%
-----
Total Annual Fund Operating Expenses 0.43%*
THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT ANY TIME. WITH
THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Life Vision Aggressive Growth Fund 0.25%
--------------------------------------------------------------------------------
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
$44 $138 $241 $542
--------------------------------------------------------------------------------
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. For
more information about these fees, see "Investment Adviser."
46 PROSPECTUS
--------------------------------------------------------------------------------
LIFE VISION GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON OMITTED] 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 ICON 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
VISION GROWTH AND
ASSET CLASS INCOME FUND'S ASSETS)
--------------------------------------------------------------------------------
Equity Funds 50-80%
Capital Appreciation 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 for taxable investors.
[LIFE PRESERVER ICON OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS 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 market has 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 ICON 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 CHART OMITTED]
[PLOT POINTS TO FOLLOW:]
1993 10.02%
1994 -3.52%
1995 22.68%
1996 12.16%
1997 18.08%
1998 11.16%
1999 7.95%
2000 7.08%
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 1/1/01 TO 6/30/01 WAS -0.71%.
THIS TABLE COMPARES THIS LIFE VISION FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE
PERIODS ENDING DECEMBER 31, 2000 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.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Life Vision Growth
and Income Fund 7.08% 11.22% 10.46%*
--------------------------------------------------------------------------------
Hybrid 40/17/16/13/12/2
Blend of the Following
Market Indices -2.27% 12.19% 12.55%*
--------------------------------------------------------------------------------
Russell 1000 Index -7.79% 18.16% 16.99%*
--------------------------------------------------------------------------------
Merrill Lynch 1-5 Year
U.S. Corporate/
Government Index 8.88% 6.08% 6.19%*
--------------------------------------------------------------------------------
Lehman Brothers U.S.
Government/Credit
Index 11.84% 6.23% 7.08%*
--------------------------------------------------------------------------------
MSCI EAFE Index -14.17% 7.14% 10.62%*
--------------------------------------------------------------------------------
Russell 2000 Index -3.02% 10.32% 11.85%*
--------------------------------------------------------------------------------
Russell Mid-Cap Index 8.25% 16.68% 15.89%*
--------------------------------------------------------------------------------
* SINCE 12/31/92
(CONTINUED)
48 PROSPECTUS
--------------------------------------------------------------------------------
LIFE VISION GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
[INDEX ICON 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 ICON 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 FUND ASSETS)
--------------------------------------------------------------------------------
TRUST SHARES
Investment Advisory Fees 0.25%
Other Expenses 0.14%
-----
Total Annual Fund Operating Expenses 0.39%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT ANY TIME. WITH
THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Life Vision Growth and Income Fund 0.25%
--------------------------------------------------------------------------------
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
$40 $125 $219 $493
--------------------------------------------------------------------------------
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. For
more information about these fees, see "Investment Adviser."
PROSPECTUS 49
--------------------------------------------------------------------------------
LIFE VISION MODERATE GROWTH FUND
--------------------------------------------------------------------------------
[BRIEFCASE ICON 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 ICON 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 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
VISION MODERATE
ASSET CLASS GROWTH FUND'S ASSETS)
--------------------------------------------------------------------------------
Equity Funds 35-65%
Capital Appreciation 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 for taxable investors.
[LIFE PRESERVER ICON OMITTED] WHAT ARE THE RISKS OF INVESTING IN THIS 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 market has 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.
(CONTINUED)
50 PROSPECTUS
--------------------------------------------------------------------------------
LIFE VISION MODERATE GROWTH FUND
--------------------------------------------------------------------------------
[BULLSEYE ICON 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 CHART OMITTED]
[PLOT POINTS TO FOLLOW:]
1993 9.26%
1994 -2.97%
1995 20.52%
1996 10.51%
1997 16.41%
1998 11.15%
1999 6.19%
2000 5.46%
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 1/1/01 TO 6/30/01 WAS 0.00%.
THIS TABLE COMPARES THIS LIFE VISION FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE
PERIODS ENDED DECEMBER 31, 2000, 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.
TRUST SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
Life Vision Moderate
Growth Fund 5.46% 9.87% 9.36%*
--------------------------------------------------------------------------------
Hybrid 27/26/22/14/10/1
Blend of the following
Benchmarks 0.69% 10.42% 10.88%*
--------------------------------------------------------------------------------
Russell 1000 Index -7.79% 18.16% 16.99%*
--------------------------------------------------------------------------------
Merrill Lynch 1-5 Year
U.S. Corporate/
Government Index 8.88% 6.08% 6.19%*
--------------------------------------------------------------------------------
Lehman Brothers U.S.
Government/Credit
Index 11.84% 6.23% 7.08%*
--------------------------------------------------------------------------------
MSCI EAFE Index -14.17% 7.14% 10.62%*
--------------------------------------------------------------------------------
Russell 2000 Index -3.02% 10.32% 11.85%*
--------------------------------------------------------------------------------
Russell Mid-Cap Index 8.25% 16.68% 15.89%*
--------------------------------------------------------------------------------
* SINCE 12/31/92
PROSPECTUS 51
--------------------------------------------------------------------------------
LIFE VISION MODERATE GROWTH FUND
--------------------------------------------------------------------------------
[INDEX ICON 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 ICON 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 FUND ASSETS)
--------------------------------------------------------------------------------
TRUST SHARES
Investment Advisory Fees 0.25%
Other Expenses 0.12%
-----
Total Annual Fund Operating Expenses 0.37%*
*THE FUND'S TOTAL ACTUAL ANNUAL FUND OPERATING EXPENSES FOR THE MOST RECENT
FISCAL YEAR WERE LESS THAN THE AMOUNT SHOWN ABOVE BECAUSE THE ADVISER WAIVED A
PORTION OF THE FEES IN ORDER TO KEEP TOTAL OPERATING EXPENSES AT A SPECIFIED
LEVEL. THIS FEE WAIVER REMAINS IN PLACE AS OF THE DATE OF THIS PROSPECTUS, BUT
THE ADVISER MAY DISCONTINUE ALL OR PART OF THIS FEE WAIVER AT ANY TIME. WITH
THIS FEE WAIVER, THE FUND'S ACTUAL TOTAL OPERATING EXPENSES ARE AS FOLLOWS:
Life Vision Moderate Growth Fund 0.25%
--------------------------------------------------------------------------------
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
Adviser could discontinue this voluntary waiver at any time. For more
information about these fees, see "Investment Adviser."
52 PROSPECTUS
--------------------------------------------------------------------------------
MORE INFORMATION ABOUT RISK
--------------------------------------------------------------------------------
[LIFE PRESERVER ICON OMITTED]
MORE INFORMATION ABOUT RISK EQUITY RISK
BALANCED FUND
CAPITAL APPRECIATION FUND
GROWTH AND INCOME FUND
INFORMATION AND TECHNOLOGY FUND
INTERNATIONAL EQUITY FUND
INTERNATIONAL EQUITY INDEX FUND
MID-CAP EQUITY FUND
SMALL CAP GROWTH STOCK FUND
SMALL CAP VALUE EQUITY 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
U.S. GOVERNMENT 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 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
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.
PROSPECTUS 53
--------------------------------------------------------------------------------
MORE INFORMATION ABOUT RISK
--------------------------------------------------------------------------------
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 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.
54 PROSPECTUS
--------------------------------------------------------------------------------
MORE INFORMATION ABOUT FUND INVESTMENTS AND INVESTMENT ADVISER
--------------------------------------------------------------------------------
[MOUNTAIN PEAK ICON 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 (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 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. 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.
[MAGNIFYING GLASS ICON OMITTED] INVESTMENT ADVISER
The investment adviser (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 or the Adviser), 50 Hurt Plaza, Suite
1400, Atlanta, Georgia 30303, serves as the Adviser to the Funds. As of June 30,
2001, Trusco had in excess of $45 billion in assets under management. For the
fiscal period ended May 31, 2001, the Adviser received advisory fees of:
BALANCED FUND 0.91%
CAPITAL APPRECIATION FUND 1.12%
GROWTH AND INCOME FUND 0.90%
INFORMATION AND TECHNOLOGY FUND 1.09%
INTERNATIONAL EQUITY FUND 1.25%
INTERNATIONAL EQUITY INDEX FUND 0.81%
INVESTMENT GRADE BOND FUND 0.71%
LIMITED-TERM FEDERAL
MORTGAGE SECURITIES FUND 0.59%
MID-CAP EQUITY FUND 1.11%
SHORT-TERM BOND FUND 0.59%
SHORT-TERM U.S. TREASURY
SECURITIES FUND 0.58%
SMALL CAP GROWTH STOCK FUND 1.14%
SMALL CAP VALUE EQUITY FUND 1.15%
TAX SENSITIVE GROWTH STOCK FUND 1.14%
U.S. GOVERNMENT SECURITIES FUND 0.70%
VALUE INCOME STOCK FUND 0.80%
PRIME QUALITY MONEY MARKET FUND 0.53%
U.S. GOVERNMENT SECURITIES
MONEY MARKET FUND 0.55%
U.S. TREASURY MONEY MARKET FUND 0.55%
LIFE VISION AGGRESSIVE GROWTH FUND 0.07%
LIFE VISION GROWTH AND INCOME FUND 0.11%
LIFE VISION MODERATE GROWTH FUND 0.13%
The Adviser may use its affiliates as brokers for Fund transactions.
PROSPECTUS 55
--------------------------------------------------------------------------------
PORTFOLIO MANAGERS
--------------------------------------------------------------------------------
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,
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 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 28 years of
investment experience. In January 2000, Mr. West was named Managing Director of
SunTrust Bank, and is now a Managing Director of Trusco, after working at STI
since 1985. Mr. West has more than 15 years of investment experience. In January
2000, Mr. Denney was named Managing Director of SunTrust Bank and is now a
Managing Director of Trusco, after serving as Managing Director of STI since
1983. Mr. Denney has more than 22 years of investment experience.
The Information and Technology Fund has been team managed since June 1, 2001,
with Mr. Alan S. Kelley serving as the Lead Portfolio Manager. He has served as
Vice President of Trusco and has managed the 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 18 years of investment experience.
The International Equity Index Fund is managed by Mr. Chad Deakins. Mr. Deakins
serves as a Vice President of Trusco and has worked there since 1996. He has
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 7 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. In
January 2000, he was named Managing Director of Sun Trust Bank and is now
Managing Director of Trusco, after serving as Managing Director of STI since
1983. Mr. Denney has co-managed the Investment Grade Bond Fund
56 PROSPECTUS
--------------------------------------------------------------------------------
PORTFOLIO MANAGERS
--------------------------------------------------------------------------------
since it began operating in June 1992 and has managed the Limited-Term Mortgage
Securities Fund since it began operating in June 1994. Mr. Denny has more than
22 years of investment experience. In January 2000, Mr. West was named Managing
Director of Sun Trust Bank and is now a Managing Director of Trusco, after
working at STI since 1985. 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 15 years of investment experience.
Mr. John Hamlin has served as 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 12 years of investment experience.
Ms. Agnes G. Pampush, CFA, has served as a Managing Director of Trusco since
July 2000, after serving as 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 19 years
of investment experience.
Mr. David S. Yealy has served as 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 16 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 14 years of investment experience.
Mr. Brett Barner, CFA, has served as 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
17 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 16 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 17 years of investment experience.
The Value Income Stock Fund is managed by Mr. Mills Riddick, CFA. Mr. Riddick
has served as a Managing Director of Trusco since July 2000, after serving as a
Managing Director of STI since 1994. Mr. Riddick has managed the Value Income
Stock Fund since April 1995. Mr. Riddick has more than 19 years of investment
experience.
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 7 years of investment experience.
PROSPECTUS 57
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PURCHASING AND SELLING FUND SHARES
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[HANDSHAKE ICON 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 a Fund must receive your purchase
order in proper form before 4:00 p.m. Eastern time. The Fund will not accept
orders that request a particular day or price for the transaction or any other
special conditions.
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 2:00 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 valuation method, which is described in detail in the
58 PROSPECTUS
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PURCHASING AND SELLING FUND SHARES
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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.
PROSPECTUS 59
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TAXES
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DIVIDENDS AND DISTRIBUTIONS
Each Fund distributes its net investment income as follows:
QUARTERLY
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BALANCED FUND
CAPITAL APPRECIATION FUND
GROWTH AND INCOME FUND
INFORMATION AND TECHNOLOGY 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
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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 its net realized 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.
60 PROSPECTUS
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FINANCIAL HIGHLIGHTS
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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
NET REALIZED AND DISTRIBUTIONS NET NET
ASSET NET UNREALIZED DISTRIBUTIONS FROM ASSET ASSETS RATIO
VALUE INVESTMENT GAINS FROM NET REALIZED VALUE END OF EXPENSES
BEGINNING INCOME (LOSSES) ON INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD (LOSS) SECURITIES INCOME GAINS OF PERIOD RETURN(+) (000) NET ASSETS
--------- --------- ----------- ------------- ------------ --------- --------- -------- ----------
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BALANCED FUND
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Trust Shares