-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CJySaDPOCgLSHoIwK9wRwCiDHwdOLFe3vbSlHlxZvmjPvu5ChyUum5WSfwTsPi8R KXQlcA07/ygEMn6/Nz3+wQ== 0001047469-98-035636.txt : 19980929 0001047469-98-035636.hdr.sgml : 19980929 ACCESSION NUMBER: 0001047469-98-035636 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 61 FILED AS OF DATE: 19980928 EFFECTIVENESS DATE: 19980928 SROS: NONE 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: SEC FILE NUMBER: 033-45671 FILM NUMBER: 98715809 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-06557 FILM NUMBER: 98715810 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 485BPOS AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 28, 1998 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. 25 /X/ AND REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / / AMENDMENT NO. 27 /X/ STI CLASSIC FUNDS (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) 2 OLIVER STREET BOSTON, MASSACHUSETTS 02109 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, ZIP CODE) REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE (800) 342-5734 MARK NAGLE C/O SEI INVESTMENTS COMPANY ONE FREEDOM VALLEY ROAD OAKS, PENNSYLVANIA 19456 (NAME AND ADDRESS OF AGENT FOR SERVICE) Copies to: RICHARD W. GRANT, ESQ. JOHN H. GRADY, JR., ESQ. MORGAN, LEWIS & BOCKIUS LLP MORGAN, LEWIS & BOCKIUS LLP 2000 ONE LOGAN SQUARE 2000 ONE LOGAN SQUARE PHILADELPHIA, PA 19103 PHILADELPHIA, PA 19103 Title of Securities Being Registered...............Units of Beneficial Interest It is proposed that this filing will become effective (check appropriate box) __X_ Immediately upon filing pursuant to paragraph (b), or ____ On [date] pursuant to paragraph (b), or ____ 60 days after filing pursuant to paragraph (a) or ____ 75 days after filing pursuant to paragraph (a) or ____ On September 28, 1998 pursuant to paragraph (a) of Rule 485. [GRAPHIC] STI CLASSIC FUNDS--BOND AND MONEY MARKET FUNDS TRUST SHARES PROSPECTUS October 1, 1998 BOND FUNDS FLORIDA TAX-EXEMPT BOND FUND GEORGIA TAX-EXEMPT BOND FUND INVESTMENT GRADE BOND FUND INVESTMENT GRADE TAX-EXEMPT BOND FUND LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND SHORT-TERM BOND FUND SHORT-TERM U.S. TREASURY SECURITIES FUND U.S. GOVERNMENT SECURITIES FUND MONEY MARKET FUNDS PRIME QUALITY MONEY MARKET FUND TAX-EXEMPT MONEY MARKET FUND U.S. GOVERNMENT SECURITIES MONEY MARKET FUND INVESTMENT ADVISORS TO THE FUNDS: STI CAPITAL MANAGEMENT, N.A. TRUSCO CAPITAL MANAGEMENT, INC. (the "Advisors") SUNTRUST BANK, ATLANTA ---------------- STI Classic Fund ---------------- The Securities and Exchange Commission has not approved any Fund shares or determined whether this prospectus is accurate or complete. It is a crime for anyone to tell you otherwise. PROSPECTUS HOW TO READ THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers different classes of 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. We arranged the prospectus into different sections so that you can easily review this important information. On the next page, we discuss general information you should know about investing in the Funds. IF YOU WOULD LIKE MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE: 2 FLORIDA TAX-EXEMPT BOND FUND 4 GEORGIA TAX-EXEMPT BOND FUND 6 INVESTMENT GRADE BOND FUND 8 INVESTMENT GRADE TAX-EXEMPT BOND FUND 10 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND 12 PRIME QUALITY MONEY MARKET FUND 14 SHORT-TERM BOND FUND 16 SHORT-TERM U.S. TREASURY SECURITIES FUND 18 TAX-EXEMPT MONEY MARKET FUND 20 U.S. GOVERNMENT SECURITIES FUND 22 U.S. GOVERNMENT SECURITIES MONEY MARKET FUND IF YOU WOULD LIKE MORE INFORMATION ABOUT THE FOLLOWING TOPICS, PLEASE SEE: 24 EACH FUND'S PRINCIPAL INVESTMENTS 25 THE ADVISORS AND THEIR PORTFOLIO MANAGERS 26 PURCHASING, SELLING AND EXCHANGING FUND SHARES 28 HISTORICAL FINANCIAL INFORMATION ABOUT EACH FUND 30 DISTRIBUTIONS OF DIVIDENDS AND CAPITAL GAINS 30 TAXES 31 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS
FOR INFORMATION ABOUT KEY TERMS AND CONCEPTS, LOOK FOR OUR "SIMPLY SPEAKING" EXPLANATIONS. - -------------------------------------------------------------------------------- FUND SUMMARY INVESTMENT STRATEGY WHAT ARE THE RISKS OF INVESTING? PERFORMANCE INFORMATION WHAT IS AN INDEX? FUND FEES AND EXPENSES FUND INVESTMENTS INVESTMENT ADVISORS PURCHASING FUND SHARES - -------------------------------------------------------------------------------- OCTOBER 1, 1998 PROSPECTUS 1 INTRODUCTION Each Fund is a mutual fund. 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 Fund (except 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 securities markets generally, as well as those that affect particular companies or governments. These price movements, sometimes called volatility, will vary depending on the types of securities a Fund owns and the markets where these securities trade. Like other investments, you could lose money on your investment in a Fund. Your investment in a Fund is not a bank deposit. It is not insured or guaranteed by the FDIC or any government agency. Each Money Market Fund tries to maintain a constant price per share of $1.00, but we cannot guarantee this. Each Fund has its own investment goal and strategies for reaching that goal. But, we cannot guarantee that a Fund will achieve its goal. A Fund's goal may be changed without shareholder approval. Before investing, make sure that the Fund's goal matches your own. The Investment Advisors invest each Fund's assets in a way that the Advisor believes will help the Fund achieve its goal. An Advisor's judgments about the stock markets, economy and companies, or selecting investments may not reflect actual market movements, economic conditions or company performance. 2 PROSPECTUS FLORIDA TAX-EXEMPT BOND FUND FUND SUMMARY INVESTMENT GOALS Current income exempt from federal income taxes for Florida residents without undue risk INVESTMENT FOCUS Florida municipal securities SHARE PRICE VOLATILITY Medium PRINCIPAL INVESTMENT Attempts to invest more Fund assets in undervalued STRATEGY sectors and less in overvalued ones INVESTOR PROFILE Florida residents who want income exempt from federal income taxes
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
INVESTMENT STRATEGY The Florida Tax-Exempt Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal income taxes. Issuers of these securities can be located in Florida, the District of Columbia, Puerto Rico and other U.S. territories and possessions. In selecting investments for the Fund, we try to limit risk as much as possible. Based on our analysis of municipalities, credit risk, market trends and investment cycles, we attempt to invest more of the Fund's assets in undervalued market sectors and less in overvalued sectors. We also try to identify and invest in municipal issuers with improving credit and avoid those with deteriorating credit. We anticipate that the Fund's average weighted maturity will range from 6 to 25 years. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in Florida debt securities. As a result, the Fund is subject to the risk that the prices of debt securities will decline due to rising interest rates. This risk is greater for long-term debt securities than for short-term debt securities. The Fund's concentration of investments in securities of issuers located in Florida subjects the Fund to economic conditions and government policies of Florida. Debt securities may decline in credit quality due to economic or governmental events. In addition, an issuer may be unable to make timely payments of principal or interest to the Fund. 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.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1995 15.85 1996 3.94 1997 7.82
BEST QUARTER WORST QUARTER 6.18% -1.41% (3/31/95) (3/31/96)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.31%. PROSPECTUS 3 FLORIDA TAX-EXEMPT BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX.
SINCE INCEPTION 1 YEAR 3 YEARS (1/25/94) FLORIDA TAX-EXEMPT BOND FUND 7.82% 9.09% 6.51% LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX 9.23% 10.19% 6.38%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor 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 with maturities between 8 and 12 years. The Index represents various market sectors and geographic locations. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees .65% Other Expenses .16% --------- Total Annual Fund Operating Expenses .81%
- -------------------------------------------------- EXAMPLE - -------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $83 $259 $450 $1002
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .51% AND .67%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors." 4 PROSPECTUS GEORGIA TAX-EXEMPT BOND FUND FUND SUMMARY INVESTMENT GOAL Current income exempt from federal and Georgia income taxes for Georgia residents without undue risk INVESTMENT FOCUS Georgia municipal securities SHARE PRICE VOLATILITY Medium PRINCIPAL INVESTMENT Attempts to invest more Fund assets in undervalued STRATEGY sectors and less in overvalued ones INVESTOR PROFILE Georgia residents who want income exempt from federal and state income taxes
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
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, the District of Columbia, Puerto Rico and other U.S. territories and possessions. In selecting investments for the Fund, we try to limit risk as much as possible. Based on our analysis of municipalities, credit risk, market trends and investment cycles, we attempt to invest more of the Fund's assets in undervalued market sectors and less in overvalued sectors. We try to diversify the Fund's holdings within Georgia. We also try to identify and invest in municipal issuers with improving credit and avoid those with deteriorating credit. We anticipate that the Fund's average weighted maturity will range from 6 to 25 years. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in Georgia debt securities. As a result, the Fund is subject to the risk that the prices of debt securities will decline due to rising interest rates. This risk is greater for long-term debt securities than for short-term debt securities. The Fund's concentration of investments in securities of issuers located in Georgia subjects the Fund to economic conditions and government policies of Georgia. Debt securities may decline in credit quality due to economic or governmental events. In addition, an issuer may be unable to make timely payments of principal or interest to the Fund. 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.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1995 13.51 1996 3.53 1997 8.17
BEST QUARTER WORST QUARTER 5.02% -.79% (3/31/95) (3/31/96)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.02%. PROSPECTUS 5 GEORGIA TAX-EXEMPT BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX.
SINCE FUND INCEPTION 1 YEAR 3 YEARS (1/18/94) GEORGIA TAX-EXEMPT BOND FUND 8.17% 8.33% 4.88% LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX 9.23% 10.19% 6.38%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor 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 with maturities between 8 and 12 years. The Index represents various market sectors and geographic locations. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees .65% Other Expenses .17% --------- Total Annual Fund Operating Expenses .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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $84 $262 $455 $1014
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .50% AND .67%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors." 6 PROSPECTUS INVESTMENT GRADE BOND FUND 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 Medium PRINCIPAL INVESTMENT Attempts to identify relatively inexpensive STRATEGY 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
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
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, we try to minimize risk while attempting to outperform selected market indices. Currently, our selected index is the Lehman Government/Corporate Bond Index, a widely recognized, unmanaged index of investment grade government and corporate debt securities. We seek to invest more in portions of the Index that seem relatively inexpensive, and less in those that seem expensive. We allocate the Fund's investments among various market sectors based on our analysis of historical data, yield information and credit ratings. We anticipate that the Fund's average weighted maturity will range from 4 to 10 years. 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 taxes. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in investment grade debt securities. As a result, the Fund is subject to the risk that the prices of debt securities will decline due to rising interest rates. This risk is greater for long-term debt securities than for short-term debt securities. In addition, an issuer may be unable to make timely payments of principal or interest to the Fund. Some investment grade debt securities have speculative characteristics. In addition, the Fund is subject to the risk of investing in mortgage-backed securities. See "Mortgage-Backed Securities" to the right. SIMPLY SPEAKING . . . MORTGAGE-BACKED SECURITIES A mortgage-backed security pools all interest and principal payments from the underlying mortgages and pays it to the security's owner. The mortgages underlying mortgage-backed securities may mature or be paid off before the stated maturity date. This has four drawbacks. First, the Fund may lose money on its investment. Second, the monthly income payments to the Fund may fluctuate. Third, we cannot predict the maturity of the Fund's investment with certainty. Fourth, we would invest any resulting proceeds elsewhere, generally at lower interest rates. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1993 10.84 1994 -3.32 1995 17.80 1996 2.34 1997 9.08
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 1/1/98 TO 6/30/98 WAS 4.31%. PROSPECTUS 7 INVESTMENT GRADE BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX.
SINCE FUND INCEPTION 1 YEAR 5 YEARS (7/16/92) INVESTMENT GRADE BOND FUND 9.08% 7.10% 6.96% LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX 9.75% 7.61% 7.97%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers Government/ Corporate Bond Index is a widely recognized index of government and corporate debt securities rated investment grade or better, with maturities of at least 1 year. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees .74% Other Expenses .13% --------- Total Annual Fund Operating Expenses .87%
- -------------------------------------------------- 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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $89 $278 $482 $1073
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .64% AND .77%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors." 8 PROSPECTUS INVESTMENT GRADE TAX-EXEMPT BOND FUND 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 Medium PRINCIPAL INVESTMENT Attempts to invest more Fund assets in undervalued STRATEGY 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
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
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 selecting investments for the Fund, we try to limit risk as much as possible. Based on our analysis of municipalities, credit risk, market trends and investment cycles, we attempt to invest more of the Fund's assets in undervalued market sectors and less in overvalued sectors. We also try to identify and invest in municipal issuers with improving credit and avoid those with deteriorating credit. We anticipate that the Fund's average weighted maturity will range from 4 to 10 years. Due to the Fund's investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and capital gains taxes. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in investment grade debt securities. As a result, the Fund is subject to the risk that the prices of debt securities will decline due to rising interest rates. This risk is greater for long-term debt securities than for short-term debt securities. Debt securities may decline in credit quality due to economic or governmental events. In addition, an issuer may be unable to make timely payments of principal or interest to the Fund. Some investment grade bonds may have speculative characteristics. 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.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1994 -0.32 1995 14.98 1996 5.52 1997 7.80
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 1/1/98 TO 6/30/98 WAS 2.70%. PROSPECTUS 9 INVESTMENT GRADE TAX-EXEMPT BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE LEHMAN BROTHERS 5-YEAR G.O. INDEX.
SINCE INCEPTION 1 YEAR 3 YEARS (10/21/93) INVESTMENT GRADE TAX-EXEMPT BOND FUND 7.80% 9.36% 6.64% LEHMAN BROTHERS 5-YEAR G.O. INDEX 6.48% 7.54% 5.33%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers 5-Year G.O. 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. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees .74% Other Expenses .15% --------- Total Annual Fund Operating Expenses .89%
- -------------------------------------------------- EXAMPLE - -------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $91 $284 $493 $1096
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .62% AND .77%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors." 10 PROSPECTUS LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital INVESTMENT FOCUS Mortgage-backed securities SHARE PRICE VOLATILITY Medium PRINCIPAL INVESTMENT Attempts to identify securities that are less prone to pre-payment risk STRATEGY INVESTOR PROFILE Conservative investors who want to receive income from their investment
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 average maturity from 1 to 5 years. In selecting investments for the Fund, we try to identify securities that we expect to perform well in rising and falling markets. We also attempt to reduce the risk that the underlying mortgages are pre-paid by focusing on securities that we believe are less prone to this risk. For example, Fannie Mae or GNMA securities that were issued years ago may be less prone to pre-payment risk because there have been many opportunities for pre-payment, but none have occurred. Due to the Fund's investment strategy, the Fund may buy or sell securities frequently. This may result in higher transaction costs and capital gains taxes. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in debt securities. As a result, the Fund is subject to the risk that the prices of debt securities will decline due to rising interest rates. This risk is greater for long-term debt securities than for short-term debt securities. In addition, the Fund is subject to the risk of investing in mortgage-backed securities. See "Mortgage-Backed Securities" to the right. SIMPLY SPEAKING . . . MORTGAGE-BACKED SECURITIES A mortgage-backed security pools all interest and principal payments from the underlying mortgages and pays it to the security's owner. Collateralized mortgage obligations (CMOs) are a type of mortgage-backed security that are divided into separate maturity classes. Mortgage income is applied first to the CMO with the shortest maturity, second to the CMO with the next shortest, and so on. The mortgages underlying mortgage-backed securities may mature or be paid off before the stated maturity date. This has four drawbacks. First, the Fund may lose money on its investment. Second, the monthly income payments to the Fund may fluctuate. Third, we cannot predict the maturity of the Fund's investment with certainty. Fourth, we would invest any resulting proceeds elsewhere, generally at lower interest rates. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1995 12.14 1996 4.53 1997 6.74
BEST QUARTER WORST QUARTER 4.05% .32% (3/31/95) (3/31/97)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.84%. PROSPECTUS 11 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE MERRILL LYNCH 1-5 YEAR SHORT/INTERMEDIATE U.S. TREASURY INDEX.
SINCE INCEPTION 1 YEAR 3 YEARS (6/7/94) LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND 6.74% 7.76% 6.57% MERRILL LYNCH 1-5 YEAR SHORT/INTERMEDIATE U.S. TREASURY INDEX 7.11% 8.08% 7.16%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Merrill Lynch 1-5 Year Short/ Intermediate U.S. Treasury Index is a widely recognized index of U.S. Treasury securities with maturities 1 year or greater and no more than 5 years. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees .65% Other Expenses .13% --------- Total Annual Fund Operating Expenses .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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may 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
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .54% AND .67%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors." 12 PROSPECTUS PRIME QUALITY MONEY MARKET FUND FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital and liquidity INVESTMENT FOCUS Money market instruments PRINCIPAL INVESTMENT Attempts to identify money market instruments with the most attractive risk/return STRATEGY trade-off INVESTOR PROFILE Conservative investors who want to receive current income from their investment
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, we try to increase income without adding undue risk. We analyze maturity, yields, market sectors and credit risk. Investments are made in money market instruments with the most attractive risk/return trade-off. MONEY MARKET FUNDS Money market funds invest in high quality, short-term debt securities, commonly known as money market instruments. These include CDs, bankers' acceptances, commercial paper, U.S. Treasury securities, some municipal securities, and repurchase agreements. Money market funds follow strict rules about credit risk, maturity and diversification of its investments. An investment in a money market fund is not a bank deposit. Although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in a money market fund. 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.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1993 2.77 1994 3.77 1995 5.47 1996 4.99 1997 5.15
BEST QUARTER WORST QUARTER 1.37% .68% (6/30/95) (6/30/93)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.56%. PROSPECTUS 13 PRIME QUALITY MONEY MARKET FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE IBC/ DONOGHUE FIRST TIER AVERAGE.
SINCE INCEPTION 1 YEAR 5 YEARS (6/8/92) PRIME QUALITY MONEY MARKET FUND 5.15% 4.43% 4.28% IBC/DONOGHUE FIRST TIER AVERAGE 5.01% 4.32% 4.25%
TO OBTAIN YIELD INFORMATION FOR THE FUND, CALL 1-800-814-3397. SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The IBC/Donoghue First Tier Average is a widely recognized index of [ ]. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees .65% Other Expenses .13% --------- Total Annual Fund Operating Expenses .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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may 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
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .51% AND .60%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors." 14 PROSPECTUS SHORT-TERM BOND FUND 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 Attempts to identify securities that offer a STRATEGY 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
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
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 intends to maintain an average weighted maturity of 3 years or less. In selecting investments for the Fund, we attempt 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. We manage the Fund from a total return perspective. That is, we make day to day investment decisions for the Fund with a view towards maximizing returns. We analyze yields, market sectors and credit risk in an effort to identify attractive investments with the best risk/reward trade-off. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in debt securities. As a result, the Fund is subject to the risk that the prices of debt securities will decline due to rising interest rates. In addition, an issuer may be unable to make timely payments of principal or interest to the Fund. Also, the Fund may invest in bonds rated "investment grade." Some investment grade bonds may have speculative characteristics. In addition, the Fund is subject to the risk of investing in mortgage-backed and asset-backed securities. See "Mortgage-Backed and Asset-Backed Securities" to the right. SIMPLY SPEAKING . . . MORTGAGE-BACKED AND ASSET-BACKED SECURITIES A mortgage-backed security pools all interest and principal payments from the underlying mortgages and pays it to the security's owner. The owner of an asset-backed security owns a share of the underlying pool of assets, such as truck and auto loans, leases and credit card receivables. The mortgages, receivables or other assets underlying these securities may mature or be paid off before the stated maturity date. This has four drawbacks. First, the Fund may lose money on its investment. Second, the monthly income payments to the Fund may fluctuate. Third, we cannot predict the maturing of the Fund's investment with certainty. Fourth, we would invest any resulting proceeds elsewhere, generally at lower interest rates. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1994 -.07 1995 11.77 1996 3.90 1997 6.78
BEST QUARTER WORST QUARTER 3.76% -.58% (6/30/95) (3/31/94)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 3.00%. PROSPECTUS 15 SHORT-TERM BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE SALOMON 1-3 YEAR TREASURY/GOVERNMENT SPONSORED/CORPORATE INDEX AND THE SALOMON ONE YEAR TREASURY BENCHMARK ON-THE-RUN INDEX.
SINCE INCEPTION 1 YEAR 3 YEARS (3/15/93) SHORT-TERM BOND FUND 6.78% 7.44% 5.45% SALOMON 1-3 YEAR TREASURY/ GOVERNMENT SPONSORED/ CORPORATE INDEX 6.67% 7.54% 5.63% SALOMON ONE YEAR TREASURY BENCHMARK ON-THE-RUN INDEX 6.10% 6.61% 5.34%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor 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, government agency and investment grade corporate securities with maturities greater than 1 year and less than 3 years. The Salomon One Year Treasury Benchmark On-the-Run Index is a widely recognized index of U.S. Treasury securities. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees .65% Other Expenses .15% --------- Total Annual Fund Operating Expenses .80%
- -------------------------------------------------- EXAMPLE - -------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may 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
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .52% AND .67%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors." 16 PROSPECTUS SHORT-TERM U.S. TREASURY SECURITIES FUND FUND SUMMARY INVESTMENT GOALS High current income, while preserving capital INVESTMENT FOCUS Short-term U.S. Treasury securities only SHARE PRICE VOLATILITY Low PRINCIPAL INVESTMENT Attempts to identify Treasury securities with STRATEGY 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
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
INVESTMENT STRATEGY The Short-Term U.S. Treasury Securities Fund invests exclusively in short-term U.S. Treasury securities (those with remaining maturities of three 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. We manage the Fund from a total return perspective. That is, we make day to day investment decisions for the Fund with a view toward maximizing returns and yield. We try to select those U.S. Treasury securities that offer the best risk/reward trade-off. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in U.S. Treasury securities. As a result, the Fund is subject to the risk that the prices of debt securities will decline due to rising interest rates. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1994 1.41 1995 8.58 1996 4.52 1997 5.86
BEST QUARTER WORST QUARTER 2.61% -.10% (3/31/95) (3/31/94)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.75%. PROSPECTUS 17 SHORT-TERM U.S. TREASURY SECURITIES FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE SALOMON 1-3 YEAR TREASURY/GOVERNMENT SPONSORED/CORPORATE INDEX AND THE SALOMON 6 MONTH TREASURY BILL INDEX.
SINCE FUND INCEPTION 1 YEAR 3 YEARS (3/15/93) SHORT-TERM U.S. TREASURY SECURITIES FUND 5.86% 6.31% 4.82% SALOMON 1-3 YEAR TREASURY/ GOVERNMENT SPONSORED/ CORPORATE INDEX 6.67% 7.54% 5.63% SALOMON 6 MONTH TREASURY BILL INDEX 5.41% 5.53% 4.98%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor 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, government agency and investment grade corporate debt securities with maturities greater than 1 year and less than 3 years. The Salomon 6 Month Treasury Bill Index is a widely recognized index of U.S. Treasury bills. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees .65% Other Expenses .20% --------- Total Annual Fund Operating Expenses .85%
- -------------------------------------------------- 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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may 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 $1049
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .47% AND .67%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors." 18 PROSPECTUS TAX-EXEMPT MONEY MARKET FUND FUND SUMMARY INVESTMENT GOALS High current interest income exempt from federal income taxes, while preserving capital and liquidity INVESTMENT FOCUS Municipal money market instruments PRINCIPAL INVESTMENT Attempts to increase income without added risk by analyzing credit quality STRATEGY INVESTOR PROFILE Conservative investors who want to receive current tax-exempt income from their investment
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, we analyze the credit quality and structure of each security to minimize risk. We actively manage the Fund's average maturity based on current interest rates and our outlook of the market. SIMPLY SPEAKING . . . MONEY MARKET FUNDS Money market funds invest in high quality, short-term debt securities, commonly known as money market instruments. These include CDs, bankers' acceptances, U.S. Treasury securities, some municipal securities, commercial paper, and repurchase agreements. Money market funds follow strict rules about credit risk, maturity and diversification of its investments. An investment in a money market fund is not a bank deposit. Although a money market fund seeks to keep a constant share price of $1.00, you may lose money by investing in a money market fund. 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.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1993 2.02 1994 2.47 1995 3.48 1996 3.06 1997 3.23
BEST QUARTER WORST QUARTER .92% .45% (6/30/95) (3/31/93)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 1.53%. PROSPECTUS 19 TAX-EXEMPT MONEY MARKET FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE IBC/ DONOGHUE TAX-FREE STOCKBROKER & GENERAL PURPOSE AVERAGE.
SINCE INCEPTION 1 YEAR 5 YEARS (6/8/92) TAX-EXEMPT MONEY MARKET FUND 3.23% 2.85% 2.79% IBC/DONOGHUE TAX-FREE STOCKBROKER & GENERAL PURPOSE AVERAGE 3.14% 2.77% 2.77%
TO OBTAIN YIELD INFORMATION FOR THE FUND, CALL 1-800-814-3397. SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The IBC/Donoghue Tax-Free Stockbroker & General Purpose Average is a widely recognized index of [ ]. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees .55% Other Expenses .13% --------- Total Annual Fund Operating Expenses .68%
- -------------------------------------------------- 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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $69 $218 $379 $847
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .49% AND .62%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors." 20 PROSPECTUS U.S. GOVERNMENT SECURITIES FUND FUND SUMMARY INVESTMENT GOALS High current income, while preserving capital INVESTMENT FOCUS Mortgage-backed securities and U.S. Treasury obligations SHARE PRICE VOLATILITY Low to medium PRINCIPAL INVESTMENT Attempts to increase income without adding undue STRATEGY risk INVESTOR PROFILE Conservative investors who want to receive income from their investment
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
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. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in U.S. government debt securities. As a result, the Fund is subject to the risk that the prices of debt securities will decline due to rising interest rates. This risk is greater for long-term debt securities than for short-term debt securities. In addition, the Fund is subject to the risk of investing in mortgage-backed securities. See "Mortgage-Backed Securities" to the right. SIMPLY SPEAKING . . . MORTGAGE-BACKED SECURITIES A mortgage-backed security pools all interest and principal payments from the underlying mortgages and pays it to the security's owner. The mortgages underlying mortgage-backed securities may mature or be paid off before the stated maturity date. This has four drawbacks. First, the Fund may lose money on its investment. Second, the monthly income payments to the Fund may fluctuate. Third, we cannot predict the maturity of the Fund's investment with certainty. Fourth, we would invest any resulting proceeds elsewhere, generally at lower interest rate. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the 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.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1995 17.33 1996 2.55 1997 8.94
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 1/1/98 TO 6/30/98 WAS 3.90%. PROSPECTUS 21 U.S. GOVERNMENT SECURITIES FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT BOND INDEX.
SINCE INCEPTION 1 YEAR 3 YEARS (7/31/94) U.S. GOVERNMENT SECURITIES FUND 8.94% 9.44% 7.73% LEHMAN BROTHERS INTERMEDIATE GOVERNMENT BOND INDEX 7.72% 8.65% 7.55%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers Intermediate Government Bond Index is a widely recognized index of U.S. Treasury securities and government agency securities with maturities ranging from 1 to 10 years. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees .74% Other Expenses .19% --------- Total Annual Fund Operating Expenses .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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $95 $296 $515 $1143
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .58% AND .77%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors." 22 PROSPECTUS U.S. GOVERNMENT SECURITIES MONEY MARKET FUND FUND SUMMARY INVESTMENT GOALS High current income, while preserving capital and liquidity INVESTMENT FOCUS U.S. Treasury and government agency securities, and repurchase agreements PRINCIPAL INVESTMENT Attempts to increase income without adding undue risk by analyzing yields STRATEGY INVESTOR PROFILE Conservative investors who want to receive current income
INVESTMENT STRATEGY The U.S. Government Securities Money Market Fund invests exclusively in U.S. Treasury bills, notes, bonds and components of these securities, government agency securities, and repurchase agreements involving these securities. In selecting investments for the Fund, we try to increase income without adding undue risk by analyzing yields. We actively manage the maturity of the Fund and its portfolio to maximize the Fund's yield based on current market interest rates and our outlook on the market. SIMPLY SPEAKING . . . MONEY MARKET FUNDS Money market funds invest in high quality, short-term debt securities, commonly known as money market instruments. These include CDs, bankers' acceptances, U.S. Treasury securities, some municipal securities, commercial paper, and repurchase agreements. Money market funds follow strict rules about credit risk, maturity and diversification of its investments. An investment in a money market fund is not a bank deposit. Although a money market fund seeks to keep a constant share price of $1.00, you may lose money by investing in a money market fund. 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.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1993 2.67 1994 3.64 1995 5.39 1996 4.81 1997 4.99
BEST QUARTER WORST QUARTER 1.36% .65% (6/30/95) (6/30/93)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.45%. PROSPECTUS 23 U.S. GOVERNMENT SECURITIES MONEY MARKET FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE IBC/ DONOGHUE U.S. TREASURY & REPO AVERAGE.
SINCE INCEPTION 1 YEAR 5 YEARS (6/8/92) U.S. GOVERNMENT SECURITIES MONEY MARKET FUND 4.99% 4.29% 4.15% IBC/DONOGHUE U.S. TREASURY & REPO AVERAGE 4.89% 4.21% 4.13%
TO OBTAIN YIELD INFORMATION FOR THE FUND, CALL 1-800-814-3397. SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The IBC/Donoghue U.S. Treasury & Repo Average is a widely recognized index of [ ]. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees .65% Other Expenses .14% --------- Total Annual Fund Operating Expenses .79%
- -------------------------------------------------- EXAMPLE - -------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $81 $252 $439 $978
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .50% AND .63%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors." 24 PROSPECTUS EACH FUND'S PRINCIPAL INVESTMENT FUND INVESTMENTS The table below shows each Fund's principal investments. In other words, the table describes the type or types of investments that we believe will most likely help each Fund achieve its investment goal. BOND FUNDS
FLORIDA GEORGIA INVESTMENT INVESTMENT LIMITED- SHORT- SHORT-TERM U.S. TAX- TAX- GRADE BOND GRADE TAX- TERM FEDERAL TERM BOND U.S. GOVERNMENT EXEMPT EXEMPT FUND EXEMPT MORTGAGE FUND TREASURY SECURITIES BOND BOND BOND SECURITIES SECURITIES FUND FUND FUND FUND FUND FUND - ---------------------------------------------------------------------------------------------------------------------------- Asset-Backed Securities X - ---------------------------------------------------------------------------------------------------------------------------- Corporate Debt Securities X X - ---------------------------------------------------------------------------------------------------------------------------- Mortgage- Backed Securities X X X X - ---------------------------------------------------------------------------------------------------------------------------- Municipal Securities X X X - ---------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities X X X - ----------------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUNDS
PRIME QUALITY MONEY TAX-EXEMPT MONEY U.S. GOVERNMENT SECURITIES MARKET FUND MARKET FUND MONEY MARKET FUND - ----------------------------------------------------------------------------------------------------------- Bank Obligations X - ----------------------------------------------------------------------------------------------------------- Commercial Paper X X - ----------------------------------------------------------------------------------------------------------- Corporate Obligations X - ----------------------------------------------------------------------------------------------------------- Foreign Securities (U.S. Dollar denominated) X - ----------------------------------------------------------------------------------------------------------- Mortgage-Backed Securities X - ----------------------------------------------------------------------------------------------------------- Municipal Securities X - ----------------------------------------------------------------------------------------------------------- U.S. Government Securities X X - -----------------------------------------------------------------------------------------------------------
Each Fund also may invest in other securities, use other strategies and engage in other investment practices, which are described in detail in our Statement of Additional Information. Of course, we cannot guarantee that any Fund will achieve its investment goal. The investments listed above and the investments and strategies described throughout this prospectus are those that we 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. 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, and the U.S. Government Securities Fund may each shorten its average weighted maturity to as little as 90 days. When a Fund is investing for temporary defensive purposes, it is not pursuing its investment goal. PROSPECTUS 25 THE ADVISORS AND THEIR PORTFOLIO MANAGERS INVESTMENT ADVISORS The Investment Advisors make investment decisions for the Funds and continuously review, supervise and administer their Funds' respective investment programs. The Board of Trustees supervises the Advisors and establishes policies that the Advisors must follow in their management activities. STI Capital Management, N.A. (STI), P.O. Box 3808, Orlando, Florida 32802, serves as the Advisor to the Investment Grade Bond, Limited-Term Federal Mortgage Securities, Investment Grade Tax-Exempt Bond and Florida Tax-Exempt Bond Funds. As of May 31, 1998, STI had approximately $11.7 billion in assets under management. For the fiscal year ended May 31, 1998, STI received advisory fees of: FLORIDA TAX-EXEMPT BOND FUND............. .51% INVESTMENT GRADE BOND FUND............... .64% INVESTMENT GRADE TAX-EXEMPT BOND FUND.... .62% LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND................................... .54%
Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Advisor to the U.S. Government Securities, Short-Term Bond, Short-Term U.S. Treasury Securities, Prime Quality Money Market, U.S. Government Securities Money Market, and Tax-Exempt Money Market Funds. As of May 31, 1998, Trusco had approximately $22 billion in assets under management. For the fiscal year ended May 31, 1998, Trusco received advisory fees of: SHORT-TERM BOND FUND..................... .52% SHORT-TERM U.S. TREASURY SECURITIES FUND................................... .47% U.S. GOVERNMENT SECURITIES MONEY MARKET FUND................................... .50% PRIME QUALITY MONEY MARKET FUND.......... .51% TAX-EXEMPT MONEY MARKET FUND............. .49% U.S. GOVERNMENT SECURITIES FUND.......... .58%
SunTrust Bank, Atlanta, 25 Park Place, Atlanta, Georgia 30303, serves as the Advisor to the Georgia Tax-Exempt Bond Fund. As of June 31, 1998, SunTrust Bank, Atlanta had approximately $76 billion under management. For the fiscal year ended May 31, 1998, SunTrust Bank, Atlanta received advisory fees of .50% for the Georgia Tax-Exempt Bond Fund. The Advisors may use their affiliates as brokers for Fund transactions. PORTFOLIO MANAGERS Mr. L. Earl Denney, CFA, has served as Senior Vice President of STI since 1983. He has managed the Investment Grade Bond Fund since it began operating in June 1992. He has more than 20 years of experience in fixed income investment management. Prior to joining STI, he was fixed income portfolio manager with American National Bank. The U.S. Government Securities Fund has been co-managed by Mr. Charles B. Leonard and Mr. Michael L. Ford since it began operating in June 1994. Mr. Leonard, CFA, has served as First Vice President of Trusco since 1988, and has more than 25 years of investment experience. Mr. Ford has been an Associate of Trusco since April 1994, and has more than 11 years of investment experience. Prior to joining Trusco, Mr. Ford served as a senior securities analyst at Liberty Capital Advisors from 1992 to 1994 and served as a securities analyst at Southern Farm Bureau Life Insurance Company from 1990 to 1992. The Limited-Term Federal Mortgage Securities Fund has been co-managed by Mr. L. Earl Denney, CFA, and Mr. Dave E. West, CFA, since it began operating in June 1994. Mr. Denney has served as Senior Vice President of STI since 1983. Mr. Denney has more than 20 years of experience in fixed income investment management. Prior to joining STI, he was fixed income portfolio manager with American National Bank. Mr. West has served as a Vice President of STI since 1994, and has served as a fixed-income portfolio manager with STI since 1989. Mr. David Yealy has served as a Vice President of Trusco since 1993. He has managed the Short- 26 PROSPECTUS PURCHASING, SELLING AND EXCHANGING FUND SHARES Term Bond Fund and Short-Term U.S. Treasury Securities Fund since July 1996. He has more than years of investment experience. Mr. Ronald Schwartz, CFA, has served as a Senior Vice President since 1992. He has managed the Investment Grade Tax-Exempt Bond Fund and Florida Tax-Exempt Bond Fund since each Fund began operating in June 1992 and January 1994, respectively. He has more than 18 years of investment experience. Prior to joining STI, he served as a trader at the Bank of Boston. Ms. Gay Cash has served as a Vice President of SunTrust Bank, Atlanta since 1987. She has managed Georgia Tax-Exempt Bond Fund since it began operating in January 1994. She has more than 18 years of investment experience. PURCHASING FUND SHARES HOW TO PURCHASE FUND SHARES Generally you may not purchase Trust Shares directly. Rather, Trust Shares are sold to financial institutions or intermediaries, including subsidiaries of SunTrust Banks, Inc. (SunTrust) on behalf of accounts for which they act as fiduciary, agent, investment advisor, or custodian. As a result, you, as a customer of a financial institution, may purchase Trust Shares through accounts maintained with financial institutions and potentially through the Preferred Portfolio 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. We may reject any purchase order if we determine that accepting the order would not be in the best interests of the STI Classic Funds or its shareholders. SIMPLY SPEAKING . . . 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 a Money Market Fund on federal holidays. The price per share (the offering price) will be the net asset value per share (NAV) next determined after we receive your purchase order. We calculate each Fund's 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 the Bond Funds, to receive the current Business Day's NAV, generally we must receive your purchase order from your financial institution before 4:00 p.m. Eastern time. For the Money Market Funds, your purchase order will be effective on the Business Day we receive it if: - - we receive your order before 11:00 a.m. Eastern time for the Tax-Exempt Money Market Fund or before 1:00 p.m. Eastern time for the Prime Quality and U.S. Government Securities Money Market Funds; and - - we receive federal funds (readily available) before we calculate NAV (normally 4:00 p.m. Eastern time). Otherwise, your purchase order will be effective the following Business Day, as long as we receive federal funds before we calculate NAV on that following day. SIMPLY SPEAKING . . . FOR CUSTOMERS OF OTHER FINANCIAL INSTITUTIONS You may have to transmit your purchase and sale requests to your financial institution 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 us. For more information about how to purchase or sell Fund shares through your financial institution, you should contact your financial institution directly. PROSPECTUS 27 PURCHASING, SELLING AND EXCHANGING FUND SHARES HOW WE CALCULATE NAV In calculating NAV for the Bond Funds, we generally value a Fund's portfolio at market price. In calculating NAV for the Money Market Funds, we generally value a Fund's portfolio using the amortized cost valuation method, which is described in detail in our Statement of Additional Information. If market prices are unavailable, or we think that the market prices or the amortized cost valuation method are unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. We expect the NAV of each Money Market Fund to remain constant at $1.00 per share, although we cannot guarantee this. SIMPLY SPEAKING . . . NET ASSET VALUE NAV for one Fund share is the value of that share's portion of all of the assets in the Fund. SELLING FUND SHARES HOW TO SELL YOUR FUND SHARES You may sell (sometimes called "redeem") your shares on any Business Day by contacting your financial institution. Your financial institution will give you information about how to sell your shares. The sale price of each share will be the next NAV determined after we receive your request from your financial institution. So, for the Bond Funds, to receive the current Business Day's NAV, generally we must receive your sale order from your financial institution before 4:00 p.m. Eastern time. For the Money Market Funds, your sale order will be effective on that same Business Day if we receive your order before: - - 11:00 a.m. Eastern time for the Tax-Exempt Money Market Fund; or - - 1:00 p.m. Eastern time for the Prime Quality Money Market and U.S. Government Securities Money Market Funds. SIMPLY SPEAKING . . . TELEPHONE TRANSACTIONS Purchasing and selling Fund shares over the telephone is extremely convenient, but not without risk. Although we have certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, we are not responsible for any losses or costs incurred by following telephone instructions we reasonably believe to be genuine. If you or your financial institution transact with us over the telephone, you will generally bear the risk of any loss. REDEMPTIONS IN KIND We generally pay sale proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) we might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). Although it is highly unlikely that your shares would ever be redeemed in kind, you would probably have to pay brokerage 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 We may suspend your right to sell your shares if the NYSE restricts trading, the SEC declares an emergency or for other reasons. More information about this is in our Statement of Additional Information. 28 PROSPECTUS HISTORICAL FINANCIAL INFORMATION 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 has been audited by Arthur Andersen, LLP, independent public accountants. Their report, along with each Fund's financial statements, appears in our annual report that accompanies our Statement of Additional Information. You can obtain our annual report, which contains more performance information, at no charge by calling 1-800-874-4700. SIMPLY SPEAKING . . . FINANCIAL HIGHLIGHTS Study these tables to see how each Fund performed since it began investment operations.
NET ASSET NET REALIZED DISTRIBUTIONS VALUE NET GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED VALUE END OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS OF PERIOD ----------- ------------- ------------- ------------- ------------- ----------- - ----------------------------- FLORIDA TAX-EXEMPT BOND FUND - ----------------------------- Trust Shares 1998.................................... $ 10.28 $ 0.44 $ 0.45 $ (0.44 ) $ (0.01 ) $ 10.72 1997.................................... 10.06 0.46 0.25 (0.46 ) (0.03 ) 10.28 1996.................................... 10.18 0.46 (0.07 ) (0.46 ) (0.05 ) 10.06 1995.................................... 9.75 0.44 0.43 (0.44 ) -- 10.18 1994(1)................................. 10.00 0.13 (0.25 ) (0.13 ) -- 9.75 - ------------------------------ GEORGIA TAX-EXEMPT BOND FUND - ------------------------------ Trust Shares 1998.................................... $ 9.73 $ 0.41 $ 0.39 $ (0.41 ) $ (0.01 ) $ 10.11 1997.................................... 9.56 0.42 0.22 (0.42 ) (0.05 ) 9.73 1996.................................... 9.63 0.43 (0.05 ) (0.43 ) (0.02 ) 9.56 1995.................................... 9.42 0.42 0.21 (0.42 ) -- 9.63 1994(2)................................. 10.00 0.14 (0.58 ) (0.14 ) -- 9.42 - ---------------------------- INVESTMENT GRADE BOND FUND - ---------------------------- Trust Shares 1998.................................... $ 10.16 $ 0.60 $ 0.49 $ (0.60 ) $ -- $ 10.65 1997.................................... 10.07 0.60 0.09 (0.60 ) -- 10.16 1996.................................... 10.26 0.60 (0.19 ) (0.60 ) -- 10.07 1995.................................... 9.89 0.61 0.37 (0.61 ) -- 10.26 1994.................................... 10.45 0.50 (0.36 ) (0.50 ) (0.20 ) 9.89 - ---------------------------------------- INVESTMENT GRADE TAX-EXEMPT BOND FUND - ---------------------------------------- Trust Shares 1998.................................... $ 11.22 $ 0.44 $ 0.50 $ (0.44 ) $ (0.32 ) $ 11.40 1997.................................... 11.10 0.44 0.33 (0.44 ) (0.21 ) 11.22 1996.................................... 11.28 0.45 0.19 (0.45 ) (0.37 ) 11.10 1995.................................... 10.68 0.46 0.60 (0.46 ) -- 11.28 1994(3)................................. 11.37 0.22 (0.34 ) (0.22 ) (0.35 ) 10.68 RATIO OF NET RATIO OF INVESTMENT RATIO OF EXPENSES TO NET ASSETS END EXPENSES TO INCOME TO AVERAGE NET ASSETS TOTAL OF PERIOD AVERAGE NET AVERAGE NET (EXCLUDING WAIVERS RETURN(A) (000) ASSETS ASSETS AND REIMBURSEMENTS) ------------- -------------- ------------- -------------- -------------------- - ----------------------------- FLORIDA TAX-EXEMPT BOND FUND - ----------------------------- Trust Shares 1998.................................... 8.77 % $ 93,939 0.66 % 4.16 % 0.80 % 1997.................................... 7.22 50,487 0.65 4.48 0.80 1996.................................... 3.87 30,790 0.65 4.49 0.88 1995.................................... 9.26 10,118 0.65 4.63 1.13 1994(1)................................. (1.19)** 3,192 0.65 * 3.86 * 1.12 * - ------------------------------ GEORGIA TAX-EXEMPT BOND FUND - ------------------------------ Trust Shares 1998.................................... 8.37 % $ 62,363 0.66 % 4.09 % 0.81 % 1997.................................... 6.79 39,732 0.65 4.31 0.81 1996.................................... 3.89 22,950 0.65 4.36 0.89 1995.................................... 6.94 13,187 0.65 4.56 0.98 1994(2)................................. (4.43)** 4,338 0.65 * 4.12 * 1.06 * - ---------------------------- INVESTMENT GRADE BOND FUND - ---------------------------- Trust Shares 1998.................................... 10.92 % $ 793,488 0.76 % 5.67 % 0.86 % 1997.................................... 6.99 633,646 0.75 5.89 0.85 1996.................................... 4.02 599,514 0.75 5.81 0.87 1995.................................... 10.39 543,308 0.75 6.22 0.88 1994.................................... 1.17 460,538 0.75 4.77 0.88 - ---------------------------------------- INVESTMENT GRADE TAX-EXEMPT BOND FUND - ---------------------------------------- Trust Shares 1998.................................... 8.57 % $ 146,606 0.76 % 3.83 % 0.88 % 1997.................................... 7.13 139,144 0.75 3.96 0.86 1996.................................... 5.82 124,507 0.75 4.01 0.89 1995.................................... 10.21 78,208 0.75 4.34 0.91 1994(3)................................. (1.10)** 44,595 0.75 * 3.46 * 0.95 * RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (EXCLUDING WAIVERS PORTFOLIO AND REIMBURSEMENTS) TURNOVER RATE -------------------- ------------- - ----------------------------- FLORIDA TAX-EXEMPT BOND FUND - ----------------------------- Trust Shares 1998.................................... 4.02 % 69 % 1997.................................... 4.33 135 1996.................................... 4.26 63 1995.................................... 4.15 105 1994(1)................................. 3.39 * 53 - ------------------------------ GEORGIA TAX-EXEMPT BOND FUND - ------------------------------ Trust Shares 1998.................................... 3.94 % 7 % 1997.................................... 4.15 15 1996.................................... 4.12 60 1995.................................... 4.23 25 1994(2)................................. 3.71 * 26 - ---------------------------- INVESTMENT GRADE BOND FUND - ---------------------------- Trust Shares 1998.................................... 5.57 % 109 % 1997.................................... 5.79 298 1996.................................... 5.69 184 1995.................................... 6.09 238 1994.................................... 4.64 259 - ---------------------------------------- INVESTMENT GRADE TAX-EXEMPT BOND FUND - ---------------------------------------- Trust Shares 1998.................................... 3.71 % 378 % 1997.................................... 3.85 489 1996.................................... 3.87 514 1995.................................... 4.18 592 1994(3)................................. 3.26 * 432
* Annualized ** Return is for the period indicated and has not been annualized. (1) Commenced operations on January 25, 1994. (2) Commenced operations on January 18, 1994. (3) Commenced operations on October 21, 1993. (A) Total return figures do not reflect applicable sales loads. PROSPECTUS 29 HISTORICAL FINANCIAL INFORMATION
NET ASSET NET REALIZED DISTRIBUTIONS VALUE NET GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED VALUE END OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS OF PERIOD ----------- ------------- ------------- ------------- ------------- ----------- - --------------------------------------------- LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND - --------------------------------------------- Trust Shares 1998.................................... $ 10.02 $ 0.58 $ 0.11 $ (0.58 ) $ (0.01 ) $ 10.12 1997.................................... 9.99 0.58 0.04 (0.58 ) (0.01 ) 10.02 1996.................................... 10.11 0.62 (0.14 ) (0.60 ) -- 9.99 1995(4)................................. 10.00 0.58 0.13 (0.60 ) -- 10.11 - ---------------------- SHORT-TERM BOND FUND - ---------------------- Trust Shares 1998.................................... $ 9.90 $ 0.55 $ 0.16 $ (0.55 ) $ (0.01 ) $ 10.05 1997.................................... 9.86 0.53 0.07 (0.53 ) (0.03 ) 9.90 1996.................................... 9.98 0.54 (0.10 ) (0.54 ) (0.02 ) 9.86 1995.................................... 9.79 0.53 0.19 (0.53 ) -- 9.98 1994.................................... 10.01 0.42 (0.21 ) (0.42 ) (0.01 ) 9.79 - --------------------------------------- SHORT-TERM U.S. TREASURY SECURITIES FUND - --------------------------------------- Trust Shares 1998.................................... $ 9.88 $ 0.51 $ 0.10 $ (0.52 ) $ -- $ 9.97 1997.................................... 9.84 0.51 0.04 (0.51 ) -- 9.88 1996.................................... 9.93 0.55 (0.09 ) (0.55 ) -- 9.84 1995.................................... 9.82 0.47 0.11 (0.47 ) -- 9.93 1994.................................... 9.98 0.33 (0.11 ) (0.33 ) (0.05 ) 9.82 - ------------------------------- U.S. GOVERNMENT SECURITIES FUND - ------------------------------- Trust Shares 1998.................................... $ 10.02 $ 0.61 $ 0.44 $ (0.61 ) $ -- $ 10.46 1997.................................... 9.91 0.62 0.11 (0.62 ) -- 10.02 1996.................................... 10.27 0.62 (0.33 ) (0.62 ) (0.03 ) 9.91 1995(5)................................. 9.98 0.53 0.29 (0.53 ) -- 10.27 - --------------------------------- PRIME QUALITY MONEY MARKET FUND - --------------------------------- Trust Shares 1998.................................... $ 1.00 $ 0.05 $ -- $ (0.05 ) $ -- $ 1.00 1997.................................... 1.00 0.05 -- (0.05 ) -- 1.00 1996.................................... 1.00 0.05 -- (0.05 ) -- 1.00 1995.................................... 1.00 0.05 -- (0.05 ) -- 1.00 1994.................................... 1.00 0.03 -- (0.03 ) -- 1.00 - ------------------------------- TAX-EXEMPT MONEY MARKET FUND - ------------------------------- Trust Shares 1998.................................... $ 1.00 $ 0.03 $ -- $ (0.03 ) $ -- $ 1.00 1997.................................... 1.00 0.03 -- (0.03 ) -- 1.00 1996.................................... 1.00 0.03 -- (0.03 ) -- 1.00 1995.................................... 1.00 0.03 -- (0.03 ) -- 1.00 1994.................................... 1.00 0.02 -- (0.02 ) -- 1.00 - ---------------------------------------------- U.S. GOVERNMENT SECURITIES MONEY MARKET FUND - ---------------------------------------------- Trust Shares 1998.................................... $ 1.00 $ 0.05 $ -- $ (0.05 ) $ -- $ 1.00 1997.................................... 1.00 0.05 -- (0.05 ) -- 1.00 1996.................................... 1.00 0.05 -- (0.05 ) -- 1.00 1995.................................... 1.00 0.05 -- (0.05 ) -- 1.00 1994.................................... 1.00 0.03 -- (0.03 ) -- 1.00 RATIO OF NET RATIO OF INVESTMENT RATIO OF EXPENSES TO NET ASSETS END EXPENSES TO INCOME TO AVERAGE NET ASSETS TOTAL OF PERIOD AVERAGE NET AVERAGE NET (EXCLUDING WAIVERS RETURN(A) (000) ASSETS ASSETS AND REIMBURSEMENTS) ------------- -------------- ------------- -------------- -------------------- - -------------------------------------------- LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUN - -------------------------------------------- Trust Shares 1998.................................... 7.12 % $ 137,488 0.66 % 5.75 % 0.77 % 1997.................................... 6.43 123,903 0.65 5.81 0.78 1996.................................... 4.84 73,370 0.65 6.04 0.84 1995(4)................................. 7.50 ** 41,823 0.65 * 6.43 * 0.93 * - ---------------------- SHORT-TERM BOND FUND - ---------------------- Trust Shares 1998.................................... 7.31 % $ 120,422 0.66 % 5.47 % 0.79 % 1997.................................... 6.30 89,701 0.65 5.37 0.78 1996.................................... 4.45 91,156 0.65 5.39 0.81 1995.................................... 7.60 60,952 0.65 5.49 0.85 1994.................................... 2.02 34,772 0.65 4.15 0.85 - --------------------------------------- SHORT-TERM U.S. TREASURY SECURITIES FUND - --------------------------------------- Trust Shares 1998.................................... 6.30 % $ 46,920 0.66 % 5.19 % 0.84 % 1997.................................... 5.76 21,988 0.65 5.23 0.92 1996.................................... 4.73 10,149 0.65 5.56 1.00 1995.................................... 6.11 9,599 0.65 4.91 1.08 1994.................................... 2.17 12,723 0.65 3.23 0.81 - ------------------------------- U.S. GOVERNMENT SECURITIES FUND - ------------------------------- Trust Shares 1998.................................... 10.76 % $ 34,899 0.76 % 5.93 % 0.92 % 1997.................................... 7.54 19,471 0.75 6.19 1.02 1996.................................... 2.77 10,277 0.75 6.05 1.25 1995(5)................................. 8.64 ** 3,291 0.75 * 6.67 * 3.33 * - --------------------------------- PRIME QUALITY MONEY MARKET FUND - --------------------------------- Trust Shares 1998.................................... 5.22 % $ 1,880,229 0.59 % 5.10 % 0.77 % 1997.................................... 5.01 1,086,555 0.58 4.90 0.76 1996.................................... 5.25 1,050,800 0.58 5.11 0.78 1995.................................... 4.79 799,189 0.58 4.77 0.79 1994.................................... 2.88 583,399 0.58 2.86 0.79 - ------------------------------- TAX-EXEMPT MONEY MARKET FUND - ------------------------------- Trust Shares 1998.................................... 3.21 % $ 448,023 0.51 % 3.14 % 0.67 % 1997.................................... 3.09 333,006 0.50 3.04 0.66 1996.................................... 3.28 273,613 0.50 3.23 0.68 1995.................................... 3.10 215,413 0.45 3.12 0.70 1994.................................... 2.08 143,982 0.42 2.05 0.71 - -------------------------------------------- U.S. GOVERNMENT SECURITIES MONEY MARKET FUND - -------------------------------------------- Trust Shares 1998.................................... 5.04 % $ 377,490 0.62 % 4.92 % 0.78 % 1997.................................... 4.83 344,350 0.61 4.73 0.76 1996.................................... 5.14 325,493 0.61 5.02 0.78 1995.................................... 4.67 434,111 0.61 4.64 0.80 1994.................................... 2.77 309,228 0.61 2.69 0.77 RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (EXCLUDING WAIVERS PORTFOLIO AND REIMBURSEMENTS) TURNOVER RATE -------------------- ------------- - -------------------------------------------- LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUN - -------------------------------------------- Trust Shares 1998.................................... 5.64 % 163 % 1997.................................... 5.68 133 1996.................................... 5.85 83 1995(4)................................. 6.15 * 68 - ---------------------- SHORT-TERM BOND FUND - ---------------------- Trust Shares 1998.................................... 5.34 % 87 % 1997.................................... 5.24 118 1996.................................... 5.23 163 1995.................................... 5.29 200 1994.................................... 3.95 75 - --------------------------------------- SHORT-TERM U.S. TREASURY SECURITIES FUND - --------------------------------------- Trust Shares 1998.................................... 5.01 % 39 % 1997.................................... 4.96 93 1996.................................... 5.21 94 1995.................................... 4.48 88 1994.................................... 3.07 117 - ------------------------------- U.S. GOVERNMENT SECURITIES FUND - ------------------------------- Trust Shares 1998.................................... 5.77 % 14 % 1997.................................... 5.92 21 1996.................................... 5.55 83 1995(5)................................. 4.09 * 30 - --------------------------------- PRIME QUALITY MONEY MARKET FUND - --------------------------------- Trust Shares 1998.................................... 4.92 % 1997.................................... 4.72 1996.................................... 4.91 1995.................................... 4.56 1994.................................... 2.65 - ------------------------------- TAX-EXEMPT MONEY MARKET FUND - ------------------------------- Trust Shares 1998.................................... 2.98 % 1997.................................... 2.88 1996.................................... 3.05 1995.................................... 2.87 1994.................................... 1.76 - -------------------------------------------- U.S. GOVERNMENT SECURITIES MONEY MARKET FUND - -------------------------------------------- Trust Shares 1998.................................... 4.76 % 1997.................................... 4.58 1996.................................... 4.85 1995.................................... 4.45 1994.................................... 2.53
* Annualized ** Return is for the period the indicated and has not been annualized. (4) Commenced operations on June 7, 1994. (5) Commenced operations on July 31, 1994. (A) Total return figures do not reflect applicable sales loads. 30 PROSPECTUS OTHER INFORMATION DIVIDENDS AND DISTRIBUTIONS Each Fund declares income dividends daily and pays these dividends monthly. The Funds make distributions of capital gains, if any, at least annually. 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 us in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after we receive your written notice. To cancel your election, simply send us written notice. SIMPLY SPEAKING . . . THE "RECORD DATE" If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. TAXES PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Capital gains distributions may be taxable at different rates depending on the length of time a Fund holds its portfolio securities. YOU MAY BE TAXED ON EACH SALE OF FUND SHARES. The Investment Grade Tax-Exempt Bond, Florida Tax-Exempt Bond, Georgia Tax-Exempt Bond, and Tax-Exempt Money Market Funds 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. The Funds use a tax management technique known as "highest in, first out." Using this technique, the portfolio holdings that have experienced the smallest gain or largest loss are sold first in an effort to minimize capital gains and enhance after-tax returns. MORE INFORMATION ABOUT TAXES IS IN OUR STATEMENT OF ADDITIONAL INFORMATION. SIMPLY SPEAKING . . . FUND DISTRIBUTIONS Distributions you receive from a Fund may be taxable whether or not you reinvest them. PROSPECTUS 31 HOW TO OBTAIN MORE INFORMATION INVESTMENT ADVISORS STI Capital Management, N.A. Trusco Capital Management, Inc. SunTrust Bank, Atlanta DISTRIBUTOR SEI Investments Distribution Co. LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) More detailed information about the STI Classic Funds is included in our SAI. The SAI has been filed 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 SEMIANNUAL REPORTS These reports list the Funds' holdings and contain information from the Funds' managers about fund strategies and recent market conditions and trends. TO OBTAIN MORE INFORMATION: BY TELEPHONE: Call 1-800-874-4770 BY MAIL: Write to us c/o SEI Investments Distribution Co. Oaks, Pennsylvania 19456. BY E-MAIL: xxxxxxxxxxxxxxxx BY INTERNET: http://www.suntrust.com FROM THE SEC: You can also obtain these documents, and other information about the STI Classic Funds, from 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 call 1-800-SEC-0330). 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 20549-6009. The Fund's Investment Company Act registration number is 811-06557. [GRAPHIC] STI CLASSIC FUNDS-EQUITY FUNDS TRUST SHARES PROSPECTUS October 1, 1998 BALANCED FUND CAPITAL GROWTH FUND EMERGING MARKETS EQUITY FUND INTERNATIONAL EQUITY FUND INTERNATIONAL EQUITY INDEX FUND MID-CAP EQUITY FUND SMALL CAP EQUITY FUND SMALL CAP GROWTH STOCK FUND SUNBELT EQUITY FUND TAX SENSITIVE GROWTH STOCK FUND VALUE INCOME STOCK FUND INVESTMENT ADVISORS TO THE FUNDS: STI CAPITAL MANAGEMENT, N.A. TRUSCO CAPITAL MANAGEMENT, INC. (the "Advisors") ----------------- STI Classic Funds ----------------- The Securities and Exchange Commission has not approved any Fund shares or determined whether this prospectus is accurate or complete. It is a crime for anyone to tell you otherwise. PROSPECTUS HOW TO READ THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers different classes of 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. We arranged the prospectus into different sections so that you can easily review this important information. On the next page, we discuss general information you should know about investing in the Funds. IF YOU WOULD LIKE MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE: 2 BALANCED FUND 4 CAPITAL GROWTH FUND 6 EMERGING MARKETS EQUITY FUND 8 INTERNATIONAL EQUITY FUND 10 INTERNATIONAL EQUITY INDEX FUND 12 MID-CAP EQUITY FUND 14 SMALL CAP EQUITY FUND 16 SMALL CAP GROWTH STOCK FUND 18 SUNBELT EQUITY FUND 20 TAX SENSITIVE GROWTH STOCK FUND 22 VALUE INCOME STOCK FUND IF YOU WOULD LIKE MORE INFORMATION ABOUT THE FOLLOWING TOPICS, PLEASE SEE: 24 EACH FUND'S PRINCIPAL INVESTMENTS 24 THE ADVISORS AND THEIR PORTFOLIO MANAGERS 25 PURCHASING, SELLING AND EXCHANGING FUND SHARES 27 HISTORICAL FINANCIAL INFORMATION ABOUT EACH FUND 29 DISTRIBUTIONS OF DIVIDENDS AND CAPITAL GAINS 29 TAXES 31 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS
FOR INFORMATION ABOUT KEY TERMS AND CONCEPTS, LOOK FOR OUR "SIMPLY SPEAKING" EXPLANATIONS. - -------------------------------------------------------------------------------- FUND SUMMARY INVESTMENT STRATEGY WHAT ARE THE RISKS OF INVESTING? PERFORMANCE INFORMATION WHAT IS AN INDEX? FUND FEES AND EXPENSES FUND INVESTMENTS INVESTMENT ADVISORS PURCHASING FUND SHARES - -------------------------------------------------------------------------------- OCTOBER 1, 1998 PROSPECTUS 1 INTRODUCTION Each Fund is a mutual fund. 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 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 securities markets generally, as well as those that affect particular companies or governments. These price movements, sometimes called volatility, will vary depending on the types of securities a Fund owns and the markets where these securities trade. The Equity Funds invest primarily in common stocks and other equity securities. Historically, equity securities have outperformed other types of investments on a long-term basis, but have been more subject to price fluctuation in the short run. Like other investments, you could lose money on your investment in a Fund. Your investment in a Fund is not a bank deposit. It is not insured or guaranteed by the FDIC or any government agency. Each Fund has its own investment goal and strategies for reaching that goal. But, we cannot guarantee that a Fund will achieve its goal. A Fund's goal may be changed without shareholder approval. Before investing, make sure that the Fund's goal matches your own. The Investment Advisors invest each Fund's assets in a way that the Advisor believes will help the Fund achieve its goal. An Advisor's judgments about the stock markets, economy and companies, or selecting investments may not reflect actual market movements, economic conditions or company performance. 2 PROSPECTUS BALANCED FUND FUND SUMMARY INVESTMENT GOALS Capital appreciation and current income INVESTMENT FOCUS PRIMARY U.S. common stocks SECONDARY Bonds SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT Attempts to identify companies with a history of STRATEGY earnings growth and bonds with minimal risk INVESTOR PROFILE Investors who want income from their investment as well as an increase in its value
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
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, we attempt to identify high-quality companies with a history of earnings growth. In selecting bonds, we try 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 taxes. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests in both common stocks and bonds. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. In addition, the value of bonds held by the Fund may decline due to rising interest rates. An issuer may be unable to make timely payments of principal or interest. The Fund may have more assets than usual invested in bonds during periods of rising interest rates or less assets than usual invested in bonds during falling interest rates. Some investment grade bonds may have speculative characteristics. Fixed income securities, regardless of credit quality, also experience price volatility, especially in response to interest rate changes. 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.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1995 25.51% 1996 12.13% 1997 21.14%
BEST QUARTER WORST QUARTER 11.21% .80% (6/30/97) (3/31/97)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 12.62%. PROSPECTUS 3 BALANCED FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE S&P 500 INDEX AND THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX.
SINCE FUND INCEPTION 1 YEAR 3 YEARS (1/3/94) BALANCED FUND 21.14% 19.46% 13.03% S&P 500 INDEX 33.35% 31.13% 23.48% LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX 9.75% 10.43% 6.92%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor 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 index of 500 stocks designed to mimic the overall equity market's industry weightings. The Lehman Government/ Corporate Bond Index is a widely recognized index of government and corporate debt securities rated investment grade or better, with maturities of at least 1 year. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees .95% Other Expenses .14% --------- Total Annual Fund Operating Expenses 1.09%
- -------------------------------------------------- EXAMPLE - -------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $111 $347 $601 $1329
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .83% AND .97%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors." 4 PROSPECTUS CAPITAL GROWTH FUND FUND SUMMARY INVESTMENT GOAL Capital appreciation INVESTMENT FOCUS U.S. common stocks SHARE PRICE VOLATILITY Medium PRINCIPAL INVESTMENT Attempts to identify companies with above average STRATEGY growth potential INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need to receive income on their investment
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
INVESTMENT STRATEGY The Capital Growth Fund invests primarily in U.S. common stocks and other equity securities that we believe are undervalued by the stock market. In selecting investments for the Fund, we choose companies that we believe have above average growth potential. We rotate the Fund's investments among various market sectors based on our research of business cycles. Our strategy focuses on large-cap stocks with a strong growth history. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains taxes. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in U.S. common stocks. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. 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.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1993 9.89% 1994 -7.41% 1995 31.15% 1996 20.31% 1997 31.13%
BEST QUARTER WORST QUARTER 17.09% -4.09% (6/30/97) (12/31/94)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 17.25%. PROSPECTUS 5 CAPITAL GROWTH FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE S&P 500 INDEX.
SINCE INCEPTION 1 YEAR 5 YEARS (7/1/92) CAPITAL GROWTH FUND 31.13% 16.05% 17.02% S&P 500 INDEX 33.35% 20.25% 20.32%
SIMPLY SPEAKING . . . 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 advisor 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 index of 500 stocks designed to mimic the overall equity market's industry weightings. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.15% Other Expenses .13% --------- Total Annual Fund Operating Expenses 1.28%
- -------------------------------------------------- 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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $130 $406 $702 $1545
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.04% AND 1.17%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors." 6 PROSPECTUS EMERGING MARKETS EQUITY FUND FUND SUMMARY INVESTMENT GOAL Long term capital appreciation INVESTMENT FOCUS Undervalued foreign common stocks SHARE PRICE VOLATILITY Very High PRINCIPAL INVESTMENT Focus on individual stocks and companies in an STRATEGY attempt to identify attractively priced investments INVESTOR PROFILE Aggressive long-term investors who are willing to accept the volatility of of emerging markets for the possibility of higher returns
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
INVESTMENT STRATEGY The Emerging Markets Equity Fund invests primarily in common stocks and other equity securities of foreign issuers located in emerging market countries. An emerging market country is a country that the World Bank or the United Nations considers to be emerging or developing. Our "bottom-up" strategy focuses on individual stocks and companies. Through research, we attempt to identify investments that we feel are attractively priced relative to the current market. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in common stocks of foreign companies. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. Investments in foreign markets may be more volatile than investments in U.S. markets. Investments in emerging foreign markets may be more volatile than investments in developed foreign markets. Diplomatic, political or economic developments in a foreign country may cause investments in that country to lose money. These developments may occur more frequently in emerging market countries. Emerging market securities may be even more susceptible to political or economic developments than those in more developed countries. The value of the U.S. dollar may rise, causing reduced returns for U.S. persons investing abroad. A foreign country may not have the same accounting and financial reporting standards as the U.S. Some emerging market countries may have little to no accounting or financial reporting standards. Foreign stock markets, brokers and companies are generally subject to less supervision and regulation than their U.S. counterparts. There may be little to no supervision and regulation in some emerging market countries. 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 Advisor's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Advisor'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 THE FUND'S PERFORMANCE DURING 1997.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1997 (3.43%)
BEST QUARTER WORST QUARTER 10.29% -17.26% (3/31/97) (12/31/97)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS -6.26%. PROSPECTUS 7 EMERGING MARKETS EQUITY FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS FREE INDEX.
SINCE INCEPTION 1 YEAR (3/29/96) EMERGING MARKETS EQUITY FUND -3.43% -9.90% MSCI EMERGING MARKETS FREE INDEX -13.40% -8.51%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Morgan Stanley Capital International Emerging Markets Free Index is a widely recognized index of 500 stocks from approximately 17 different emerging market countries. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.30% Other Expenses .49% --------- Total Annual Fund Operating Expenses 1.79%
- -------------------------------------------------- EXAMPLE - -------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $182 $563 $970 $2105
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.08% AND 1.57%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors." 8 PROSPECTUS INTERNATIONAL EQUITY FUND FUND SUMMARY INVESTMENT GOAL Long-term capital appreciation INVESTMENT FOCUS Foreign common stocks SHARE PRICE VOLATILITY High PRINCIPAL INVESTMENT Attempts to identify undervalued companies with STRATEGY good fundamentals 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
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
INVESTMENT STRATEGY The International Equity Fund invests primarily in common stocks and other equity securities of foreign companies. In selecting investments for the Fund, we diversify the Fund's investments among at least three foreign countries. The Fund invests primarily in developed countries, but may invest in countries with emerging markets. Our "bottom-up" approach to stock selection focuses on individual stocks and fundamental characteristics of companies. Our goal is to find companies with top management, quality products and sound financial positions, that are trading at a discount. 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 taxes. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in common stocks of foreign companies. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. In addition, investments in foreign markets may be more volatile than investments in U.S. markets. Diplomatic, political or economic developments may cause foreign investments to lose money. The value of the U.S. dollar may rise, causing reduced returns for U.S. persons investing abroad. A foreign country may not have the same accounting and financial reporting standards as the U.S. Foreign stock markets, brokers and companies are generally subject to less supervision and regulation than their U.S. counterparts. Emerging markets securities may be even more susceptible to these risks. 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 Advisor's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Advisor'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 FUND'S PERFORMANCE FROM YEAR TO YEAR.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1996 22.08% 1997 13.35%
BEST QUARTER WORST QUARTER 12.19% -7.79% (6/30/97) (12/31/97)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 16.44%. PROSPECTUS 9 INTERNATIONAL EQUITY FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA AND FAR EAST (MSCI-EAFE) INDEX.
SINCE INCEPTION 1 YEAR (2/2/95) INTERNATIONAL EQUITY FUND 13.35% 19.05% MSCI EAFE INDEX 1.78% 6.47%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Morgan Stanley Capital International EAFE Index is a widely recognized index of over 900 securities listed on the stock exchanges in Europe, Australia and the Far East. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.25% Other Expenses .24% --------- Total Annual Fund Operating Expenses 1.49%
- -------------------------------------------------- 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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $152 $471 $813 $1779
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.24% AND 1.48%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors." 10 PROSPECTUS INTERNATIONAL EQUITY INDEX FUND FUND SUMMARY INVESTMENT GOAL To provide investment results that correspond to the performance of the MSCI EAFE-GDP Index INVESTMENT FOCUS Foreign common stocks in MSCI EAFE-GDP Index SHARE PRICE VOLATILITY High PRINCIPAL INVESTMENT Statistical analysis to track the Index STRATEGY 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
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
INVESTMENT STRATEGY The International Equity Index Fund invests primarily in common stocks of foreign companies. In selecting investments for the Fund, we choose companies included in the MSCI EAFE-GDP Index, an index of equity securities of companies located in Europe, Australia 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. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in common stocks of foreign companies. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. In addition, investments in foreign markets may be more volatile than investments in U.S. markets. Diplomatic, political or economic developments may cause foreign investments to lose money. The value of the U.S. dollar may rise, causing reduced returns for U.S. persons investing abroad. A foreign country may not have the same accounting and financial reporting standards as the U.S. Foreign stock markets, brokers and companies are generally subject to less supervision and regulation than their U.S. counterparts. Emerging markets securities may be even more susceptible to these risks. 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.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1995 10.73% 1996 6.04% 1997 8.99%
BEST QUARTER WORST QUARTER 11.84% -5.5% (6/30/97) (12/31/97)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 23.22%. PROSPECTUS 11 INTERNATIONAL EQUITY INDEX FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA AND FAR EAST-GROSS DOMESTIC PRODUCT (MSCI EAFE-GDP) WEIGHTED INDEX.
SINCE INCEPTION 1 YEAR 3 YEARS (9/1/94) INTERNATIONAL EQUITY INDEX FUND 8.99% 8.57% 6.39% MSCI EAFE-GDP INDEX 4.35% 6.62% 5.26%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The MSCI EAFE-GDP Index is a widely recognized index of over 900 securities listed on the stock exchanges in Europe, Australia and the Far East. The Index is weighted by the gross domestic product of the various countries in the index. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees .90% Other Expenses .29% --------- Total Annual Fund Operating Expenses 1.19%
- -------------------------------------------------- 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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $121 $378 $654 $1443
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE .77% AND 1.07%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors." 12 PROSPECTUS MID-CAP EQUITY FUND FUND SUMMARY INVESTMENT GOAL Capital appreciation INVESTMENT FOCUS U.S. mid-cap common stocks SHARE PRICE VOLATILITY Moderate to high PRINCIPAL INVESTMENT Attempts to identify companies with above average STRATEGY 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
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
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, we choose companies that have small- to mid-sized market capitalizations (i.e., companies with market capitalizations of $500 million to $7 billion) and that have above average growth potentials at attractive prices. We evaluate companies based on their industry sectors and the market in general. The Fund maintains large holdings in the industries that appear to perform best during a given business cycle. We analyze companies that are in favored industries based on their fundamental characteristics, such as growth rates and earnings. We do not consider current income in selecting investments for the Fund. 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 taxes. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in mid-cap common stocks. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. In addition, small- to mid-sized companies may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these companies may have somewhat limited product lines, markets and financial resources, and may depend upon a relatively small- to medium-sized management group. 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.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1995 31.22% 1996 15.42% 1997 21.23%
BEST QUARTER WORST QUARTER 14.22% -2.89% (9/30/97) (3/31/97)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 6.66%. PROSPECTUS 13 MID-CAP EQUITY FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE S&P MIDCAP 400 INDEX.
SINCE INCEPTION 1 YEAR 3 YEARS (1/3/94) MID-CAP EQUITY FUND 21.23% 22.45% 32.54% S&P MIDCAP 400 INDEX 32.23% 27.32% 18.95%
SIMPLY SPEAKING . . . WHAT IS AN INDEX? An index measures the market prices of securities in a particular market or market sector. You cannot invest directly in an index. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P MidCap 400 Index is a widely recognized index of 400 U.S. mid-cap common stocks chosen for market size, liquidity and industry group representation. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.15% Other Expenses .13% --------- Total Annual Fund Operating Expenses 1.28%
- -------------------------------------------------- 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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $130 $406 $702 $1545
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.04% AND 1.17%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors." 14 PROSPECTUS SMALL CAP EQUITY FUND (CURRENTLY CLOSED TO NEW INVESTORS) FUND SUMMARY INVESTMENT GOALS PRIMARY Capital appreciation SECONDARY Current income INVESTMENT FOCUS U.S. small-cap common stocks SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT Attempts to identify undervalued small-cap stocks STRATEGY INVESTOR PROFILE Investors who primarily want the value of their investment to grow, but want to receive some income from their investment
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
INVESTMENT STRATEGY The Small Cap Equity Fund invests primarily in common stocks of U.S. companies. In selecting investments for the Fund, we choose common stocks of small sized companies (i.e., companies with market capitalizations under $1 billion) that we believe are undervalued in the market. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in small-cap common stocks. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. In addition, small sized companies may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, small-sized companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. 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 Advisor's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Advisor's collective fund was not a registered mutual fund so it as 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 FUND'S PERFORMANCE FROM YEAR TO YEAR.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1995 30.99% 1996 34.25% 1997 32.59%
BEST QUARTER WORST QUARTER 14.95% -2.11% (6/30/97) (12/31/97)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS -.08%. PROSPECTUS 15 SMALL CAP EQUITY FUND (CURRENTLY CLOSED TO NEW INVESTORS) THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE FRANK RUSSELL 2000 SMALL STOCK INDEX.
SINCE INCEPTION 1 YEAR 3 YEARS (8/31/94) SMALL CAP EQUITY FUND 32.59% 32.60% 29.40% FRANK RUSSELL 2000 SMALL STOCK INDEX 22.36% 22.34% 21.05%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Frank Russell 2000 Small Stock Index is a widely recognized index of the 2,000 smallest U.S. companies out of the 3,000 largest companies. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.15% Other Expenses .17% --------- Total Annual Fund Operating Expenses 1.32%
- -------------------------------------------------- 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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $134 $418 $723 $1590
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.05% AND 1.22%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors." 16 PROSPECTUS SMALL CAP GROWTH STOCK FUND (AVAILABLE FOR PURCHASE ON OCTOBER 7, 1998) 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 Identifies small-cap companies with above-average STRATEGY growth potential INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need current income
INVESTMENT STRATEGY The Small Cap Growth Fund invests primarily in U.S. companies that demonstrate above-average growth potential. We invest in companies with an established operating history and a solid balance sheet. In selecting investments for the Fund, we choose companies with market capitalizations of up to about $3 billion. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transactions costs and additional capital gains taxes. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in common stocks of smaller U.S. companies. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. In addition, investments in small-or mid-cap companies involve greater risk than investments in larger, more established companies because of the greater business risks of small size, limited markets and financial resources, smaller product lines and lack of depth of management. These securities are often traded over-the-counter and may not be traded in high volumes. Consequently, securities prices could be less stable than those of larger, more established companies. SIMPLY SPEAKING . . . 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 advisor 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 index of 500 stocks designed to mimic the overall equity market's industry weightings. PROSPECTUS 17 SMALL CAP GROWTH STOCK FUND (AVAILABLE FOR PURCHASE ON OCTOBER 7, 1998) FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. It shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.00% AND 1.20%, RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors." - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.15% Other Expenses* .20% --------- Total Annual Fund Operating Expenses 1.35%
* OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT YEAR. - -------------------------------------------------- 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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS $137 $428
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. 18 PROSPECTUS SUNBELT EQUITY FUND FUND SUMMARY INVESTMENT GOAL Capital appreciation INVESTMENT FOCUS Southern U.S. common stocks SHARE PRICE VOLATILITY High PRINCIPAL INVESTMENT Attempts to identify companies with positive STRATEGY earnings trends INVESTOR PROFILE Aggressive investors with long-term investment goals who are willing to accept higher volatility for the possibility of higher returns
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
INVESTMENT STRATEGY The Sunbelt Equity Fund invests substantially all of its assets in common stocks and other equity securities of companies in the southern region of the U.S. These companies are headquartered and/or conduct a substantial portion of their business in the southern region of the U.S., which includes Texas, Arkansas, Alabama, Mississippi, Tennessee, Kentucky, Florida, Virginia, Georgia, North Carolina, South Carolina and Louisiana. Our investment strategy is based on the belief that a portfolio of companies in this region with positive earnings trends will generate above-average returns over time. This focus on favorable earnings characteristics is the cornerstone of our philosophy. We do not consider current income in selecting investments for the Fund. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in southern U.S. common stocks. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. Because the Fund focuses its investments in southern companies, economic conditions in or government policies imposed by southern states may cause the Fund to be more volatile than an equity fund that invests in companies located across the U.S. 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 1994, when the Fund began operating, represent the performance of the Advisor's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Advisor'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 FUND'S PERFORMANCE FROM YEAR TO YEAR.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1988 25.33% 1989 25.72% 1990 4.38% 1991 49.78% 1992 18.80% 1993 22.70% 1994 -4.69% 1995 24.39% 1996 18.42% 1997 21.34%
BEST QUARTER WORST QUARTER 21.62% -19.36% (3/31/91) (12/31/87)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 5.98%. PROSPECTUS 19 SUNBELT EQUITY FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE FRANK RUSSELL 2000 GROWTH INDEX AND THE S&P SMALLCAP 600 INDEX.
SINCE INCEPTION 1 YEAR 5 YEARS 10 YEARS (12/1/80) SUNBELT EQUITY FUND 21.34% 15.89% 18.81% 14.28% FRANK RUSSELL 2000 GROWTH INDEX 12.95% 12.74% 13.49% 8.11% S&P SMALLCAP 600 INDEX 25.49% 17.48% 15.37% 9.35%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Frank Russell 2000 Index is a widely recognized index of the 2,000 largest U.S. companies with higher growth rates. The S&P SmallCap 600 Index is a widely recognized index of 600 U.S. small cap stocks. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.15% Other Expenses .13% --------- Total Annual Fund Operating Expenses 1.28%
- -------------------------------------------------- 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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $130 $406 $702 $1545
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.04% AND 1.17%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors." 20 PROSPECTUS TAX SENSITIVE GROWTH STOCK FUND (AVAILABLE FOR PURCHASE ON DECEMBER 15, 1998) FUND SUMMARY INVESTMENT GOAL Long-term capital growth, with nominal dividend income INVESTMENT FOCUS U.S. common stocks of growth companies SHARE PRICE VOLATILITY Medium PRINCIPAL INVESTMENT Attempts to identify companies that have STRATEGY above-average growth potential and uses a low portfolio turnover strategy to reduce capital gains distributions. INVESTOR PROFILE Taxable investors who want to increase the value of their investment while minimizing taxable capital gains distributions.
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
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. We invest the Fund's assets across all market capitalizations. We attempt 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. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund primarily invests in common stocks. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. In addition, the Fund may invest in small-cap companies. These companies involve greater risk than investments in larger, more established companies because of the greater business risks of small size, limited markets and financial resources, smaller product lines and lack of depth of management. These securities are often traded over-the-counter and may not be traded in high volumes. Consequently, securities prices could be less stable than those of larger, more established companies. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the 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 October 1998, when the Fund began operating, represent the performance of the Advisor's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for [Trust]/[Flex] shares of the Fund. The Advisor'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]
BEST QUARTER WORST QUARTER 18.10% -0.04% (6/30/97) (12/31/97)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 14.54%. PROSPECTUS 21 TAX SENSITIVE GROWTH STOCK FUND (AVAILABLE FOR PURCHASE ON DECEMBER 15, 1998) THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE S&P 500 INDEX.
SINCE INCEPTION 1 YEAR (12/31/95) TAX SENSITIVE GROWTH STOCK FUND 28.76% 24.84% S&P 500 INDEX 33.55% 24.34% LIPPER GROWTH AND INCOME AVERAGE 27.05
SIMPLY SPEAKING . . . 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 advisor 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 index of 500 stocks designed to mimic the overall equity market's industry weightings. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. The Fund fees and expenses below are in addition to the sales charges you may pay directly when you purchase or sell Fund shares. Sales charges are discussed on pages 3 and of this prospectus. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.15% Other Expenses* .20% --------- Total Annual Fund Operating Expenses 1.35%
* OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT YEAR. - -------------------------------------------------- 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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $137 $428 $739 $1624
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.00% AND 1.20%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors" and "Distribution of the Fund Shares." 22 PROSPECTUS VALUE INCOME STOCK FUND FUND SUMMARY INVESTMENT GOALS PRIMARY Current income SECONDARY Capital appreciation INVESTMENT FOCUS U.S. common stocks SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT Attempts to identify high dividend-paying, STRATEGY undervalued stocks INVESTOR PROFILE Investors who are looking for current income and capital appreciation with less volatility than the average stock fund
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
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, we primarily choose companies that have a market capitalization of at least $500 million and that have a history of paying regular dividends. We focus on high dividend-paying stocks that trade below their historical value. Our "bottom-up" approach to stock selection emphasizes individual stocks over economic trends. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in U.S. common stocks. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. In addition, common stocks held by the Fund may stop paying dividends or pay less in dividends than we expected. 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 Advisor's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Trust Shares of the Fund. The Advisor'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 FUND'S PERFORMANCE FROM YEAR TO YEAR.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1990 -4.93% 1991 39.30% 1992 20.05% 1993 11.14% 1994 3.54% 1995 35.93% 1996 19.46% 1997 27.08%
BEST QUARTER WORST QUARTER 18.56% -14.86% (3/31/91) (9/30/90)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 7.79%. PROSPECTUS 23 VALUE INCOME STOCK FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE S&P BARRA VALUE 500 INDEX.
SINCE INCEPTION 1 YEAR 5 YEARS (10/31/89) VALUE INCOME STOCK FUND 27.08% 18.88% 19.38% S&P/BARRA 500 INDEX 29.98% 20.68% 15.43%
SIMPLY SPEAKING . . . 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 advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P BARRA Value Index is a widely recognized index of U.S. common stock prices. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees .80% Other Expenses .17% --------- Total Annual Fund Operating Expenses .97%
- -------------------------------------------------- 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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may be different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS $99 $309 $536 $1190
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. 24 PROSPECTUS EACH FUND'S PRINCIPAL INVESTMENTS FUND INVESTMENTS The table below shows each Fund's principal investments. In other words, the table describes the type or types of investments that we believe will most likely help each Fund achieve its investment goal.
BALANCED CAPITAL EMERGING INTERNATIONAL INTERNATIONAL MID-CAP FUND GROWTH MARKETS EQUITY EQUITY EQUITY FUND EQUITY FUND INDEX FUND FUND - --------------------------------------------------------------------------------------- Bonds X - --------------------------------------------------------------------------------------- U.S. Stocks X X X - --------------------------------------------------------------------------------------- Foreign Stocks X X X - --------------------------------------------------------------------------------------- SMALL SMALL CAP SUNBELT TAX SENSITIVE VALUE CAP GROWTH STOCK EQUITY GROWTH STOCK INCOME EQUITY FUND FUND FUND STOCK FUND FUND - -------------------- Bonds - -------------------- U.S. Stocks X X X X X - -------------------- Foreign Stocks - --------------------
Each Fund also may invest in other securities, use other strategies and engage in other investment practices, which are described in detail in our Statement of Additional Information. Of course, we cannot guarantee that any Fund will achieve its investment goal. The investments listed above and the investments and strategies described throughout 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 Equity Fund also may invest in investment grade fixed income securities and mid- to large-cap common stocks. When a Fund is investing for temporary defensive purposes, it is not pursuing its investment goal. INVESTMENT ADVISORS The Investment Advisors make investment decisions for the Funds and continuously review, supervise and administer their Funds' respective investment program. The Board of Trustees supervises the Advisors and establishes policies that the Advisors must follow in their management activities. STI Capital Management, N.A. (STI), P.O. Box 3808, Orlando, Florida 32802, serves as the Advisor to the Balanced, Capital Growth, Emerging Markets Equity, International Equity, Mid-Cap Equity, Small Cap Equity, and Value Income Stock Funds. As of May 31, 1998, STI Capital had approximately 11.7 billion in assets under management. For the fiscal year ended May 31, 1998, STI Capital received advisory fees of: BALANCED FUND............................ .83% CAPITAL GROWTH FUND...................... 1.04% EMERGING MARKETS EQUITY FUND............. 1.08% INTERNATIONAL EQUITY FUND................ 1.24% MID-CAP EQUITY FUND...................... 1.04% SMALL CAP EQUITY FUND.................... 1.05% VALUE INCOME STOCK FUND.................. .80%
Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Advisor to the Small Cap Growth Stock, Sunbelt Equity Fund and the Tax Sensitive Growth Stock Fund. As of May 31, 1998, Trusco had approximately 22 billion in assets under management. For the fiscal year ended May 31, 1998, Trusco received advisory fees of 1.04%. STI and Trusco co-manage the International Equity Index Fund. For the fiscal year ended May 31, 1998, STI and Trusco received and shared advisory fees of .77%. The Advisors may use their affiliates as brokers for Fund transactions. PORTFOLIO MANAGERS Mr. Anthony Gray has served as Chairman and Chief Investment Officer of STI since 1979. He has managed the Capital Growth Fund since it began operating in June 1992. He has more than 30 years of investment experience. Mr. Mills Riddick, CFA, has served as Managing Director of STI since 1994. He has managed the Value Income Stock Fund since April 1995. He has more than 15 years of investment experience, and has been a portfolio manager at STI since 1989. Prior to joining STI, Mr. Riddick served as a broker with Drexel Burnham Lambert. PROSPECTUS 25 PURCHASING, SELLING AND EXCHANGING FUND SHARES Mr. Brett Barner, CFA, has served as Vice President of STI since 1994. He has managed the Small Cap Equity Fund since it began operating in January 1997. He has more than 10 years of investment experience and has been a portfolio manager with STI since 1990. Prior to joining STI, Mr. Barner served as a consultant with Drexel Burnham Lambert and Shearson Lehman Brothers. Mr. Elliott A. Perny has served as Senior Executive Vice President of STI since September 1992. He has managed the Mid-Cap Equity Fund since October 1996. He has more than 25 years of investment experience, and has served as a portfolio manager at STI since 1991. Prior to joining STI, Mr. Perny served as a portfolio manager at Florida National Bank and Atlantic Bank. The Balanced Fund is co-managed by Mr. Anthony R. Gray and Mr. L. Earl Denney, CFA. Mr. Gray manages the equity portion of the Fund. Mr. Denney, CFA, has served as Senior Vice President of STI since 1983, has more than 20 years of investment experience. Prior to joining STI, Mr. Denney served as a fixed income portfolio manager with American National Bank. Mr. James Foster has served as Vice President of Trusco since 1989. He has managed the Sunbelt Equity Fund since it began operating in January 1994. He has more than 27 years of investment experience. Mr. Ned Dau has served as Managing Director of STI since 1997. He has managed the International Equity and Emerging Markets Equity Funds since May 1997. He has more than years of investment experience. Prior to joining STI, he was a senior international equity analyst for American Express Financial Advisors from 1996 to 1997 and for the Principal Financial Group from 1992 to 1995. PURCHASING FUND SHARES HOW TO PURCHASE FUND SHARES Generally you may not purchase Trust Shares directly. Rather, Trust Shares are sold to financial institutions or intermediaries, including subsidiaries of SunTrust Banks, Inc. (SunTrust) on behalf of accounts for which they act as fiduciary, agent, investment advisor, or custodian. As a result, you, as a customer of a financial institution, may purchase Trust Shares through accounts maintained with financial institutions and potentially through the Preferred Portfolio 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. We may reject any purchase order if we determine that accepting the order would not be in the best interests of the STI Classic Funds or its shareholders. SIMPLY SPEAKING . . . 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 we receive your purchase order. We calculate each Fund's 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, if you want to receive the current Business Day's NAV, generally we must receive your purchase order from your financial institution before 4:00 p.m. Eastern time. 26 PROSPECTUS PURCHASING, SELLING AND EXCHANGING FUND SHARES SIMPLY SPEAKING . . . FOR CUSTOMERS OF OTHER FINANCIAL INSTITUTIONS You may have to transmit your purchase and sale requests to your financial institution 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 us. For more information about how to purchase or sell Fund shares through your financial institution, you should contact your financial institution directly. HOW WE CALCULATE NAV In calculating NAV, we generally value a Fund's portfolio at market price. If market prices are unavailable or we think that they are unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. Some Funds hold portfolio 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 NAV of these Funds' shares may change on days when you cannot purchase or sell Fund shares. SIMPLY SPEAKING . . . NET ASSET VALUE NAV for one Fund share is the value of that share's portion of all of the assets in the Fund. SELLING FUND SHARES HOW TO SELL YOUR FUND SHARES You may sell (sometimes called "redeem") your shares on any Business Day by contacting your financial institution. Your financial institution will give you information about how to sell your shares. The sale price of each share will be the next NAV determined after we receive your request from your financial institution. SIMPLY SPEAKING . . . TELEPHONE TRANSACTIONS Purchasing and selling Fund shares over the telephone is extremely convenient, but not without risk. Although we have certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, we are not responsible for any losses or costs incurred by following telephone instructions we reasonably believe to be genuine. If you or your financial institution transact with us over the telephone, you will generally bear the risk of any loss. REDEMPTIONS IN KIND We generally pay sale proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) we might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). Although it is highly unlikely that your shares would ever be redeemed in kind, you would probably have to pay brokerage 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 We may suspend your right to sell your shares if the NYSE restricts trading, the SEC declares an emergency or for other reasons. More information about this is in our Statement of Additional Information. PROSPECTUS 27 HISTORICAL FINANCIAL INFORMATION 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 has been audited by Arthur Andersen, LLP, independent public accountants. Their report, along with each Fund's financial statements, appears in our annual report that accompanies our Statement of Additional Information. You can obtain our annual report, which contains more performance information, at no charge by calling 1-800-874-4700. SIMPLY SPEAKING . . . FINANCIAL HIGHLIGHTS Study these tables to see how each Fund performed since it began investment operations.
NET REALIZED AND NET ASSET UNREALIZED DISTRIBUTIONS VALUE NET GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING OF INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED VALUE END OF PERIOD INCOME (LOSS) INVESTMENTS INCOME CAPITAL GAINS PERIOD ------------- ------------- ------------- ------------- ------------- ------------- - ------------- BALANCED FUND - ------------- Trust Shares 1998......................... $ 11.94 $ 0.31 $ 2.19 $ (0.32) $ (1.03) $ 13.09 1997......................... 11.55 0.33 1.47 (0.32) (1.09) 11.94 1996......................... 10.26 0.33 1.41 (0.34) (0.11) 11.55 1995......................... 9.76 0.33 0.49 (0.32) -- 10.26 1994(1)...................... 10.00 0.11 (0.29) (0.06) -- 9.76 - -------------------- CAPITAL GROWTH FUND - -------------------- Trust Shares 1998......................... $ 15.09 $ 0.09 $ 3.96 $ (0.09) $ (2.57) $ 16.48 1997......................... 14.90 0.12 3.13 (0.12) (2.94) 15.09 1996......................... 12.18 0.12 3.32 (0.13) (0.59) 14.90 1995......................... 11.99 0.16 0.57 (0.14) (0.40) 12.18 1994......................... 11.95 0.16 0.31 (0.17) (0.26) 11.99 - ----------------------------- EMERGING MARKETS EQUITY FUND - ----------------------------- Trust Shares 1998......................... $ 10.79 $ 0.16 $ (1.86) $ (0.08) $ (0.14) $ 8.87 1997(2)...................... 10.00 0.04 0.75 -- -- 10.79 - ------------------------ INTERNATIONAL EQUITY FUND - ------------------------ Trust Shares 1998......................... $ 13.63 $ 0.04 $ 2.69 $ (0.04) $ (1.32) $ 15.00 1997......................... 11.40 0.03 2.57 (0.02) (0.35) 13.63 1996(3)...................... 10.00 0.05 1.35 -- -- 11.40 RATIO OF NET RATIO OF INVESTMENT EXPENSES TO INCOME (LOSS) RATIO OF NET AVERAGE NET TO AVERAGE RATIO OF INVESTMENT ASSETS NET ASSETS NET ASSETS EXPENSES TO INCOME (LOSS) (EXCLUDING (EXCLUDING TOTAL RETURN END OF PERIOD AVERAGE NET TO AVERAGE WAIVERS AND WAIVERS AND (A) (000) ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) ------------- ------------- ------------- ------------- ------------- ------------- - ------------- BALANCED FUND - ------------- Trust Shares 1998......................... 22.15% $ 188,465 0.96% 2.51% 1.08% 2.39% 1997......................... 16.66 151,358 0.95 2.89 1.08 2.76 1996......................... 17.26 111,638 0.95 3.00 1.09 2.86 1995......................... 8.72 89,051 0.95 3.44 1.11 3.28 1994(1)...................... (1.78)** 90,579 0.95* 2.76* 1.25* 2.46* - -------------------- CAPITAL GROWTH FUND - -------------------- Trust Shares 1998......................... 29.51% $ 1,532,587 1.16% 0.61% 1.27% 0.50% 1997......................... 24.66 1,085,128 1.15 0.83 1.25 0.73 1996......................... 28.97 981,498 1.15 0.90 1.27 0.78 1995......................... 6.63 984,205 1.15 1.38 1.28 1.25 1994......................... 3.87 891,870 1.15 1.25 1.29 1.11 - ----------------------------- EMERGING MARKETS EQUITY FUND - ----------------------------- Trust Shares 1998......................... (15.74%) $ 34,554 1.56% 1.14% 1.78% 0.92% 1997(2)...................... 7.90** 39,495 1.55* 1.37* 2.04* 0.88* - ------------------------ INTERNATIONAL EQUITY FUND - ------------------------ Trust Shares 1998......................... 21.87% $ 628,870 1.47% 0.61% 1.48% 0.60% 1997......................... 23.29 489,325 1.46 0.51 1.51 0.46 1996(3)...................... 14.00** 213,306 1.46* 1.36* 1.65* 1.17* PORTFOLIO TURNOVER RATE ------------- - ------------- BALANCED FUND - ------------- Trust Shares 1998......................... 154% 1997......................... 197 1996......................... 155 1995......................... 157 1994(1)...................... 106 - -------------------- CAPITAL GROWTH FUND - -------------------- Trust Shares 1998......................... 194% 1997......................... 141 1996......................... 156 1995......................... 128 1994......................... 124 - ----------------------------- EMERGING MARKETS EQUITY FUND - ----------------------------- Trust Shares 1998......................... 74% 1997(2)...................... 24 - ------------------------ INTERNATIONAL EQUITY FUND - ------------------------ Trust Shares 1998......................... 108% 1997......................... 139 1996(3)...................... 113
* Annualized. ** Return is for period indicated and has not been annualized. (1) Commenced operations on January 3, 1994. (2) Commenced operations on January 31, 1997. (3) Commenced operations on December 1, 1995. 28 PROSPECTUS HISTORICAL FINANCIAL INFORMATION (A) Total return figures do not reflect applicable sales loads. PROSPECTUS 29
NET REALIZED AND NET ASSET UNREALIZED DISTRIBUTIONS VALUE NET GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING OF INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED VALUE END OF PERIOD INCOME (LOSS) INVESTMENTS INCOME CAPITAL GAINS PERIOD ------------- ------------- ------------- ------------- ------------- ------------- - ------------------------------ INTERNATIONAL EQUITY INDEX FUND - ------------------------------ Trust Shares 1998......................... $ 11.34 $ 0.11 $ 2.65 $ (0.11) $ (0.68) $ 13.31 1997......................... 10.96 0.10 0.69 (0.11) (0.30) 11.34 1996......................... 10.24 0.10 0.84 (0.13) (0.09) 10.96 1995(4)...................... 10.00 0.08 0.19 (0.02) (0.01) 10.24 - ----------------------- MID-CAP EQUITY FUND (B) - ----------------------- Trust Shares 1998......................... $ 13.21 $ -- $ 2.54 $ -- $ (1.96) $ 13.79 1997......................... 12.76 0.03 1.69 (0.05) (1.22) 13.21 1996......................... 11.00 0.08 2.63 (0.08) (0.87) 12.76 1995......................... 9.85 0.08 1.15 (0.08) -- 11.00 1994(5)...................... 10.00 0.02 (0.16) (0.01) -- 9.85 - --------------------- SMALL-CAP EQUITY FUND - --------------------- Trust Shares 1998......................... $ 11.07 $ 0.14 $ 2.41 $ (0.12) $ (0.62) $ 12.88 1997(2)...................... 10.00 0.05 1.04 (0.02) -- 11.07 - ------------------- SUNBELT EQUITY FUND - ------------------- Trust Shares 1998......................... $ 13.28 $ 0.01 $ 3.03 $ -- $ (1.20) $ 15.12 1997......................... 14.11 (0.09) 0.25 -- (0.99) 13.28 1996......................... 10.03 (0.04) 4.32 -- (0.20) 14.11 1995......................... 9.70 (0.01) 0.38 -- (0.04) 10.03 1994(1)...................... 10.00 -- (0.30) -- -- 9.70 - ------------------------ VALUE INCOME STOCK FUND - ------------------------ Trust Shares 1998......................... $ 13.71 $ 0.26 $ 2.62 $ (0.27) $ (2.42) $ 13.90 1997......................... 13.15 0.30 2.32 (0.30) (1.76) 13.71 1996......................... 11.59 0.35 2.71 (0.34) (1.16) 13.15 1995......................... 10.54 0.32 1.56 (0.32) (0.51) 11.59 1994......................... 10.23 0.29 0.70 (0.32) (0.36) 10.54 RATIO OF NET RATIO OF INVESTMENT EXPENSES TO INCOME (LOSS) RATIO OF NET AVERAGE NET TO AVERAGE RATIO OF INVESTMENT ASSETS NET ASSETS NET ASSETS EXPENSES TO INCOME (LOSS) (EXCLUDING (EXCLUDING TOTAL RETURN END OF PERIOD AVERAGE NET TO AVERAGE WAIVERS AND WAIVERS AND (A) (000) ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) ------------- ------------- ------------- ------------- ------------- ------------- - ------------------------------ INTERNATIONAL EQUITY INDEX FUND - ------------------------------ Trust Shares 1998......................... 25.82% $ 56,200 1.06% 0.88% 1.18% 0.76% 1997......................... 7.48 53,516 1.05 0.71 1.15 0.61 1996......................... 9.29 90,980 1.05 0.84 1.19 0.70 1995(4)...................... 2.69** 89,446 1.05* 1.13* 1.31* 0.87* - ----------------------- MID-CAP EQUITY FUND (B) - ----------------------- Trust Shares 1998......................... 21.14% $ 337,825 1.16% (0.29%) 1.27% (0.40%) 1997......................... 14.23 287,370 1.15 0.23 1.26 0.12 1996......................... 25.54 253,905 1.15 0.70 1.29 0.56 1995......................... 12.56 125,562 1.15 0.88 1.32 0.71 1994(5)...................... (1.39)** 57,036 1.15* 1.20* 1.68* 0.67* - --------------------- SMALL-CAP EQUITY FUND - --------------------- Trust Shares 1998......................... 23.59% $ 390,841 1.21% 1.07% 1.31% 0.97% 1997(2)...................... 10.97** 131,049 1.20* 1.86* 1.37* 1.69* - ------------------- SUNBELT EQUITY FUND - ------------------- Trust Shares 1998......................... 23.86% $ 431,921 1.16% (0.90%) 1.27% (1.01%) 1997......................... 1.48 381,371 1.15 (0.65) 1.26 (0.76) 1996......................... 43.19 412,430 1.15 (0.34) 1.28 (0.47) 1995......................... 3.81 258,908 1.15 (0.12) 1.30 (0.27) 1994(1)...................... (2.99)** 128,280 1.15* (0.19)* 1.58* (0.62)* - ------------------------ VALUE INCOME STOCK FUND - ------------------------ Trust Shares 1998......................... 23.10% $ 1,725,418 0.92% 1.85% 0.92% 1.85% 1997......................... 22.18 1,488,062 0.91 2.40 0.91 2.40 1996......................... 27.91 1,244,399 0.92 2.86 0.92 2.86 1995......................... 19.06 991,977 0.95 3.16 0.95 3.16 1994......................... 9.95 573,082 0.88 3.21 0.97 3.12 PORTFOLIO TURNOVER RATE ------------- - ------------------------------ INTERNATIONAL EQUITY INDEX FUND - ------------------------------ Trust Shares 1998......................... 1% 1997......................... 2 1996......................... 30 1995(4)...................... 10 - ----------------------- MID-CAP EQUITY FUND (B) - ----------------------- Trust Shares 1998......................... 129% 1997......................... 152 1996......................... 116 1995......................... 66 1994(5)...................... 8 - --------------------- SMALL-CAP EQUITY FUND - --------------------- Trust Shares 1998......................... 55% 1997(2)...................... 27 - ------------------- SUNBELT EQUITY FUND - ------------------- Trust Shares 1998......................... 70% 1997......................... 72 1996......................... 106 1995......................... 80 1994(1)...................... 21 - ------------------------ VALUE INCOME STOCK FUND - ------------------------ Trust Shares 1998......................... 99% 1997......................... 105 1996......................... 134 1995......................... 126 1994......................... 149
* Annualized. ** Return is for period indicated and has not been annualized. (1) Commenced operations on January 3, 1994. (2) Commenced operations on January 31, 1997. (4) Commenced operations on June 6, 1994. (5) Commenced operations on February 2, 1994. (A) Total return figures do not reflect applicable sales loads. (B) During the fiscal year ended May 31, 1996, the Aggressive Growth Fund changed its name to the Mid-Cap Equity Fund. PROSPECTUS 29 OTHER INFORMATION DIVIDENDS AND DISTRIBUTIONS Each Fund distributes its income quarterly, except the International Equity, International Equity Index and Emerging Markets Equity Funds. These Funds distribute income annually. The Funds make distributions of capital gains, if any, at least annually. 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 us in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after we receive your written notice. To cancel your election, simply send us written notice. SIMPLY SPEAKING . . . THE "RECORD DATE" If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. TAXES PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Capital gains distributions may be taxable at different rates depending on the length of time a Fund holds its portfolio securities. YOU MAY BE TAXED ON EACH SALE OF FUND SHARES. The Funds use a tax management technique known as "highest in, first out." Using this technique, the portfolio holdings that have experienced the smallest gain or largest loss are sold first in an effort to minimize capital gains and enhance after-tax returns. MORE INFORMATION ABOUT TAXES IS IN OUR STATEMENT OF ADDITIONAL INFORMATION. SIMPLY SPEAKING . . . FUND DISTRIBUTIONS Distributions you receive from a Fund may be taxable whether or not you reinvest them. 30 PROSPECTUS NOTES PROSPECTUS 31 HOW TO OBTAIN MORE INFORMATION INVESTMENT ADVISORS STI Capital Management, N.A. Trusco Capital Management, Inc. DISTRIBUTOR SEI Investments Distribution Co. LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) More detailed information about the STI Classic Funds is included in our SAI. The SAI has been filed 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 SEMIANNUAL REPORTS These reports list the Funds' holdings and contain information from the Funds' managers about fund strategies and recent market conditions and trends. TO OBTAIN MORE INFORMATION: BY TELEPHONE: Call 1-800-874-4770 BY MAIL: Write to us c/o SEI Investments Distribution Co. Oaks, Pennsylvania 19456. BY E-MAIL: xxxxxxxxxxxxxxxx BY INTERNET: http://www.suntrust.com FROM THE SEC: You can also obtain these documents, and other information about the STI Classic Funds, from 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 call 1-800-SEC-0330). 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 20549-6009. The Fund's Investment Company Act registration number is 811-06557. [GRAPHIC] STI CLASSIC FUNDS-BOND FUNDS FLEX AND INVESTOR SHARES PROSPECTUS October 1, 1998 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 U.S. GOVERNMENT SECURITIES FUND INVESTMENT ADVISORS TO THE FUNDS: STI CAPITAL MANAGEMENT, N.A. TRUSCO CAPITAL MANAGEMENT, INC. (the "Advisors") SUNTRUST BANK, ATLANTA ----------------- STI Classic Funds ----------------- The Securities and Exchange Commission has not approved any Fund shares or determined whether this prospectus is accurate or complete. It is a crime for anyone to tell you otherwise. PROSPECTUS HOW TO READ THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers different classes of 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 the Flex Shares of the Bond Funds that you should know before investing. Please read this prospectus and keep it for future reference. We arranged the prospectus into different sections so that you can easily review this important information. On the next page, we discuss general information you should know about investing in the Funds. IF YOU WOULD LIKE MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE: 2 FLORIDA TAX-EXEMPT BOND FUND 4 GEORGIA TAX-EXEMPT BOND FUND 6 INVESTMENT GRADE BOND FUND 8 INVESTMENT GRADE TAX-EXEMPT BOND FUND 10 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND 12 SHORT-TERM BOND FUND 14 SHORT-TERM U.S. TREASURY SECURITIES FUND 16 U.S. GOVERNMENT SECURITIES FUND IF YOU WOULD LIKE MORE INFORMATION ABOUT THE FOLLOWING TOPICS, PLEASE SEE: 18 EACH FUND'S PRINCIPAL INVESTMENTS 19 THE ADVISORS AND THEIR PORTFOLIO MANAGERS 20 PURCHASING, SELLING AND EXCHANGING FUND SHARES 25 HISTORICAL FINANCIAL INFORMATION ABOUT EACH FUND 27 HOW FUND SHARES ARE DISTRIBUTED 28 DISTRIBUTIONS OF DIVIDENDS AND CAPITAL GAINS 28 TAXES 31 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS
FOR INFORMATION ABOUT KEY TERMS AND CONCEPTS, LOOK FOR OUR "SIMPLY SPEAKING" EXPLANATIONS. - -------------------------------------------------------------------------------- FUND SUMMARY INVESTMENT STRATEGY WHAT ARE THE RISKS OF INVESTING? PERFORMANCE INFORMATION WHAT IS AN INDEX? FUND FEES AND EXPENSES FUND INVESTMENTS INVESTMENT ADVISORS PURCHASING FUND SHARES - -------------------------------------------------------------------------------- OCTOBER 1, 1998 PROSPECTUS 1 INTRODUCTION Each Fund is a mutual fund. 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 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 securities markets generally, as well as those that affect particular companies or governments. These price movements, sometimes called volatility, will vary depending on the types of securities a Fund owns and the markets where these securities trade. Like other investments, you could lose money on your investment in a Fund. Your investment in a Fund is not a bank deposit. It is not insured or guaranteed by the FDIC or any government agency. Each Fund has its own investment goal and strategies for reaching that goal. But, we cannot guarantee that a Fund will achieve its goal. A Fund's goal may be changed without shareholder approval. Before investing, make sure that the Fund's goal matches your own. The Investment Advisors invest each Fund's assets in a way that the Advisor believes will help the Fund achieve its goal. An Advisor's judgments about the stock markets, economy and companies, or selecting investments may not reflect actual market movements, economic conditions or company performance. CHOOSING INVESTOR OR FLEX SHARES 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 - - Front-end sales charge - - Lower annual expenses - - $2,000 minimum initial investment FLEX SHARES - - Deferred sales charge - - Higher annual expenses - - $10,000 minimum initial investment 2 PROSPECTUS FLORIDA TAX-EXEMPT BOND FUND FUND SUMMARY INVESTMENT GOAL Current income exempt from federal income taxes for Florida residents without undue risk INVESTMENT FOCUS Florida municipal securities SHARE PRICE VOLATILITY Medium PRINCIPAL INVESTMENT Attempts to invest more Fund assets in undervalued STRATEGY sectors and less in overvalued ones INVESTOR PROFILE Florida residents who want income exempt from federal income taxes
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
INVESTMENT STRATEGY The Florida Tax-Exempt Bond Fund invests substantially all of its assets in municipal securities with income exempt from federal income taxes. Issuers of these securities can be located in Florida, the District of Columbia, Puerto Rico and other U.S. territories and possessions. In selecting investments for the Fund, we try to limit risk as much as possible. Based on our analysis of municipalities, credit risk, market trends and investment cycles, we attempt to invest more of the Fund's assets in undervalued market sectors and less in overvalued sectors. We also try to identify and invest in municipal issuers with improving credit and avoid those with deteriorating credit. It is anticipated that the Fund's average weighted maturity will range from 6 to 25 years. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in Florida debt securities. As a result, the Fund is subject to the risk that the prices of debt securities will decline due to rising interest rates. This risk is greater for long-term debt securities than for short-term debt securities. The Fund's concentration of investments in securities of issuers located in Florida subjects the Fund to economic conditions and government policies of Florida. Debt securities may decline in credit quality due to economic or governmental events. In addition, an issuer may be unable to make timely payments of principal or interest to the Fund. 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 performance of Flex Shares and Investor Shares will differ slightly due to differences in expenses. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
1995 15.70% 1996 3.73% 1997 7.96%
BEST QUARTER WORST QUARTER 6.13% -1.56% (3/31/95) (3/31/96)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.21%. PROSPECTUS 3 FLORIDA TAX-EXEMPT BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX.
SINCE FUND INCEPTION INVESTOR SHARES 1 YEAR 3 YEARS (1/18/94) FLORIDA TAX-EXEMPT BOND FUND 3.60% 7.52% 5.28% LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX 9.23% 10.19% 6.38%
SINCE FUND INCEPTION FLEX SHARES 1 YEAR (6/1/95) FLORIDA TAX-EXEMPT BOND FUND 5.09% 6.17% LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX 9.23% 7.97%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor 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 with maturities between 8 and 12 years. The Index represents various market sectors and geographic locations. FUND FEES AND EXPENSES This table describes the shareholder fees and expenses that you may pay if you purchase or sell Fund shares. You would pay these fees directly from your investment in a Fund.
INVESTOR SHARES FLEX SHARES SHAREHOLDER FEES 3.75% None Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* None 2.00% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** *THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." **THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES."
The table below describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees .65% .65% Distribution and Service (12b-1) Fees .18% 1.00% Other Expenses .52% .37% --- --- Total Annual Fund Operating Expenses 1.35% 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. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may 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 $ 1087 $ 1938 Flex Shares $ 405 $ 634 $ 1088 $ 2348 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $ 507 $ 787 $ 1087 $ 1938 Flex Shares $ 205 $ 634 $ 1088 $ 2348
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor and the Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE .51%, .00% AND .87%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE .51%, .49% AND 1.37%, RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" and "Distribution of Fund Shares." 4 PROSPECTUS GEORGIA TAX-EXEMPT BOND FUND FUND SUMMARY INVESTMENT GOAL Current income exempt from federal and Georgia income taxes for Georgia residents without undue risk INVESTMENT FOCUS Georgia municipal securities SHARE PRICE VOLATILITY Medium PRINCIPAL INVESTMENT Attempts to invest more Fund assets in undervalued STRATEGY sectors and less in overvalued ones INVESTOR PROFILE Georgia residents who want income exempt from federal and state income taxes
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
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, the District of Columbia, Puerto Rico and other U.S. territories and possessions. In selecting investments for the Fund, we try to limit risk as much as possible. Based on our analysis of municipalities, credit risk, market trends and investment cycles, we attempt to invest more of the Fund's assets in undervalued market sectors and less in overvalued sectors. We try to diversify the Fund's holdings within Georgia. We also try to identify and invest in municipal issuers with improving credit and avoid those with deteriorating credit. It is anticipated that the Fund's average weighted maturity will range from 6 to 25 years. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in Georgia debt securities. As a result, the Fund is subject to the risk that the prices of debt securities will decline due to rising interest rates. This risk is greater for long-term debt securities than for short-term debt securities. The Fund's concentration of investments in securities of issuers located in Georgia subjects the Fund to economic conditions and government policies of Georgia. Debt securities may decline in credit quality due to economic or governmental events. In addition, an issuer may be unable to make timely payments of principal or interest to the Fund. 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 performance of Flex Shares and Investor Shares will differ slightly due to differences in expenses. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
1995 13.13% 1996 3.43% 1997 7.96%
BEST QUARTER WORST QUARTER 4.84% -.73% (3/31/95) (3/31/96)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 1.92%. PROSPECTUS 5 GEORGIA TAX-EXEMPT BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX.
SINCE INCEPTION INVESTOR SHARES 1 YEAR 3 YEARS (1/19/94) GEORGIA TAX-EXEMPT BOND FUND 3.91% 6.72% 3.72% LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX 9.23% 10.19% 6.38%
SINCE INCEPTION FLEX SHARES 1 YEAR (6/6/95) GEORGIA TAX-EXEMPT BOND FUND 5.32% 5.58% LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX 9.23% 7.97%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor 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 with maturities between 8 and 12 years. The Index represents various market sectors and geographic locations. FUND FEES AND EXPENSES This table describes the shareholder fees and expenses that you may pay if you purchase or sell Fund shares. You would pay these fees directly from your investment in a Fund.
INVESTOR SHARES FLEX SHARES SHAREHOLDER FEES 3.75% None Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* None 2.00% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** *THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." **THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES."
The table below describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees .65% .65% Distribution and Service (12b-1) Fees .18% 1.00% Other Expenses .48% .38% --- --- Total Annual Fund Operating Expenses 1.31% 2.03%
- --------------------------------------------------------------- EXAMPLE - -------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may 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 $ 1066 $ 1895 Flex Shares $ 406 $ 637 $ 1093 $ 2358 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $ 503 $ 775 $ 1066 $ 1895 Flex Shares $ 206 $ 637 $ 1093 $ 2358
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor and the Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE .50%, .00% AND .87%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE .50%, .49% AND 1.37%, RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" and "Distribution of Fund Shares." 6 PROSPECTUS INVESTMENT GRADE BOND FUND 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 Medium PRINCIPAL INVESTMENT Attempts to identify relatively inexpensive STRATEGY 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
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
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, we try to minimize risk while attempting to outperform selected market indices. Currently, our selected index is the Lehman Government/Corporate Bond Index, a widely recognized, unmanaged index of investment grade government and corporate debt securities. We seek to invest more in portions of the Index that seem relatively inexpensive, and less in those that seem expensive. We allocate the Fund's investments among various market sectors based on our analysis of historical data, yield information and credit ratings. We anticipate that the Fund's average weighted maturity will range from 4 to 10 years. 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 taxes. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in investment grade debt securities. As a result, the Fund is subject to the risk that the prices of debt securities will decline due to rising interest rates. This risk is greater for long-term debt securities than for short-term debt securities. In addition, an issuer may be unable to make timely payments of principal or interest to the Fund. Some investment grade debt securities have speculative characteristics. In addition, the Fund is subject to the risk of investing in mortgage-backed securities. See "Mortgage-Backed Securities" to the right. SIMPLY SPEAKING . . . MORTGAGE-BACKED SECURITIES A mortgage-backed security pools all interest and principal payments from the underlying mortgages and pays it to the security's owner. The mortgages underlying mortgage-backed securities may mature or be paid off before the stated maturity date. This has four drawbacks. First, the Fund may lose money on its investment. Second, the monthly income payments to the Fund may fluctuate. Third, we cannot predict the maturity of the Fund's investment with certainty. Fourth, we would invest any resulting proceeds elsewhere, generally at a lower interest rate. 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 performance of Flex Shares and Investor Shares will differ slightly due to differences in expenses. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
1993 10.43 1994 -3.57 1995 17.26 1996 1.93 1997 8.64
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 1/1/98 TO 6/30/98 WAS 4.13%. PROSPECTUS 7 INVESTMENT GRADE BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX.
SINCE INCEPTION INVESTOR SHARES 1 YEAR 3 YEARS (6/11/92) INVESTMENT GRADE BOND FUND 4.56% 7.73% 5.93% LEHMAN GOVERNMENT/ CORPORATE BOND INDEX 9.75% 10.43% 8.13%
*NOT IN OPERATION DURING THIS PERIOD.
SINCE INCEPTION FLEX SHARES 1 YEAR (6/7/95) INVESTMENT GRADE BOND FUND 6.14% 6.04% LEHMAN GOVERNMENT/CORPORATE BOND INDEX 9.75% 8.08%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers Government/Corporate Bond Index is a widely recognized index of government and corporate debt securities rated investment grade or better, with maturities of at least 1 year. FUND FEES AND EXPENSES This table describes the shareholder fees and expenses that you may pay if you purchase or sell Fund shares. You would pay these fees directly from your investment in a Fund.
INVESTOR SHARES FLEX SHARES SHAREHOLDER FEES 3.75% None Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* None 2.00% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** *THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." **THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES."
The table below describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees .74% .74% Distribution and Service (12b-1) Fees .43% 1.00% Other Expenses .22% .38% --- --- Total Annual Fund Operating Expenses 1.39% 2.12%
- --------------------------------------------------------------- EXAMPLE - -------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may 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 $ 511 $ 799 $ 1107 $ 1981 Flex Shares $ 415 $ 664 $ 1139 $ 2452 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $ 511 $ 799 $ 1107 $ 1981 Flex Shares $ 215 $ 664 $ 1139 $ 2452
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor and the Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE .64%, .31% AND 1.17%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE .64%, .64% AND 1.66%, RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" and "Distribution of Fund Shares." 8 PROSPECTUS INVESTMENT GRADE TAX-EXEMPT BOND FUND FUND SUMMARY INVESTMENT GOAL High total return through (i) current income that is exempt federal income taxes and (ii) capital appreciation, while preserving the principal amount invested INVESTMENT FOCUS Investment grade municipal securities SHARE PRICE VOLATILITY Medium PRINCIPAL INVESTMENT Attempts to invest more Fund assets in undervalued STRATEGY 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
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
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 selecting investments for the Fund, we try to limit risk as much as possible. Based on our analysis of municipalities, credit risk, market trends and investment cycles, we attempt to invest more of the Fund's assets in undervalued market sectors and less in overvalued sectors. We also try to identify and invest in municipal issuers with improving credit and avoid those with deteriorating credit. We anticipate that the Fund's average weighted maturity will range from 4 to 10 years. Due to the Fund's investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and capital gains taxes. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in investment grade debt securities. As a result, the Fund is subject to the risk that the prices of debt securities will decline due to rising interest rates. This risk is greater for long-term debt securities than for short-term debt securities. Debt securities may decline in credit quality due to economic or governmental events. In addition, an issuer may be unable to make timely payments of principal or interest to the Fund. Some investment grade bonds may have speculative characteristics. 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 performance of Flex Shares and Investor Shares will differ slightly due to differences in expenses. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
1993 14.36 1994 -0.60 1995 14.52 1996 5.00 1997 7.37
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 1/1/98 TO 6/30/98 WAS 2.59%. PROSPECTUS 9 INVESTMENT GRADE TAX-EXEMPT BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE LEHMAN BROTHERS G.O. INDEX.
SINCE INCEPTION INVESTOR SHARES 1 YEAR 3 YEARS (6/9/92) INVESTMENT GRADE TAX-EXEMPT BOND FUND 3.32% 7.51% 7.27% LEHMAN BROTHERS G.O. INDEX 6.48% 7.54% 6.38%
SINCE INCEPTION FLEX SHARES 1 YEAR (6/1/95) INVESTMENT GRADE TAX-EXEMPT BOND FUND 4.85% 6.38% LEHMAN BROTHERS G.O. INDEX 6.48% 6.35%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers G.O. 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. FUND FEES AND EXPENSES This table describes the shareholder fees and expenses that you may pay if you purchase or sell Fund shares. You would pay these fees directly from your investment in a Fund.
INVESTOR SHARES FLEX SHARES SHAREHOLDER FEES 3.75% None Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* None 2.00% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** *THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." **THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES."
The table below describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees .74% .74% Distribution and Service (12b-1) Fees .43% 1.00% Other Expenses .27% .37% --- --- Total Annual Fund Operating Expenses 1.44% 2.11%
- --------------------------------------------------------------- EXAMPLE - -------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may 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 $ 516 $ 813 $ 1132 $ 2035 Flex Shares $ 414 $ 661 $ 1134 $ 2441 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $ 516 $ 813 $ 1132 $ 2035 Flex Shares $ 214 $ 661 $ 1134 $ 2441
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor and the Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE .62%, .28% AND 1.17%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE .62%, .66% AND 1.65%, RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" and "Distribution of Fund Shares." 10 PROSPECTUS LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital INVESTMENT FOCUS Mortgage-backed securities SHARE PRICE VOLATILITY Medium PRINCIPAL INVESTMENT Attempts to identify securities that are less prone STRATEGY to pre-payment risk INVESTOR PROFILE Conservative investors who want to receive income from their investment
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
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 average maturity from 1 to 5 years. In selecting investments for the Fund, we try to identify securities that we expect to perform well in rising and falling markets. We also attempt to reduce the risk that the underlying mortgages are pre-paid by focusing on securities that we believe are less prone to this risk. For example, Fannie Mae or GNMA securities that were issued years ago may be less prone to pre-payment risk because there have been many opportunities for pre-payment, but none have occurred. Due to the Fund's investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and capital gains taxes. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in debt securities. As a result, the Fund is subject to the risk that the prices of debt securities will decline due to rising interest rates. This risk is greater for long-term debt securities than for short-term debt securities. In addition, the Fund is subject to the risk of investing in mortgage-backed securities. See "Mortgage-Backed Securities" to the right. SIMPLY SPEAKING . . . MORTGAGE-BACKED SECURITIES A mortgage-backed security pools all interest and principal payments from the underlying mortgages and pays it to the security's owner. Collateralized mortgage obligations (CMOs) are a type of mortgage-backed security that are divided into separate maturity classes. Mortgage income is applied first to the CMO with the shortest maturity, second to the CMO with the next shortest, and so on. The mortgages underlying mortgage-backed securities may mature or be paid off before the stated maturity date. This has four drawbacks. First, the Fund may lose money on its investment. Second, the monthly income payments to the Fund may fluctuate. Third, we cannot predict the maturity of the Fund's investment with certainty. Fourth, we would invest any resulting proceeds elsewhere, generally at lower interest rates. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The performance of Flex Shares and Investor Shares will differ slightly due to differences in expenses. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
1995 12.02 1996 4.29 1997 6.37
BEST QUARTER WORST QUARTER 4.01% .16% (3/31/95) (3/31/97)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.81%. PROSPECTUS 11 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE MERRILL LYNCH 1-5 YEAR SHORT/ INTERMEDIATE U.S TREASURY INDEX.
SINCE INCEPTION INVESTOR SHARES 1 YEAR 3 YEARS (7/17/94) LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND 3.69% 6.60% 5.80% MERRILL LYNCH 1-5 YEAR SHORT INTERMEDIATE U.S TREASURY INDEX 7.11% 8.08% 7.28%
SINCE INCEPTION FLEX SHARES 1 YEAR (6/7/95) LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND 4.11% 5.51% MERRILL LYNCH 1-5 YEAR SHORT INTERMEDIATE U.S. TREASURY INDEX 7.11% 6.70%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Merrill Lynch 1-5 Year Short/ Intermediate U.S. Treasury Index is a widely recognized index of U.S. Treasury Securities with maturities 1 year or greater and no more than 5 years. FUND FEES AND EXPENSES This table describes the shareholder fees and expenses that you may pay if you purchase or sell Fund shares. You would pay these fees directly from your investment in a Fund.
INVESTOR SHARES FLEX SHARES SHAREHOLDER FEES 2.50% None Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* None 2.00% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** *THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." **THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES."
The table below describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees .65% .65% Distribution and Service (12b-1) Fees .23% 1.00% Other Expenses .64% 1.08% --- --- Total Annual Fund Operating Expenses 1.52% 2.73%
- --------------------------------------------------------------- EXAMPLE - -------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may 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 $ 401 $ 718 $ 1058 $ 2017 Flex Shares $ 476 $ 847 $ 1445 $ 3061 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $ 401 $ 718 $ 1058 $ 2017 Flex Shares $ 276 $ 847 $ 1445 $ 3061
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor and the Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE .54%, .00% AND .92%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES ARE .54%, .00% AND 1.27%, RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" and "Distribution of Fund Shares." 12 PROSPECTUS SHORT-TERM BOND FUND 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 Attempts to identify securities that offer a STRATEGY 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
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
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 intends to maintain an average weighted maturity of 3 years or less. In selecting investments for the Fund, we attempt 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. We manage the Fund from a total return perspective. That is, we make day to day investment decisions for the Fund with a view towards maximizing returns. We analyze yields, market sectors and credit risk in an effort to identify attractive investments with the best risk/reward trade-off. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in debt securities. As a result, the Fund is subject to the risk that the prices of debt securities will decline due to rising interest rates. In addition, an issuer may be unable to make timely payments of principal or interest to the Fund. Also, the Fund may invest in bonds rated "investment grade." Some investment grade bonds may have speculative characteristics. In addition, the Fund is subject to the risk of investing in mortgage-backed and asset-backed securities. See "Mortgage-Backed and Asset-Backed Securities" to the right. SIMPLY SPEAKING . . . MORTGAGE-BACKED AND ASSET-BACKED SECURITIES A mortgage-backed security pools all interest and principal payments from the underlying mortgages and pays it to the security's owner. The owner of an asset-backed security owns a share of the underlying pool of assets, such as truck and auto loans, leases and credit card receivables. The mortgages receivables, or other assets underlying mortgage-backed securities may mature or be paid off before the stated maturity date. This has four drawbacks. First, the Fund may lose money on its investment. Second, the monthly income payments to the Fund may fluctuate. Third, we cannot predict the maturity of the Fund's investment with certainty. Fourth, we would invest any resulting proceeds elsewhere, generally at a lower interest rate. 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 performance of Flex Shares and Investor Shares will differ slightly due to differences in expenses. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
1994 -.33 1995 11.68 1996 3.66 1997 6.46
BEST QUARTER WORST QUARTER 3.81% -.63% (6/30/95) (3/31/94)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 3.00%. PROSPECTUS 13 SHORT-TERM BOND FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE SALOMON 1-3 YEAR TREASURY/ GOVERNMENT SPONSORED/CORPORATE INDEX AND THE SALOMON ONE YEAR TREASURY BENCHMARK ON-THE-RUN INDEX.
SINCE INCEPTION INVESTOR SHARES 1 YEAR 3 YEARS (3/22/93) SHORT-TERM BOND FUND 4.36% 6.48% 4.66% SALOMON 1-3 YEAR TREASURY/ GOVERNMENT SPONSORED/ CORPORATE INDEX 6.67% 7.54% 5.63% SALOMON ONE YEAR TREASURY BENCHMARK ON-THE-RUN INDEX 6.10% 6.61% 5.34%
SINCE INCEPTION FLEX SHARES 1 YEAR (6/20/95) SHORT-TERM BOND FUND 4.21% 5.42% SALOMON 1-3 YEAR TREASURY/GOVERNMENT SPONSORED/CORPORATE INDEX 6.67% 6.59% SALOMON ONE YEAR TREASURY BENCHMARK ON-THE-RUN INDEX 6.10% 6.26%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor 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, government agency and investment grade corporate debt securities with maturities greater than 1 and less than 3 years. The Salomon One Year Treasury Benchmark On-the-Run Index is a widely recognized index of U.S. Treasury securities. FUND FEES AND EXPENSES This table describes the shareholder fees and expenses that you may pay if you purchase or sell Fund shares. You would pay these fees directly from your investment in a Fund.
INVESTOR SHARES FLEX SHARES SHAREHOLDER FEES 2.00% None Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* None 2.00% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** *THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." **THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES."
The table below describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. The Fund fees and expenses below are in addition to the sales charges you may pay directly when you purchase or sell Fund shares. Sales charges are discussed on pages 21 and 22 of this prospectus. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees .65% .65% Distribution and Service (12b-1) Fees .23% 1.00% Other Expenses .84% 1.21% --- --- Total Annual Fund Operating Expenses 1.72% 2.86%
- --------------------------------------------------------------- EXAMPLE - -------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may 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 $ 371 $ 731 $ 1115 $ 2190 Flex Shares $ 489 $ 886 $ 1508 $ 3185 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $ 371 $ 731 $ 1115 $ 2190 Flex Shares $ 289 $ 886 $ 1508 $ 3185
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor and the Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE .52%, .00% AND .87%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE .52%, 0.00% AND 1.22%, RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" and "Distribution of Fund Shares." 14 PROSPECTUS SHORT-TERM U.S. TREASURY SECURITIES FUND FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital INVESTMENT FOCUS Short-term U.S. Treasury securities only SHARE PRICE VOLATILITY Low PRINCIPAL INVESTMENT Attempts to identify Treasury securities with STRATEGY 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
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
INVESTMENT STRATEGY The Short-Term U.S. Treasury Securities Fund invests exclusively in short-term U.S. Treasury securities (those with remaining maturities of three 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. We manage the Fund from a total return perspective. That is, we make day to day investment decisions for the Fund with a view toward maximizing returns and yield. We try to select those U.S. Treasury securities that offer the best risk/reward trade-off. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in U.S. Treasury securities. As a result, the Fund is subject to the risk that the prices of debt securities will decline due to rising interest rates. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the risks and volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. The performance of Flex Shares and Investor Shares will differ slightly due to differences in expenses. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
1994 1.28 1995 8.39 1996 4.38 1997 5.70
BEST QUARTER WORST QUARTER 2.60% -.13% (3/31/95) (3/31/94)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.68%. PROSPECTUS 15 SHORT-TERM U.S. TREASURY SECURITIES FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE SALOMON 1-3 YEAR TREASURY/ GOVERNMENT SPONSORED/CORPORATE INDEX AND THE SALOMON 6 MONTH TREASURY INDEX.
SINCE INCEPTION INVESTOR SHARES 1 YEAR 3 YEARS (3/18/93) SHORT-TERM U.S. TREASURY SECURITIES FUND 4.64% 5.78% 4.44% SALOMON 1-3 YEAR TREASURY/ GOVERNMENT SPONSORED/ CORPORATE INDEX 6.67% 7.54% 5.63% SALOMON 6 MONTH TREASURY BILL INDEX 5.41% 5.53% 4.98%
SINCE INCEPTION FLEX SHARES 1 YEAR (6/22/95) SHORT-TERM U.S. TREASURY SECURITIES FUND 3.43% 4.95% SALOMON 1-3 YEAR TREASURY/GOVERNMENT SPONSORED/CORPORATE INDEX 6.67% 6.59% SALOMON 6 MONTH TREASURY BILL INDEX 5.41% 5.63%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor 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, government agency and investment grade corporate debt securities with maturities greater than 1 year and less than 3 years. The Salomon 6 Month Treasury Bill Index is a widely recognized index of U.S. Treasury bills. FUND FEES AND EXPENSES This table describes the shareholder fees and expenses that you may pay if you purchase or sell Fund shares. You would pay these fees directly from your investment in a Fund.
INVESTOR SHARES FLEX SHARES SHAREHOLDER FEES 1.00% None Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* None 2.00% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** *THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." **THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES."
The table below describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees .65% .65% Distribution and Service (12b-1) Fees .18% 1.00% Other Expenses .51% 1.23% --- --- Total Annual Fund Operating Expenses 1.34% 2.88%
- --------------------------------------------------------------- EXAMPLE - -------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may 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 $ 235 $ 520 $ 827 $ 1697 Flex Shares $ 491 $ 892 $ 1518 $ 3204 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $ 235 $ 520 $ 827 $ 1697 Flex Shares $ 291 $ 892 $ 1518 $ 3204
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor and the Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE .47%, .00% AND .82%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE .47%, .00% AND 1.07%, RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" and "Distribution of Fund Shares." 16 PROSPECTUS U.S. GOVERNMENT SECURITIES FUND 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 medium PRINCIPAL INVESTMENT Attempts to increase income without adding undue STRATEGY risk INVESTOR PROFILE Conservative investors who want to receive income from their investment
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
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. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in U.S. government debt securities. As a result, the Fund is subject to the risk that the prices of debt securities will decline due to rising interest rates. This risk is greater for long-term debt securities than for short-term debt securities. In addition, the Fund is subject to the risk of investing in mortgage-backed securities. See "Mortgage-Backed Securities" to the right. SIMPLY SPEAKING . . . MORTGAGE-BACKED SECURITIES A mortgage-backed security pools all interest and principal payments from the underlying mortgages and pays it to the security's owner. The mortgages underlying mortgage-backed securities may mature or be paid off before the stated maturity date. This has four drawbacks. First, the Fund may lose money on its investment. Second, the monthly income payments to the Fund may fluctuate. Third, we cannot predict the maturity of the Fund's investment with certainty. Fourth, we would invest any resulting proceeds elsewhere, generally at lower interest rate. 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 performance of Flex Shares and Investor Shares will differ slightly due to differences in expenses. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
1995 16.96 1996 2.08 1997 8.60
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 1/1/98 TO 6/30/98 WAS 3.71%. PROSPECTUS 17 U.S. GOVERNMENT SECURITIES FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT BOND INDEX.
SINCE INCEPTION INVESTOR SHARES 1 YEAR 3 YEARS (6/9/94) U.S. GOVERNMENT SECURITIES FUND 4.58% 7.67% 5.98% LEHMAN BROTHERS INTERMEDIATE GOVERNMENT BOND INDEX 7.72% 8.65% 7.58%
SINCE INCEPTION FLEX SHARES 1 YEAR (6/7/95) U.S. GOVERNMENT SECURITIES FUND 5.96% 5.76% LEHMAN BROTHERS INTERMEDIATE GOVERNMENT BOND INDEX 7.72% 6.98%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Lehman Brothers Intermediate Government Bond Index is a widely recognized index of U.S. Treasury securities and government agency securities with maturities ranging from 1 to 10 years. FUND FEES AND EXPENSES This table describes the shareholder fees and expenses that you may pay if you purchase or sell Fund shares. You would pay these fees directly from your investment in a Fund.
INVESTOR SHARES FLEX SHARES SHAREHOLDER FEES 3.75% None Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* None 2.00% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** *THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." **THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES."
The table below describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees .74% .74% Distribution and Service (12b-1) Fees .38% 1.00% Other Expenses .65% .59% --- --- Total Annual Fund Operating Expenses 1.77% 2.33%
- --------------------------------------------------------------- EXAMPLE - -------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may 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 $ 548 $ 911 $ 1298 $ 2381 Flex Shares $ 436 $ 727 $ 1245 $ 2666 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $ 548 $ 911 $ 1298 $ 2381 Flex Shares $ 236 $ 727 $ 1245 $ 2666
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor and the Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE .58%, .00% AND 1.17%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE .58%, .51% AND 1.68%, RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" and "Distribution of Fund Shares." 18 PROSPECTUS EACH FUND'S PRINCIPAL INVESTMENT FUND INVESTMENTS The table below shows each Fund's principal investments. In other words, the table describes the type or types of investments that we believe will most likely help each Fund achieve its investment goal.
FLORIDA GEORGIA INVESTMENT INVESTMENT LIMITED-TERM SHORT-TERM SHORT-TERM U.S. TAX- EXEMPT TAX-EXEMPT GRADE BOND GRADE FEDERAL BOND U.S. GOVERNMENT BOND FUND BOND FUND FUND TAX-EXEMPT MORTGAGE FUND TREASURY SECURITIES BOND FUND SECURITIES SECURITIES FUND FUND FUND - -------------------------------------------------------------------------------------------------------------------------------- Asset-Backed Securities X - -------------------------------------------------------------------------------------------------------------------------------- Corporate Debt Securities X X - -------------------------------------------------------------------------------------------------------------------------------- Mortgage-Backed Securities X X X X - -------------------------------------------------------------------------------------------------------------------------------- Municipal Securities X X X - -------------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities X X X - --------------------------------------------------------------------------------------------------------------------------------
Each Fund also may invest in other securities, use other strategies and engage in other investment practices, which are described in detail in our Statement of Additional Information. Of course, we cannot guarantee that any Fund will achieve its investment goal. The investments listed above and the investments and strategies described throughout 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. 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 and U.S. Government Securities Fund each may shorten its average weighted maturity to as little as 90 days. When a Fund is investing for temporary defensive purposes, it is not pursuing its investment goal. INVESTMENT ADVISORS The Investment Advisors make investment decisions for the Funds and continuously review, supervise and administer their Funds' respective investment programs. The Board of Trustees supervises the Advisors and establishes policies that the Advisors must follow in their management activities. STI Capital Management, N.A. (STI), P.O. Box 3808, Orlando, Florida 32802, serves as the Advisor to the Investment Grade Bond, Limited-Term Federal Mortgage Securities, Investment Grade Tax-Exempt Bond and Florida Tax-Exempt Bond Funds. As of May 31, 1998, STI had approximately $11.7 billion in assets under management. For the fiscal year ended May 31, 1998, STI received advisory fees of: FLORIDA TAX-EXEMPT BOND FUND............. .51% INVESTMENT GRADE BOND FUND............... .64% INVESTMENT GRADE TAX-EXEMPT BOND FUND.... .62% LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND................................... .54%
Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Advisor to the U.S. Government Securities, Short-Term Bond, and Short-Term U.S. Treasury Securities Funds. As of May 31, 1998, Trusco had approximately $22 PROSPECTUS 19 THE ADVISORS AND THEIR PORTFOLIO MANAGERS billion in assets under management. For the fiscal year ended May 31, 1998, Trusco received advisory fees of: SHORT-TERM BOND FUND..................... .52% SHORT-TERM U.S. TREASURY SECURITIES FUND................................... .47% U.S. GOVERNMENT SECURITIES FUND.......... .58%
SunTrust Bank, Atlanta, 25 Park Place, Atlanta, Georgia 30303, serves as the Advisor to the Georgia Tax-Exempt Bond Fund. As of May 31, 1998, SunTrust Bank, Atlanta had approximately $40 billion under management. For the fiscal year ended May 31, 1998, SunTrust Bank, Atlanta received advisory fees of .50% for the Georgia Tax-Exempt Bond Fund. The Advisors may use their affiliates as brokers for Fund transactions. PORTFOLIO MANAGERS Mr. L. Earl Denney, CFA, has served as Senior Vice President of STI since 1983. He has managed the Investment Grade Bond Fund since it began operating in June 1992. He has more than 20 years of experience in fixed income investment management. Prior to joining STI, he was fixed income portfolio manager with American National Bank. The U.S. Government Securities Fund has been co-managed by Mr. Charles B. Leonard and Mr. Michael L. Ford since it began operating in June 1994. Mr. Leonard, CFA, has served as First Vice President of Trusco since 1988, and has more than 25 years of investment experience. Mr. Ford has been an Associate of Trusco since April 1994, and has more than 11 years of investment experience. Prior to joining Trusco, Mr. Ford served as a senior securities analyst at Liberty Capital Advisors from 1992 to 1994 and served as a securities analyst at Southern Farm Bureau Life Insurance Company from 1990 to 1992. The Limited-Term Federal Mortgage Securities Fund has been co-managed by Mr. L. Earl Denney, CFA, and Mr. Dave E. West, CFA, since it began operating in June 1994. Mr. Denney has served as Senior Vice President of STI since 1983. Mr. Denney has more than 20 years of experience in fixed income investment management. Prior to joining STI, he was fixed income portfolio manager with American National Bank. Mr. West has served as a Vice President of STI since 1994, and has served as a fixed-income portfolio manager with STI since 1989. Mr. David Yealy has served as a Vice President of Trusco since 1993. He has managed the Short-Term Bond Fund and Short-Term U.S. Treasury Securities Fund since July 1996. He has more than 13 years of investment experience. Mr. Ronald Schwartz, CFA, has served as a Senior Vice President since 1992. He has managed the Investment Grade Tax-Exempt Bond Fund and Florida Tax-Exempt Bond Fund since each Fund began operating in June 1992 and January 1994, respectively. He has more than 18 years of investment experience. Prior to joining STI, he served as a trader at the Bank of Boston. Ms. Gay Cash has served as a Vice President of SunTrust Bank, Atlanta since 1987. She has managed Georgia Tax-Exempt Bond Fund since it began operating in January 1994. She has more than 18 years of investment experience. 20 PROSPECTUS PURCHASING, SELLING AND EXCHANGING FUND SHARES PURCHASING FUND SHARES HOW TO PURCHASE FUND SHARES You may purchase Investor and Flex Shares directly from us by: - - mail - - telephone - - wire - - direct deposit, or - - Automated Clearing House (ACH). SIMPLY SPEAKING . . . 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). To purchase shares directly from us, please call 1-800-874-4770. Write your check, payable in U.S. dollars, to "STI Classic Funds" and include the name of the appropriate Fund(s) on the check. We cannot accept third-party checks, credit cards, credit card checks, or cash. You may also purchase shares through Investment Consultants of certain correspondent banks of SunTrust Banks, Inc. (SunTrust), or other financial institutions that have executed dealer agreements with us. We may reject any purchase order if we determine that accepting the order would not be in the best interests of the STI Classic Funds or its shareholders. The price per share (the offering price) will be the net asset value per share (NAV) next determined after we receive your purchase order plus, in the case of Investor Shares, the applicable front-end sales charge. We calculate each Fund's 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, if you want to receive the current Business Day's NAV, generally we must receive your purchase order before 4:00 p.m. Eastern time. SIMPLY SPEAKING . . . FOR CUSTOMERS OF OTHER FINANCIAL INSTITUTIONS If you purchase, sell or exchange Fund shares through a financial institution (rather than directly from us), you may have to transmit your purchase, sale and exchange requests to your financial institution 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 us. For more information about how to purchase, sell or exchange Fund shares through your financial institution, you should contact your financial institution directly. HOW WE CALCULATE NAV In calculating NAV, we generally value a Fund's portfolio at market price. If market prices are unavailable or we think that they are unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. SIMPLY SPEAKING . . . NET ASSET VALUE NAV for one Fund share is the value of that share's portion of all of the assets in the Fund. MINIMUM PURCHASES To purchase Investor Shares for the first time, you must invest at least $2,000 in any Fund. To purchase Flex Shares for the first time, you must invest at least $10,000 in any Fund ($2,000 for retirement plans). To purchase additional shares of any Fund, you must invest at least $1,000 or, if you pay by a statement coupon, $100. We may accept investments of smaller amounts, for either class of shares, at our discretion. PROSPECTUS 21 PURCHASING, SELLING AND EXCHANGING FUND SHARES 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 us at 1-800-428-6970 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 up to $100,000 once or twice a month. If you are buying Flex Shares, you should plan on investing at least $10,000 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. SALES CHARGES FRONT-END SALES CHARGES - INVESTOR SHARES The amount of any front-end sales charge included in your offering price varies, depending on the amount of your investment:
YOUR SALES YOUR SALES CHARGE CHARGE AS A AS A PERCENTAGE PERCENTAGE OF OF OFFERING YOUR NET FUND IF YOUR INVESTMENT IS: PRICE INVESTMENT - -------------------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES FUND LESS THAN $100,000 3.75% 3.90% INVESTMENT GRADE TAX-EXEMPT BOND FUND $100,000 BUT LESS THAN $250,000 3.25% 3.36% INVESTMENT GRADE BOND FUND $250,000 BUT LESS THAN $1,000,000 2.50% 2.56% FLORIDA TAX-EXEMPT BOND FUND $1,000,000 AND OVER 1.50% 1.52% GEORGIA TAX EXEMPT BOND FUND - -------------------------------------------------------------------------------------------------------------------------- LIMITED-TERM FEDERAL LESS THAN $100,000 2.50% 2.56% MORTGAGE SECURITIES FUND $100,000 BUT LESS THAN $250,000 1.75% 1.78% $250,000 BUT LESS THAN $1,000,000 1.25% 1.27% $1,000,000 AND OVER NONE NONE - -------------------------------------------------------------------------------------------------------------------------- SHORT-TERM BOND FUND LESS THAN $100,000 2.00% 2.04% $100,000 BUT LESS THAN $250,000 1.50% 1.52% $250,000 BUT LESS THAN $1,000,000 1.00% 1.01% $1,000,000 AND OVER NONE NONE - -------------------------------------------------------------------------------------------------------------------------- SHORT-TERM U.S. TREASURY LESS THAN $100,000 1.00% 1.01% SECURITIES FUND $100,000 BUT LESS THAN $250,000 0.75% 0.76% $250,000 BUT LESS THAN $1,000,000 0.50% 0.50% $1,000,000 AND OVER NONE NONE - --------------------------------------------------------------------------------------------------------------------------
22 PROSPECTUS PURCHASING, SELLING AND EXCHANGING FUND SHARES WAIVER OF FRONT-END SALES CHARGE - INVESTOR SHARES The front-end sales charge will be waived on Investor Shares purchased: (1) through reinvestment of dividends and distributions; (2) through a SunTrust Securities, Inc. asset allocation account; (3) by persons repurchasing shares they redeemed within the last 60 days (see Repurchase of Investor Shares); (4) by employees, and members of their immediate family, of SunTrust and its affiliates; (5) 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; (6) 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 (7) through dealers, retirement plans, asset allocation programs and financial institutions that, under their dealer agreements with the Distributor or otherwise, do not receive any or receive a reduced 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), equal to or less than the value of any amount of Investor Shares (for which you paid a front-end sales charge) that you redeemed within the past 60 days. In effect, this allows you to repurchase shares that you may have had to redeem, without repaying the front-end sales charge. To exercise this privilege, we must receive your purchase order within 60 days of your redemption. In addition, you must notify us 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. We 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. We 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 us with your account number(s) and, if applicable, the account numbers for your spouse and/or children (and provide the children's ages). We 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. We will only consider the value of Investor Shares sold subject to a sales charge. To be entitled to a reduced sales charge based on shares you intend to purchase over the 13-month period, you must send us a Letter of Intent. As a result, neither Investor Shares of the Money Market Funds nor Investor Shares purchased with dividends or distributions will be included in the calculation. 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 us 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 transfer agent will redeem the necessary portion of the escrowed PROSPECTUS 23 PURCHASING, SELLING AND EXCHANGING FUND SHARES 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, we will combine same day purchases of Investor Shares (that are subject to a sales charge) made by you, your spouse and your minor children (under age 21). This combination also applies to Investor Shares you purchase with a Letter of Intent. CONTINGENT DEFERRED SALES CHARGES - FLEX SHARES You do not pay a front-end sales charge when you purchase Flex Shares. But if you sell your shares within the first year after your purchase, you will pay a contingent deferred sales charge equal to 2.00% of either (1) the NAV of the shares at the time of purchase, or (2) NAV of the shares next calculated after we receive your sale request, whichever is less. The sales charge does not apply to Flex Shares you purchase through reinvestment of dividends or distributions. So, you never pay a deferred sales charge on any increase in your investment above the initial offering price. This sales charge does not apply to exchanges of Flex Shares of one Fund for Flex Shares of another Fund. The contingent deferred sales charge will be waived if you sell your Flex Shares for the following reasons: (1) to make certain withdrawals from a retirement plan (not including IRAs); (2) because of death or disability; or (3) for certain payments under the Systematic Withdrawal Plan (which is discussed below). SIMPLY SPEAKING . . . OFFERING PRICE OF FUND SHARES The offering price of Investor Shares is the NAV next calculated after we receive your request, plus the front-end sales load. The offering price of Flex Shares is simply the next calculated NAV. SELLING FUND SHARES HOW TO SELL YOUR FUND SHARES You may sell (sometimes called "redeem") your shares on any Business Day by contacting us directly by mail or telephone. You may also sell your shares by contacting your financial institution by mail or telephone. To sell your shares by telephone, the amount of your sale must be at least $1,000. If you would like to sell $25,000 or more of your shares, please notify us in writing and include a signature guarantee (a notarized signature is not sufficient). The sale price of each share will be the next NAV determined after we receive your request less, in the case of Flex Shares, any applicable deferred sales charge. SIMPLY SPEAKING . . . TELEPHONE TRANSACTIONS Purchasing, selling and exchanging Fund shares over the telephone is extremely convenient, but not without risk. Although we have certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, we are not responsible for any losses or costs incurred by following telephone instructions we reasonably believe to be genuine. If you or your financial institution transact with us over the telephone, you will generally bear the risk of any loss. 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 an account with a SunTrust affiliated bank, electronically transferred to your account. RECEIVING YOUR MONEY Normally, we will send your sale proceeds within five Business Days after we receive your request. 24 PROSPECTUS PURCHASING, SELLING AND EXCHANGING FUND SHARES 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 We generally pay sale proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) we might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). Although it is highly unlikely that your shares would ever be redeemed in kind, you would probably have to pay brokerage 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, $2,000 for Investor Shares and $10,000 for Flex Shares, you may be required to sell your shares. You will always be given at least 60 days' written notice to give you time to add to your account and avoid selling your shares. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES We may suspend your right to sell your shares if the NYSE restricts trading, the SEC declares an emergency or for other reasons. More information about this is in our Statement of Additional Information. EXCHANGING FUND SHARES HOW TO EXCHANGE YOUR SHARES You may exchange your shares on any Business Day by contacting us directly by mail or telephone. You may also exchange shares through your financial institution by mail or telephone. Exchange requests must be for an amount of at least $1,000. 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. SIMPLY SPEAKING . . . 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 we receive 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. FLEX SHARES You may exchange Flex Shares of any Fund for Flex Shares of any other Fund, or for Investor Shares of the Money Market Funds. No contingent deferred sales charge is imposed on redemptions of Money Market Funds shares you acquire in an exchange, provided you hold your shares for at least one year from your initial purchase. If you exchange Flex Shares for Investor Shares of a Money Market Fund, you may only exchange those Money Market Fund Investor Shares for Flex Shares. PROSPECTUS 25 HISTORICAL FINANCIAL INFORMATION FINANCIAL HIGHLIGHTS The tables that follow present performance information about Investor and Flex Shares of each Fund. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned [or lost] on an investment in a Fund, assuming you reinvested all of your dividends and distributions. This information has been audited by Arthur Andersen, LLP, independent public accountants. Their report, along with each Fund's financial statements, appears in our annual report that accompanies our Statement of Additional Information. You can obtain our annual report, which contains more performance information, at no charge by calling 1-800-874-4700. SIMPLY SPEAKING . . . FINANCIAL HIGHLIGHTS Study these tables to see how each Fund performed since it began investment operations.
NET REALIZED AND UNREALIZED NET NET ASSET GAINS DISTRIBUTIONS ASSET VALUE NET (LOSSES) FROM NET DISTRIBUTIONS VALUE BEGINNING OF INVESTMENT ON INVESTMENT FROM REALIZED END OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS PERIOD ------------ ------------- --------- ------------- ------------- -------- - ----------------------------- FLORIDA TAX-EXEMPT BOND FUND - ----------------------------- Investor Shares 1998.............................. $ 10.29 $ 0.42 $ 0.44 $ (0.42) $ (0.01) $ 10.72 1997.............................. 10.07 0.44 0.25 (0.44) (0.03) 10.29 1996.............................. 10.18 0.44 (0.06) (0.44) (0.05) 10.07 1995.............................. 9.75 0.42 0.43 (0.42) -- 10.18 1994(1)........................... 10.00 0.13 (0.25) (0.13) -- 9.75 Flex Shares 1998.............................. $ 10.30 $ 0.37 $ 0.45 $ (0.37) $ (0.01) $ 10.74 1997.............................. 10.08 0.39 0.25 (0.39) (0.03) 10.30 1996(2)........................... 10.19 0.39 (0.06) (0.39) (0.05) 10.08 - ------------------------------ GEORGIA TAX-EXEMPT BOND FUND - ------------------------------ Investor Shares 1998.............................. $ 9.74 $ 0.39 $ 0.40 $ (0.39) $ (0.01) $ 10.13 1997.............................. 9.58 0.40 0.21 (0.40) (0.05) 9.74 1996.............................. 9.65 0.41 (0.05) (0.41) (0.02) 9.58 1995.............................. 9.44 0.40 0.21 (0.40) -- 9.65 1994(3)........................... 10.00 0.13 (0.56) (0.13) -- 9.44 Flex Shares 1998.............................. $ 9.73 $ 0.34 $ 0.40 $ (0.34) $ (0.01) $ 10.12 1997.............................. 9.56 0.35 0.22 (0.35) (0.05) 9.73 1996(4)........................... 9.72 0.36 (0.14) (0.36) (0.02) 9.56 - ---------------------------- INVESTMENT GRADE BOND FUND - ---------------------------- Investor Shares 1998.............................. $ 10.16 $ 0.55 $ 0.49 $ (0.55) $ -- $ 10.65 1997.............................. 10.06 0.56 0.10 (0.56) -- 10.16 1996.............................. 10.26 0.56 (0.20) (0.56) -- 10.06 1995.............................. 9.89 0.57 0.38 (0.58) -- 10.26 1994.............................. 10.44 0.46 (0.35) (0.46) (0.20) 9.89 Flex Shares 1998.............................. $ 10.17 $ 0.51 $ 0.49 $ (0.51) $ -- $ 10.66 1997.............................. 10.07 0.51 0.10 (0.51) -- 10.17 1996(5)........................... 10.33 0.52 (0.26) (0.52) -- 10.07 - ---------------------------------------- INVESTMENT GRADE TAX-EXEMPT BOND FUND - ---------------------------------------- Investor Shares 1998.............................. $ 11.24 $ 0.39 $ 0.49 $ (0.39) $ (0.32) $ 11.41 1997.............................. 11.12 0.40 0.33 (0.40) (0.21) 11.24 1996.............................. 11.30 0.41 0.19 (0.41) (0.37) 11.12 1995.............................. 10.69 0.42 0.61 (0.42) -- 11.30 1994.............................. 10.79 0.33 0.25 (0.33) (0.35) 10.69 Flex Shares 1998.............................. $ 11.23 $ 0.33 $ 0.49 $ (0.33) $ (0.32) $ 11.40 1997.............................. 11.11 0.35 0.33 (0.35) (0.21) 11.23 1996(2)........................... 11.30 0.37 0.18 (0.37) (0.37) 11.11 RATIO OF NET RATIO OF INVESTMENT RATIO OF EXPENSES TO INCOME TO NET NET AVERAGE NET AVERAGE NET ASSETS RATIO OF INVESTMENT ASSETS ASSETS END OF EXPENSES TO INCOME TO (EXCLUDING (EXCLUDING TOTAL PERIOD AVERAGE NET AVERAGE NET WAIVERS AND WAIVERS AND RETURN(A) (000) ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) ------------ --------- ----------- ----------- ---------------- ---------------- - ----------------------------- FLORIDA TAX-EXEMPT BOND FUND - ----------------------------- Investor Shares 1998.............................. 8.46% $ 3,381 0.86% 3.98% 1.34% 3.50% 1997.............................. 7.00 3,226 0.85 4.28 1.31 3.82 1996.............................. 3.76 4,025 0.85 4.28 1.36 3.77 1995.............................. 9.04 3,320 0.85 4.36 1.50 3.71 1994(1)........................... (1.22)** 2,280 0.85* 3.67* 3.20* 1.32* Flex Shares 1998.............................. 8.04% $ 8,160 1.36% 3.45% 2.01% 2.80% 1997.............................. 6.48 3,000 1.35 3.78 2.28 2.85 1996(2)........................... 3.27* 2,692 1.35* 3.79* 2.54* 2.60* - ------------------------------ GEORGIA TAX-EXEMPT BOND FUND - ------------------------------ Investor Shares 1998.............................. 8.26% $ 3,975 0.86% 3.89% 1.30% 3.45% 1997.............................. 6.47 3,511 0.85 4.10 1.33 3.62 1996.............................. 3.69 3,418 0.85 4.17 1.41 3.61 1995.............................. 6.70 3,268 0.85 4.31 1.43 3.73 1994(3)........................... (4.29)** 3,300 0.85* 3.93* 2.36* 2.42* Flex Shares 1998.............................. 7.74% $ 8,264 1.36% 3.39% 2.02% 2.73% 1997.............................. 6.06 4,662 1.35 3.60 2.07 2.88 1996(4)........................... 2.25* 4,207 1.35* 3.66* 2.35* 2.66* - ---------------------------- INVESTMENT GRADE BOND FUND - ---------------------------- Investor Shares 1998.............................. 10.49% $ 33,269 1.14% 5.29% 1.38% 5.05% 1997.............................. 6.66 33,165 1.15 5.48 1.41 5.22 1996.............................. 3.50 36,155 1.15 5.40 1.44 5.11 1995.............................. 10.04 33,772 1.15 5.79 1.49 5.45 1994.............................. 0.86 35,775 1.14 4.39 1.41 4.12 Flex Shares 1998.............................. 9.99% $ 13,111 1.65% 4.76% 2.11% 4.30% 1997.............................. 6.16 5,763 1.64 5.00 2.20 4.44 1996(5)........................... 2.50* 4,621 1.64* 4.84* 2.49* 3.99* - -------------------------------------- INVESTMENT GRADE TAX-EXEMPT BOND FUND - -------------------------------------- Investor Shares 1998.............................. 8.05% $ 28,159 1.16% 3.43% 1.43% 3.16% 1997.............................. 6.69 31,857 1.15 3.56 1.38 3.33 1996.............................. 5.40 37,427 1.15 3.61 1.42 3.34 1995.............................. 9.91 41,693 1.15 3.88 1.43 3.60 1994.............................. 5.37 46,182 1.14 2.96 1.51 2.59 Flex Shares 1998.............................. 7.50% $ 8,399 1.64% 2.95% 2.10% 2.49% 1997.............................. 6.19 4,681 1.63 3.08 2.15 2.56 1996(2)........................... 4.91* 5,536 1.63* 3.12* 2.25* 2.50* PORTFOLIO TURNOVER RATE --------- - ----------------------------- FLORIDA TAX-EXEMPT BOND FUND - ----------------------------- Investor Shares 1998.............................. 69% 1997.............................. 135 1996.............................. 63 1995.............................. 105 1994(1)........................... 53 Flex Shares 1998.............................. 69% 1997.............................. 135 1996(2)........................... 63 - ------------------------------ GEORGIA TAX-EXEMPT BOND FUND - ------------------------------ Investor Shares 1998.............................. 7% 1997.............................. 15 1996.............................. 60 1995.............................. 25 1994(3)........................... 26 Flex Shares 1998.............................. 7% 1997.............................. 15 1996(4)........................... 60 - ---------------------------- INVESTMENT GRADE BOND FUND - ---------------------------- Investor Shares 1998.............................. 109% 1997.............................. 298 1996.............................. 184 1995.............................. 238 1994.............................. 259 Flex Shares 1998.............................. 109% 1997.............................. 298 1996(5)........................... 184 - -------------------------------------- INVESTMENT GRADE TAX-EXEMPT BOND FUND - -------------------------------------- Investor Shares 1998.............................. 378% 1997.............................. 489 1996.............................. 514 1995.............................. 592 1994.............................. 432 Flex Shares 1998.............................. 378% 1997.............................. 489 1996(2)........................... 514
* Annualized. ** Return is for the period indicated and has not been annualized. (1) Commenced operations on January 18, 1994. (2) Commenced operations on June 1, 1995. (3) Commenced operations on January 19, 1994. (4) Commenced operations on June 6, 1995. (5) Commenced operations on June 7, 1995. (A) Total return figures do not reflect applicable sales loads. 26 PROSPECTUS HISTORICAL FINANCIAL INFORMATION
NET REALIZED AND UNREALIZED NET ASSET GAINS DISTRIBUTIONS VALUE NET (LOSSES) FROM NET DISTRIBUTIONS NET ASSET BEGINNING OF INVESTMENT ON INVESTMENT FROM REALIZED VALUE END PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS OF PERIOD ------------ ------------- --------- ------------- ------------- --------- - --------------------------------------------- LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND - --------------------------------------------- Investor Shares 1998..................................... $ 10.00 $ 0.56 $ 0.12 $ (0.56) $ (0.01) $ 10.11 1997..................................... 9.97 0.56 0.04 (0.56) (0.01) 10.00 1996..................................... 10.11 0.60 (0.14) (0.60) -- 9.97 1995(7).................................. 9.98 0.58 0.13 (0.58) -- 10.11 Flex Shares 1998..................................... $ 10.02 $ 0.52 $ 0.11 $ (0.52) $ (0.01) $ 10.12 1997..................................... 9.99 0.52 0.04 (0.52) (0.01) 10.02 1996(8).................................. 10.14 0.55 (0.15) (0.55) -- 9.99 - ---------------------- SHORT-TERM BOND FUND - ---------------------- Investor Shares 1998..................................... $ 9.91 $ 0.53 $ 0.17 $ (0.53) $ (0.01) $ 10.07 1997..................................... 9.88 0.51 0.06 (0.51) (0.03) 9.91 1996..................................... 10.01 0.52 (0.10) (0.53) (0.02) 9.88 1995..................................... 9.81 0.51 0.19 (0.50) -- 10.01 1994..................................... 10.03 0.40 (0.21) (0.40) (0.01) 9.81 Flex Shares 1998..................................... $ 9.91 $ 0.50 $ 0.17 $ (0.50) $ (0.01) $ 10.07 1997..................................... 9.88 0.48 0.06 (0.48) (0.03) 9.91 1996(9).................................. 10.02 0.47 (0.12) (0.47) (0.02) 9.88 - --------------------------------------- SHORT-TERM U.S. TREASURY SECURITIES FUND - --------------------------------------- Investor Shares 1998..................................... $ 9.88 $ 0.49 $ 0.09 $ (0.50) $ -- $ 9.96 1997..................................... 9.84 0.50 0.04 (0.50) -- 9.88 1996..................................... 9.94 0.54 (0.10) (0.54) -- 9.84 1995..................................... 9.83 0.46 0.11 (0.46) -- 9.94 1994..................................... 9.99 0.32 (0.12) (0.31) (0.05) 9.83 Flex Shares 1998..................................... $ 9.85 $ 0.47 $ 0.10 $ (0.46) $ -- $ 9.94 1997..................................... 9.82 0.47 0.03 (0.47) -- 9.85 1996(10)................................. 9.96 0.48 (0.14) (0.48) -- 9.82 - ------------------------------- U.S. GOVERNMENT SECURITIES FUND - ------------------------------- Investor Shares 1998..................................... $ 10.02 $ 0.57 $ 0.43 $ (0.57) $ -- $ 10.45 1997..................................... 9.90 0.58 0.12 (0.58) -- 10.02 1996..................................... 10.26 0.59 (0.33) (0.59) (0.03) 9.90 1995(11)................................. 10.00 0.56 0.26 (0.56) -- 10.26 Flex Shares 1998..................................... $ 10.02 $ 0.52 $ 0.44 $ (0.52) $ -- $ 10.46 1997..................................... 9.91 0.53 0.11 (0.53) -- 10.02 1996(8).................................. 10.31 0.52 (0.37) (0.52) (0.03) 9.91 RATIO OF NET RATIO OF INVESTMENT RATIO OF EXPENSES TO INCOME TO NET NET AVERAGE NET AVERAGE NET ASSETS RATIO OF INVESTMENT ASSETS ASSETS END OF EXPENSES TO INCOME TO (EXCLUDING (EXCLUDING TOTAL PERIOD AVERAGE NET AVERAGE NET WAIVERS AND WAIVERS AND RETURN(A) (000) ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) ------------ ------ ----------- ----------- ---------------- ---------------- - --------------------------------------------- LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND - --------------------------------------------- Investor Shares 1998..................................... 6.95% $2,705 0.91% 5.50% 1.51% 4.90% 1997..................................... 6.17 2,426 0.90 5.55 1.48 4.97 1996..................................... 4.59 2,512 0.90 5.75 2.25 4.40 1995(7).................................. 7.45** 623 0.90* 6.27* 7.74* (0.57)* Flex Shares 1998..................................... 6.49% $1,543 1.26% 5.16% 2.72% 3.70% 1997..................................... 5.80 1,409 1.25 5.20 2.66 3.79 1996(8).................................. 4.10* 1,349 1.25* 5.38* 3.59* 3.04* - ---------------------- SHORT-TERM BOND FUND - ---------------------- Investor Shares 1998..................................... 7.19% $1,949 0.86% 5.27% 1.71% 4.42% 1997..................................... 5.97 2,182 0.85 5.16 1.58 4.43 1996..................................... 4.23 2,700 0.85 5.20 1.72 4.33 1995..................................... 7.44 2,609 0.85 5.24 1.56 4.53 1994..................................... 1.81 2,381 0.85 3.94 2.52 2.27 Flex Shares 1998..................................... 6.84% $2,110 1.21% 4.93% 2.85% 3.29% 1997..................................... 5.62 1,073 1.20 4.82 3.02 3.00 1996(9).................................. 3.73* 966 1.20* 4.77* 4.06* 1.91* - --------------------------------------- SHORT-TERM U.S. TREASURY SECURITIES FUND - --------------------------------------- Investor Shares 1998..................................... 6.04% $3,277 0.81% 5.07% 1.33% 4.55% 1997..................................... 5.59 3,921 0.80 5.05 1.35 4.50 1996..................................... 4.52 4,192 0.80 5.43 1.32 4.91 1995..................................... 6.03 7,144 0.80 4.74 1.33 4.21 1994..................................... 2.01 4,841 0.78 3.11 1.41 2.48 Flex Shares 1998..................................... 5.90% $1,413 1.06% 4.81% 2.87% 3.00% 1997..................................... 5.19 1,091 1.05 4.75 2.51 3.29 1996(10)................................. 3.72* 2,423 1.05* 5.03* 2.97* 3.11* - ------------------------------- U.S. GOVERNMENT SECURITIES FUND - ------------------------------- Investor Shares 1998..................................... 10.23% $3,225 1.16% 5.53% 1.76% 4.93% 1997..................................... 7.21 2,243 1.15 5.76 1.79 5.12 1996..................................... 2.47 2,396 1.15 5.68 2.50 4.33 1995(11)................................. 8.61** 589 1.15* 6.08* 6.84* 0.39* Flex Shares 1998..................................... 9.78% $4,022 1.67% 5.02% 2.32% 4.37% 1997..................................... 6.57 2,801 1.66 5.26 2.42 4.50 1996(8).................................. 1.42* 2,826 1.66* 5.18* 2.86* 3.98* PORTFOLIO TURNOVER RATE --------- - --------------------------------------------- LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND - --------------------------------------------- Investor Shares 1998..................................... 163% 1997..................................... 133 1996..................................... 83 1995(7).................................. 68 Flex Shares 1998..................................... 163% 1997..................................... 133 1996(8).................................. 83 - ---------------------- SHORT-TERM BOND FUND - ---------------------- Investor Shares 1998..................................... 87% 1997..................................... 118 1996..................................... 163 1995..................................... 200 1994..................................... 75 Flex Shares 1998..................................... 87% 1997..................................... 118 1996(9).................................. 163 - --------------------------------------- SHORT-TERM U.S. TREASURY SECURITIES FUND - --------------------------------------- Investor Shares 1998..................................... 39% 1997..................................... 93 1996..................................... 94 1995..................................... 88 1994..................................... 117 Flex Shares 1998..................................... 39% 1997..................................... 93 1996(10)................................. 94 - ------------------------------- U.S. GOVERNMENT SECURITIES FUND - ------------------------------- Investor Shares 1998..................................... 14% 1997..................................... 21 1996..................................... 83 1995(11)................................. 30 Flex Shares 1998..................................... 14% 1997..................................... 21 1996(8).................................. 83
* Annualized. ** Return is for the period indicated and has not been annualized. (7) Commenced operations on July 17, 1994. (8) Commenced operations on June 7, 1995. (9) Commenced operations on June 20, 1995. (10) Commenced operations on June 22, 1995. (11) Commenced operations on June 9, 1994. (A) Total return figures do not reflect applicable sales loads. PROSPECTUS 27 HOW FUND SHARES ARE DISTRIBUTED 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. For Investor Shares, maximum distribution fees, as a percentage of average daily net assets, are as follows: Georgia Tax-Exempt Bond Fund .18% Florida Tax-Exempt Bond Fund .18% Investment Grade Bond Fund .43% Investment Grade Tax-Exempt Bond Fund .43% Limited-Term Federal Mortgage Securities Fund .23% Short-Term Bond Fund .23% Short-Term U.S. Treasury Securities Fund .18% U.S. Government Securities Fund .38%
For Flex Shares, the maximum distribution fee is 1.00% of the average daily net assets of each Fund. 28 PROSPECTUS OTHER INFORMATION DIVIDENDS AND DISTRIBUTIONS Each Fund declares income dividends daily and pays these dividends monthly. The Funds make distributions of capital gains, if any, at least annually. 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 us in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after we receive your written notice. To cancel your election, simply send us written notice. SIMPLY SPEAKING . . . THE "RECORD DATE" If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. TAXES PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Capital gains distributions may be taxable at different rates depending on the length of time a Fund holds its portfolio securities. YOU MAY BE TAXED ON EACH SALE OR EXCHANGE OF FUND SHARES. The Florida Tax-Exempt Bond, Georgia Tax-Exempt Bond and Investment Grade Tax-Exempt Bond Funds 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. The Funds use a tax management technique known as "highest in, first out." Using this technique, the portfolio holdings that have experienced the smallest gain or largest loss are sold first in an effort to minimize capital gains and enhance after-tax returns. MORE INFORMATION ABOUT TAXES IS IN OUR STATEMENT OF ADDITIONAL INFORMATION. SIMPLY SPEAKING . . . FUND DISTRIBUTIONS Distributions you receive from a Fund may be taxable whether or not you reinvest them. PROSPECTUS 29 NOTES 30 PROSPECTUS NOTES PROSPECTUS 31 HOW TO OBTAIN MORE INFORMATION INVESTMENT ADVISORS STI Capital Management, N.A. Trusco Capital Management, Inc. SunTrust Bank, Atlanta DISTRIBUTOR SEI Investments Distribution Co. LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) More detailed information about the STI Classic Funds is included in our SAI. The SAI has been filed 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 SEMIANNUAL REPORTS These reports list the Funds' holdings and contain information from the Funds' managers about fund strategies and recent market conditions and trends. TO OBTAIN MORE INFORMATION: BY TELEPHONE: Call 1-800-874-4770 BY MAIL: Write to us c/o SEI Investments Distribution Co. Oaks, Pennsylvania 19456. BY E-MAIL: xxxxxxxxxxxxxxxx BY INTERNET: http://www.suntrust.com FROM THE SEC: You can also obtain these documents, and other information about the STI Classic Funds, from 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 call 1-800-SEC-0330). 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 20549-6009. The Fund's Investment Company Act registration number is 811-06557. [GRAPHIC] STI CLASSIC FUNDS--EQUITY FUNDS FLEX AND INVESTOR SHARES PROSPECTUS October 1, 1998 BALANCED FUND CAPITAL GROWTH FUND INTERNATIONAL EQUITY FUND INTERNATIONAL EQUITY INDEX FUND MID-CAP EQUITY FUND SMALL CAP EQUITY FUND SMALL CAP GROWTH STOCK FUND SUNBELT EQUITY FUND TAX SENSITIVE GROWTH STOCK FUND VALUE INCOME STOCK FUND INVESTMENT ADVISORS TO THE FUNDS: STI CAPITAL MANAGEMENT, N.A. TRUSCO CAPITAL MANAGEMENT, INC. (the "Advisors") ----------------- STI Classic Funds ----------------- The Securities and Exchange Commission has not approved any Fund shares or determined whether this prospectus is accurate or complete. It is a crime for anyone to tell you otherwise. PROSPECTUS HOW TO READ THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers different classes of 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. We arranged the prospectus into different sections so that you can easily review this important information. On the next page, we discuss general information you should know about investing in the Funds. IF YOU WOULD LIKE MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE: 2 BALANCED FUND 4 CAPITAL GROWTH FUND 6 INTERNATIONAL EQUITY FUND 8 INTERNATIONAL EQUITY INDEX FUND 10 MID-CAP EQUITY FUND 12 SMALL CAP EQUITY FUND 14 SMALL CAP GROWTH STOCK FUND 16 SUNBELT EQUITY FUND 18 TAX SENSITIVE GROWTH STOCK FUND 20 VALUE INCOME STOCK FUND IF YOU WOULD LIKE MORE INFORMATION ABOUT THE FOLLOWING TOPICS, PLEASE SEE: 22 EACH FUND'S PRINCIPAL INVESTMENTS 22 THE ADVISORS AND THEIR PORTFOLIO MANAGERS 24 PURCHASING, SELLING AND EXCHANGING FUND SHARES 29 HISTORICAL FINANCIAL INFORMATION ABOUT EACH FUND 31 HOW FUND SHARES ARE DISTRIBUTED 32 DISTRIBUTIONS OF DIVIDENDS AND CAPITAL GAINS 32 TAXES 36 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS
FOR INFORMATION ABOUT KEY TERMS AND CONCEPTS, LOOK FOR OUR "SIMPLY SPEAKING" EXPLANATIONS. - -------------------------------------------------------------------------------- FUND SUMMARY INVESTMENT STRATEGY WHAT ARE THE RISKS OF INVESTING? PERFORMANCE INFORMATION WHAT IS AN INDEX? FUND FEES AND EXPENSES FUND INVESTMENTS INVESTMENT ADVISORS PURCHASING FUND SHARES - -------------------------------------------------------------------------------- OCTOBER 1, 1998 PROSPECTUS 1 INTRODUCTION Each Fund is a mutual fund. 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 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 securities markets generally, as well as those that affect particular companies or governments. These price movements, sometimes called volatility, will vary depending on the types of securities a Fund owns and the markets where these securities trade. The Equity Funds invest primarily in common stocks and other equity securities. Historically, equity securities have outperformed other types of investments on a long-term basis, but have been more subject to price fluctuation in the short run. Like other investments, you could lose money on your investment in a Fund. Your investment in a Fund is not a bank deposit. It is not insured or guaranteed by the FDIC or any government agency. Each Fund has its own investment goal and strategies for reaching that goal. But, we cannot guarantee that a Fund will achieve its goal. A Fund's goal may be changed without shareholder approval. Before investing, make sure that the Fund's goal matches your own. The Investment Advisors invest each Fund's assets in a way that the Advisor believes will help the Fund achieve its goal. An Advisor's judgments about the stock markets, economy and companies, or selecting investments may not reflect actual market movements, economic conditions or company performance. CHOOSING INVESTOR OR FLEX SHARES 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 - - Front-end sales charge - - Lower annual expenses - - $2,000 minimum initial investment FLEX SHARES - - Deferred sales charge - - Higher annual expenses - - $10,000 minimum initial investment SALES LOADS This table describes the shareholder fees and expenses that you may pay if you purchase or sell Fund shares. You would pay these fees directly from your investment in a Fund. These fees are in addition to the fees and expenses that you pay indirectly by holding Fund shares (see "Fund Fees and Expenses" for each Fund).
INVESTOR SHARES FLEX SHARES SHAREHOLDER FEES 3.75% None Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* None 2.00% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)**
* THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." ** THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." 2 PROSPECTUS BALANCED FUND FUND SUMMARY INVESTMENT GOALS Capital appreciation and current income INVESTMENT FOCUS PRIMARY U.S. common stocks SECONDARY Bonds SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT Attempts to identify companies with a history of STRATEGY earnings growth and bonds with minimal risk INVESTOR PROFILE Investors who want income from their investment as well as an increase in its value
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
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, we attempt to identify high-quality companies with a history of earnings growth. In selecting bonds, we try 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 taxes. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests in both common stocks and bonds. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. In addition, the value of bonds held by the Fund may decline due to rising interest rates. An issuer may be unable to make timely payments of principal or interest. The Fund may have more assets than usual invested in bonds during periods of rising interest rates or less assets than usual invested in bonds during falling interest rates. Some investment grade bonds may have speculative characteristics. Fixed income securities regardless of credit quality, also experience price volatility, especially in response to interest rate changes. 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 performance of Flex Shares and Investor Shares will differ slightly due to differences in expenses. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1995 25.08% 1996 11.85% 1997 20.71%
BEST QUARTER WORST QUARTER 11.19% 0.64% (6/30/97) (3/31/97)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 12.48%. PROSPECTUS 3 BALANCED FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE S&P 500 INDEX AND THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX.
SINCE INCEPTION INVESTOR SHARES 1 YEAR 3 YEARS (1/4/94) BALANCED FUND 16.23% 17.59% 11.52% S&P 500 INDEX 33.35% 31.13% 23.48% LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX 9.75% 10.43% 6.92%
SINCE INCEPTION FLEX SHARES 1 YEAR (6/14/95) BALANCED FUND 17.86% 16.42% S&P 500 INDEX 33.35% 29.81% LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX 9.75% 8.08%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor 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 index of 500 stocks designed to mimic the overall equity market's industry weightings. The Lehman Brothers Government/ Corporate Bond Index is a widely recognized index of government and corporate debt securities rated investment grade or better with maturities of at least 1 year. FUND FEES AND EXPENSES This table describes the shareholder fees and expenses that you may pay if you purchase or sell Fund shares. You would pay these fees directly from your investment in a Fund.
INVESTOR SHARES FLEX SHARES SHAREHOLDER FEES 3.75% None Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* None 2.00% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)**
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." **THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." The table below describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees .95 % .95 % Distribution and Service (12b-1) Fees .28 % 1.00 % Other Expenses .37 % .29 % --- --- Total Annual Fund Operating Expenses 1.60 % 2.24 %
- -------------------------------------------------- EXAMPLE - -------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $532 $861 $1213 $2204 Flex Shares $627 $700 $1200 $2575 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $532 $861 $1213 $2204 Flex Shares $427 $700 $1200 $2575
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor and the Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE .83%, .07% AND 1.27%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE .83%, .91%, AND 2.03%, RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" and "How Fund Shares are Distributed." 4 PROSPECTUS CAPITAL GROWTH FUND FUND SUMMARY INVESTMENT GOAL Capital appreciation INVESTMENT FOCUS U.S. common stocks SHARE PRICE VOLATILITY Medium PRINCIPAL INVESTMENT Attempts to identify companies with above average STRATEGY growth potential INVESTOR PROFILE Investors who want the value of their investment to grow, but do not need to receive income on their investment
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
INVESTMENT STRATEGY The Capital Growth Fund invests primarily in U.S. common stocks and other equity securities that we believe are undervalued by the stock market. In selecting investments for the Fund, we choose companies that we believe have above average growth potential. We rotate the Fund's investments among various market sectors based on our research of business cycles. Our strategy focuses on large-cap stocks with a strong growth history. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains taxes. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in U.S. common stocks. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles and with periods of rising prices and periods of falling prices. This price volatility the principal risk of investing in the Fund. 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 performance of Flex Shares and Investor Shares will differ slightly due to differences in expenses. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1993 9.27% 1994 -8.01% 1995 30.33% 1996 19.50% 1997 30.34%
BEST QUARTER WORST QUARTER 16.84% -4.33% (6/30/97) (12/31/94)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 16.80%. PROSPECTUS 5 CAPITAL GROWTH FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE S&P 500 INDEX.
SINCE INCEPTION INVESTOR SHARES 1 YEAR 5 YEARS (6/9/92) CAPITAL GROWTH FUND 25.50% 14.46% 16.04% S&P 500 INDEX 33.35% 20.25% 19.65%
SINCE INCEPTION FLEX SHARES 1 YEAR (6/1/95) CAPITAL GROWTH FUND 27.77% 25.26% S&P 500 INDEX 33.35% 29.81%
SIMPLY SPEAKING . . . 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 advisor 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 index of 500 stocks designed to mimic the overall equity market's industry weightings. FUND FEES AND EXPENSES This table describes the shareholder fees and expenses that you may pay if you purchase or sell Fund shares. You would pay these fees directly from your investment in a Fund.
INVESTOR SHARES FLEX SHARES SHAREHOLDER FEES 3.75% None Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* None 2.00% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)**
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." **THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." The table below describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees 1.15 % 1.15 % Distribution and Service (12b-1) Fees .68 % 1.00 % Other Expenses .19 % .25 % --- --- Total Annual Fund Operating Expenses 2.02 % 2.40 %
- -------------------------------------------------- EXAMPLE - -------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may 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 $572 $985 $1422 $2635 Flex Shares $443 $748 $1280 $2736 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $572 $985 $1422 $2635 Flex Shares $243 $748 $1280 $2736
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor and the Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 1.04%, .59% AND 1.82%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 1.04%, 1.00% AND 2.29%, RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" and "How Fund Shares are Distributed." 6 PROSPECTUS INTERNATIONAL EQUITY FUND FUND SUMMARY INVESTMENT GOAL Long-term capital appreciation INVESTMENT FOCUS Foreign common stocks SHARE PRICE VOLATILITY High PRINCIPAL INVESTMENT Attempts to identify undervalued companies with STRATEGY good fundamentals 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
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
INVESTMENT STRATEGY The International Equity Fund invests primarily in common stocks and other equity securities of foreign companies. In selecting investments for the Fund, we diversify the Fund's investments among at least three foreign countries. The Fund invests primarily in developed countries, but may invest in countries with emerging markets. Our "bottom-up" approach to stock selection focuses on individual stocks and fundamental characteristics of companies. Our goal is to find companies with top management, quality products and sound financial positions, that are trading at a discount. 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 taxes. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in common stocks of foreign companies. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. In addition, investments in foreign markets may be more volatile than investments in U.S. markets. Diplomatic, political or economic developments may cause foreign investments to lose money. The value of the U.S. dollar may rise, causing reduced returns for U.S. persons investing abroad. A foreign country may not have the same accounting and financial reporting standards as the U.S. Foreign stock markets, brokers and companies are generally subject to less supervision and regulation than their U.S. counterparts. Emerging markets securities may be even more susceptible to these risks. 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 performance of Flex Shares and Investor Shares will differ slightly due to differences in expenses. The periods prior to December 1995, when the Fund began operating, represent the performance of the Advisor'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 Trust Shares of the Fund. Trust Shares have lower expenses than Investor and Flex Shares, which results in higher performance shown below. The Advisor'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 FUND'S PERFORMANCE FROM YEAR TO YEAR. THE PERIODS FROM JANUARY 1996 TO THE PRESENT REPRESENT THE PERFORMANCE OF INVESTOR SHARES OF THE FUND. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1996 21.58% 1997 13.01%
BEST QUARTER WORST QUARTER 12.07% -7.80% (6/30/97) (12/31/97)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 16.10%. PROSPECTUS 7 INTERNATIONAL EQUITY FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA AND FAR EAST (MSCI-EAFE) INDEX.
SINCE INCEPTION 1 YEAR (2/2/95) INTERNATIONAL EQUITY FUND Investor Shares 13.01% 16.96% Flex Shares 12.24% 16.23% MSCI-EAFE 11.78% 6.47%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor 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 index of over 900 securities listed on the stock exchanges in Europe, Australia, and the Far East. FUND FEES AND EXPENSES This table describes the shareholder fees and expenses that you may pay if you purchase or sell Fund shares. You would pay these fees directly from your investment in a Fund.
INVESTOR SHARES FLEX SHARES SHAREHOLDER FEES 3.75% None Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* None 2.00% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)**
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." **THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." The table below describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees 1.25 % 1.25 % Distribution and Service (12b-1) Fees .33 % 1.00 % Other Expenses .34 % .34 % --- --- Total Annual Fund Operating Expenses 1.92 % 2.59 %
- -------------------------------------------------- EXAMPLE - -------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Investor Shares $563 $955 $1373 $2534 Flex Shares $462 $805 $1375 $2925 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $563 $955 $1373 $2534 Flex Shares $262 $805 $1375 $2925
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor and the Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 1.24%, .24% AND 1.83%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 1.24%, .95% AND 2.53%, RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" and "How Fund Shares are Distributed." 8 PROSPECTUS INTERNATIONAL EQUITY INDEX FUND FUND SUMMARY INVESTMENT GOAL To provide investment results that correspond to the performance of the MSCI EAFE-GDP Index INVESTMENT FOCUS Foreign common stocks in MSCI EAFE-GDP Index SHARE PRICE VOLATILITY High PRINCIPAL INVESTMENT Statistical analysis to track the Index STRATEGY 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
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
INVESTMENT STRATEGY The International Equity Index Fund invests primarily in common stocks of foreign companies. In selecting investments for the Fund, we choose companies included in the MSCI EAFE-GDP Index, an index of equity securities of companies located in Europe, Australia 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. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in common stocks of foreign companies. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. In addition, investments in foreign markets may be more volatile than investments in U.S. markets. Diplomatic, political or economic developments may cause foreign investments to lose money. The value of the U.S. dollar may rise, causing reduced returns for U.S. persons investing abroad. A foreign country may not have the same accounting and financial reporting standards as the U.S. Foreign stock markets, brokers and companies are generally subject to less supervision and regulation than their U.S. counterparts. Emerging markets securities may be even more susceptible to these risks. 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 performance of Flex Shares and Investor Shares will differ slightly due to differences in expenses. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1995 10.20% 1996 5.78% 1997 8.44%
BEST QUARTER WORST QUARTER 11.64% -5.59% (6/30/97) (12/31/97)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 23.11%. PROSPECTUS 9 INTERNATIONAL EQUITY INDEX FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA AND FAR EAST -- GROSS DOMESTIC PRODUCT WEIGHTED (MSCI-EAFE- GDP) INDEX.
SINCE INCEPTION INVESTOR SHARES 1 YEAR 3 YEARS (6/6/94) INTERNATIONAL EQUITY INDEX FUND 4.35% 8.12% 4.80% MSCI-EAFE-GDP 4.35% 6.62% 5.26%
SINCE INCEPTION FLEX SHARES 1 YEAR (6/8/95) INTERNATIONAL EQUITY INDEX FUND 5.84% 6.75% MSCI-EAFE-GDP 4.35% 6.08%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The MSCI EAFE-GDP Index is a widely recognized index of over 900 securities listed on the stock exchanges in Europe, Australia, and the Far East. The Index is weighted by the gross domestic product of the various countries in the Index. FUND FEES AND EXPENSES This table describes the shareholder fees and expenses that you may pay if you purchase or sell Fund shares. You would pay these fees directly from your investment in a Fund.
INVESTOR SHARES FLEX SHARES SHAREHOLDER FEES 3.75% None Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* None 2.00% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)**
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." **THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." The table below describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees .90 % .90 % Distribution and Service (12b-1) Fees .38 % 1.00 % Other Expenses .57 % 1.63 % --- --- Total Annual Fund Operating Expenses 1.85 % 3.53 %
- -------------------------------------------------- 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. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may 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 $556 $935 $1338 $2463 Flex Shares $556 $1083 $1831 $3801 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $556 $935 $1338 $2463 Flex Shares $356 $1083 $1831 $3801
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor and the Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE .77%, .12% AND 1.47%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE .77%, .21% AND 2.12%, RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" and "How Fund Shares are Distributed." 10 PROSPECTUS MID-CAP EQUITY FUND FUND SUMMARY INVESTMENT GOAL Capital appreciation INVESTMENT FOCUS U.S. mid-cap common stocks SHARE PRICE VOLATILITY Moderate to high PRINCIPAL INVESTMENT Attempts to identify companies with above average STRATEGY 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
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
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, we choose companies that have small- to mid-sized market capitalizations (i.e., companies with market capitalizations of $500 million to $7 billion) and that have above average growth potentials at attractive prices. We evaluate companies based on their industry sectors and the market in general. The Fund maintains large holdings in the industries that appear to perform best during a given business cycle. We analyze companies that are in favored industries based on their fundamental characteristics, such as growth rates and earnings. We do not consider current income in selecting investments for the Fund. 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 taxes. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in mid-cap common stocks. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. In addition, small- to mid-sized companies may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, these companies may have somewhat limited product lines, markets and financial resources, and may depend upon a relatively small- to medium-sized management group. 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 performance of Flex Shares and Investor Shares will differ slightly due to differences in expenses. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S INVESTOR SHARES FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1995 30.57% 1996 14.93% 1997 20.67%
BEST QUARTER WORST QUARTER 14.13% -3.00% (9/30/97) (3/31/97)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 6.39%. PROSPECTUS 11 MID-CAP EQUITY FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE S&P MIDCAP 400 INDEX.
SINCE INCEPTION INVESTOR SHARES 1 YEAR 3 YEARS (2/1/94) MID-CAP EQUITY FUND 16.15% 20.34% 14.61% S&P MIDCAP 400 INDEX 32.23% 27.32% 19.20%
SINCE INCEPTION FLEX SHARES 1 YEAR (6/5/95) MID-CAP EQUITY FUND 17.92% 19.01% S&P 500 INDEX 32.23% 27.23%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P MidCap 400 Index is a widely recognized index of 400 U.S. mid-cap common stocks chosen for market size, liquidity, and industry group representation. FUND FEES AND EXPENSES This table describes the shareholder fees and expenses that you may pay if you purchase or sell Fund shares. You would pay these fees directly from your investment in a Fund.
INVESTOR SHARES FLEX SHARES SHAREHOLDER FEES 3.75% None Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* None 2.00% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)**
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." **THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." The table below describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees 1.15 % 1.15 % Distribution and Service (12b-1) Fees .43 % 1.00 % Other Expenses .27 % .33 % --- --- Total Annual Fund Operating Expenses 1.85 % 2.48 %
- -------------------------------------------------- EXAMPLE - -------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may 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 $556 $935 $1338 $2463 Flex Shares $451 $773 $1321 $2816 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $556 $935 $1338 $2463 Flex Shares $251 $773 $1321 $2816
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor and the Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 1.04%, .31% AND 1.62%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 1.04%, 0.85% AND 2.22%, RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" and "How Fund Shares are Distributed." 12 PROSPECTUS SMALL CAP EQUITY FUND (CURRENTLY CLOSED TO NEW INVESTORS) FUND SUMMARY INVESTMENT GOALS PRIMARY Capital appreciation SECONDARY Current income INVESTMENT FOCUS U.S. small-cap common stocks SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT Attempts to identify undervalued small-cap stocks STRATEGY INVESTOR PROFILE Investors who primarily want the value of their investment to grow, but want to receive some income from their investment
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
INVESTMENT STRATEGY The Small Cap Equity Fund invests primarily in common stocks of U.S. companies. In selecting investments for the Fund, we choose common stocks of small sized companies (i.e., companies with market capitalizations under $1 billion) that we believe are undervalued in the market. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in small-cap common stocks. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. In addition, small-sized companies may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, small-sized companies may have limited product lines, markets and financial resources, and may depend upon a relatively small management group. 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 Advisor'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 Flex Shares of the Fund. Trust Shares have lower expenses than Flex Shares, which results in higher performance shown below. The Advisor'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 FUND'S PERFORMANCE FROM YEAR TO YEAR. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1995 30.99% 1996 34.25% 1997 31.79%
BEST QUARTER WORST QUARTER 14.91% -2.39% (6/30/97) (12/31/97)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS -.59%. PROSPECTUS 13 SMALL CAP EQUITY FUND (CURRENTLY CLOSED TO NEW INVESTORS) THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE FRANK RUSSELL 2000 INDEX.
SINCE INCEPTION 1 YEAR 3 YEARS (8/31/94) SMALL CAP EQUITY FUND 29.79% 32.34% 10.96% FRANK RUSSELL 2000 SMALL STOCK INDEX 22.36% 22.34% 21.05%
SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Frank Russell 2000 Small Stock Index is a widely recognized index of the 2,000 smallest U.S. companies out of the 3,000 largest companies. FUND FEES AND EXPENSES This table describes the shareholder fees and expenses that you may pay if you purchase or sell Fund shares. You would pay these fees directly from your investment in a Fund.
FLEX SHARES SHAREHOLDER FEES None Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* 2.00% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)**
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." **THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." The table below describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
FLEX SHARES Investment Advisory Fees 1.15 % Distribution and Service (12b-1) Fees 1.00 % Other Expenses .40 % --- Total Annual Fund Operating Expenses 2.55 %
- -------------------------------------------------- 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. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may 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 $458 $793 $1355 $2885 IF YOU DO NOT SELL YOUR SHARES: Flex Shares $258 $793 $1355 $2885
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor and the Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES ARE 1.05%, .82% AND 2.27%, RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" and "How Fund Shares are Distributed." 14 PROSPECTUS SMALL CAP GROWTH STOCK FUND 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 Identifies small-cap companies with above-average STRATEGY growth potential INVESTOR PROFILE Investors who want the value of their investment to grow, but who do not need current income
INVESTMENT STRATEGY The Small Cap Growth Fund invests primarily in U.S. companies that demonstrate above-average growth potential. We invest in companies with an established operating history and a solid balance sheet. In selecting investments for the Fund, we choose companies with market capitalizations of up to about $3 billion. Due to its investment strategy, the Fund may buy and sell securities frequently. This may result in higher transactions costs and additional capital gains taxes. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in common stocks of smaller U.S. companies. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. In addition, investments in small-or mid-cap companies involve greater risk than investments in larger, more established companies because of the greater business risks of small size, limited markets and financial resources, smaller product lines and lack of depth of management. These securities are often traded over-the-counter and may not be traded in high volumes. Consequently, securities prices could be less stable than those of large, more established companies. SIMPLY SPEAKING . . . 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 advisor 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 index of 500 stocks designed to mimic the overall equity market's industry weightings. PROSPECTUS 15 SMALL CAP GROWTH STOCK FUND FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. It shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.00% AND 1.35%, RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors". - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.00% Other Expenses* .20% --------- Total Annual Fund Operating Expenses 1.20%
* OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT YEAR. - -------------------------------------------------------- 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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS $137 $428
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. 16 PROSPECTUS SUNBELT EQUITY FUND FUND SUMMARY INVESTMENT GOAL Capital appreciation INVESTMENT FOCUS Southern U.S. common stocks SHARE PRICE VOLATILITY High PRINCIPAL INVESTMENT Attempts to identify companies with positive STRATEGY earnings trends INVESTOR PROFILE Aggressive investors with long-term investment goals who are willing to accept higher volatility for the possibility of higher returns
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
INVESTMENT STRATEGY The Sunbelt Equity Fund invests substantially all of its assets in common stocks and other equity securities of companies in the southern region of the U.S. These companies are headquartered and/or conduct a substantial portion of their business in the southern region of the U.S., which includes Texas, Arkansas, Alabama, Mississippi, Tennessee, Kentucky, Florida, Virginia, Georgia, North Carolina, South Carolina and Louisiana. Our investment strategy is based on the belief that a portfolio of companies in this region with positive earnings trends will generate above average returns over time. This focus on favorable earnings characteristics is the cornerstone of our philosophy. We do not consider current income in selecting investments for the Fund. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in southern U.S. common stocks. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. Because the Fund focuses its investments in southern companies, economic conditions in or government policies imposed by southern states may cause the Fund to be more volatile than an equity fund that invests in companies located across the U.S. 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 performance of Flex Shares and Investor Shares will differ slightly due to differences in expenses. The periods prior to January 1994, when the Fund began operating, represent the performance of the Advisor's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Investor Shares of the Fund. The Advisor'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 FUND'S PERFORMANCE FROM YEAR TO YEAR. THE PERIODS FROM JANUARY 1994 TO THE PRESENT REPRESENT THE PERFORMANCE OF THE INVESTOR SHARES OF THE FUND. THE BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1993 21.80% 1994 -5.20% 1988 24.37% 1989 25.19% 1990 -5.28% 1991 49.14% 1992 18.13% 1993 21.80% 1994 -5.20% 1995 23.99% 1996 17.80% 1997 20.79%
BEST QUARTER WORST QUARTER 21.67% -19.18% (3/31/91) (12/31/87)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 5.75%. PROSPECTUS 17 SUNBELT EQUITY FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE FRANK RUSSELL 2000 GROWTH INDEX AND THE S&P SMALLCAP 600 INDEX.
SINCE INCEPTION 1 YEAR 5 YEARS 10 YEARS (12/1/80) SUNBELT EQUITY FUND Investor Shares 16.25% 14.41% 17.69% 12.67% Flex Shares* 18.04% 15.27% 18.49% 20.60% FRANK RUSSELL 2000 GROWTH INDEX 12.95% 12.74% 13.49% 8.11% S&P SMALLCAP 600 INDEX 25.49% 17.48% 15.37% 9.35%
* THE PERIODS FROM JANUARY 1994 TO JUNE 1995 REPRESENT THE PERFORMANCE OF INVESTOR SHARES OF THE FUND. SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The Frank Russell 2000 Growth Index is a widely recognized index of the 2,000 largest U.S. companies with higher growth rates. The S&P SmallCap 600 Index is a widely recognized index of 600 U.S. small cap stocks. FUND FEES AND EXPENSES This table describes the shareholder fees and expenses that you may pay if you purchase or sell Fund shares. You would pay these fees directly from your investment in a Fund.
INVESTOR SHARES FLEX SHARES SHAREHOLDER FEES 3.75% None Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* None 2.00% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)**
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." **THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." The table below describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees 1.15 % 1.15 % Distribution and Service (12b-1) Fees .43 % 1.00 % Other Expenses .29 % .44 % --- --- Total Annual Fund Operating Expenses 1.87 % 2.59 %
- -------------------------------------------------- EXAMPLE - -------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may 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 $558 $941 $1348 $2483 Flex Shares $462 $805 $1375 $2925 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $558 $941 $1348 $2483 Flex Shares $262 $805 $1375 $2925
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor and the Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR INVESTOR SHARES ARE 1.04%, .29% AND 1.62%, RESPECTIVELY. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES FOR FLEX SHARES ARE 1.04%, 0.74% AND 2.22%, RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" and "How Fund Shares are Distributed." 18 PROSPECTUS TAX SENSITIVE GROWTH STOCK FUND (available for purchase after December 15, 1998) FUND SUMMARY INVESTMENT GOAL Long-term capital growth, with nominal dividend income INVESTMENT FOCUS U.S. common stocks of growth companies SHARE PRICE VOLATILITY Medium PRINCIPAL INVESTMENT Attempts to identify companies that have STRATEGY above-average growth potential and uses a low portfolio turnover strategy to reduce capital gains distributions. INVESTOR PROFILE Taxable investors who want to increase the value of their investment while minimizing taxable capital gains distributions.
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
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. We invest the Fund's assets across all market capitalizations. We attempt 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. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund primarily invests in common stocks. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. In addition, the Fund may invest in small-cap companies. These companies involve greater risk than investments in larger, more established companies because of the greater business risks of small size, limited markets and financial resources, smaller product lines and lack of depth of management. These securities are often traded over-the-counter and may not be traded in high volumes. Consequently, securities prices could be less stable than those of larger, more established companies. PERFORMANCE INFORMATION The bar chart and the performance table below illustrate the 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 October 1998, when the Fund began operating, represent the performance of the Advisor's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Flex shares of the Fund. The Advisor'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.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1988 24.37% 1989 25.19% 1990 -5.28% 1991 49.14% 1992 18.13%
BEST QUARTER WORST QUARTER 17.78% -0.35% (6/30/97) (12/31/97)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 23.48%. PROSPECTUS 19 TAX SENSITIVE GROWTH STOCK FUND (AVAILABLE FOR PURCHASE AFTER DECEMBER 15, 1998) THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE S&P 500 INDEX.
SINCE INCEPTION 1 YEAR (12/31/95) TAX SENSITIVE GROWTH STOCK 25.31% 24.84% S&P 500 INDEX 33.55% 20.25% LIPPER GROWTH AND INCOME FUND INDEX 26.98% 23.78%
SIMPLY SPEAKING . . . 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 advisor 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 index of 500 stocks designed to mimic the overall equity market's industry weightings. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. The Fund fees and expenses below are in addition to the sales charges you may pay directly when you purchase or sell Fund shares. Sales charges are discussed on pages 3 and of this prospectus. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 1.15% Distribution and Service (12b-1) Fees 1.00% Other Expenses* .25% --------- Total Annual Fund Operating Expenses 2.40%
* OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT YEAR. - -------------------------------------------------------- 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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS With Redemption $443 $748 $1,280 $2,736 No Redemption $243 $748 $1,280 $2,736
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor is voluntarily waiving a portion of its fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE 1.00% AND 2.25%, RESPECTIVELY. The Advisor could discontinue this voluntary waiver at any time. For more information about these fees, see "Investment Advisors" and "Distribution of Fund Shares." 20 PROSPECTUS VALUE INCOME STOCK FUND FUND SUMMARY INVESTMENT GOALS PRIMARY Current income SECONDARY Capital appreciation INVESTMENT FOCUS U.S. common stocks SHARE PRICE VOLATILITY Moderate PRINCIPAL INVESTMENT Attempts to identify high dividend-paying, STRATEGY undervalued stocks INVESTOR PROFILE Investors who are looking for current income and capital appreciation with less volatility than the average stock fund
TOP FIVE HOLDINGS AS OF X/XX/XX* Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come................... 00% Holding Name Copy To Come...... 00% Holding Name Copy To Come...... 00% * HOLDINGS MAY VARY
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, we primarily choose companies that have a market capitalization of at least $500 million and that have a history of paying regular dividends. We focus on high dividend-paying stocks that trade below their historical value. Our "bottom-up" approach to stock selection emphasizes individual stocks over economic trends. WHAT ARE THE RISKS OF INVESTING IN THIS FUND? The Fund invests primarily in U.S. common stocks. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. In addition, common stocks held by the Fund may stop paying dividends or pay less in dividends than we expected. 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 performance of Flex Shares and Investor Shares will differ slightly due to differences in expenses. The periods prior to February 1993, when the Fund began operating, represent the performance of the Advisor's similarly managed collective investment fund. This past performance has been adjusted to reflect current expenses for Investor Shares of the Fund. The Advisor'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 FUND'S 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 BAR CHART DOES NOT REFLECT SALES CHARGES. IF SALES CHARGES HAD BEEN REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN BELOW.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1990 -4.93% 1991 39.30% 1992 20.05% 1993 10.86% 1994 2.87% 1995 35.50% 1996 19.06% 1997 26.57%
BEST QUARTER WORST QUARTER 12.22% -4.29% (6/30/97) (3/31/94)
* THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 7.56%. PROSPECTUS 21 VALUE INCOME STOCK FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE S&P/ BARRA VALUE INDEX.
SINCE INCEPTION 1 YEAR 5 YEARS (10/31/89) VALUE INCOME STOCK FUND Investor Shares 21.80% 17.52% 18.69% Flex Shares* 23.65% 18.22% 23.28% S&P/BARRA VALUE INDEX 29.98% 20.68% 15.43%
* THE PERIODS FROM FEBRUARY 1993 TO JUNE 1995 REPRESENT THE PERFORMANCE OF INVESTOR SHARES OF THE FUND. SIMPLY SPEAKING . . . 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 advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The S&P/BARRA Value Index is a widely recognized index of U.S. common stock prices. FUND FEES AND EXPENSES This table describes the shareholder fees and expenses that you may pay if you purchase or sell Fund shares. You would pay these fees directly from your investment in a Fund.
INVESTOR SHARES FLEX SHARES SHAREHOLDER FEES 3.75% None Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)* None 2.00% Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)**
*THIS SALES CHARGE VARIES DEPENDING UPON HOW MUCH YOU INVEST. SEE "PURCHASING FUND SHARES." **THIS SALES CHARGE IS IMPOSED IF YOU SELL FLEX SHARES WITHIN ONE YEAR OF YOUR PURCHASE. SEE "SELLING FUND SHARES." The table below describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees .80 % .80 % Distribution and Service (12b-1) Fees .33 % 1.00 % Other Expenses .19 % .22 % --- --- Total Annual Fund Operating Expenses 1.32 % 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. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns may 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 $504 $778 $1071 $1906 Flex Shares $405 $634 $1088 $2348 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $504 $778 $1071 $1906 Flex Shares $205 $634 $1088 $2348
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, shareholder, distribution, administration and custody services. These expenses are deducted from the Fund's income. The Fund's expenses in the table above are shown as a percentage of the Fund's net assets. 22 PROSPECTUS EACH FUND'S PRINCIPAL INVESTMENTS FUND INVESTMENTS THE TABLE BELOW SHOWS EACH FUND'S PRINCIPAL INVESTMENTS. IN OTHER WORDS, THE TABLE DESCRIBES THE TYPE OR TYPES OF INVESTMENTS THAT WE BELIEVE WILL MOST LIKELY HELP EACH FUND ACHIEVE ITS INVESTMENT GOAL.
BALANCED CAPITAL INTERNATIONAL INTERNATIONAL MID-CAP SMALL CAP SMALL CAP SUNBELT FUND GROWTH EQUITY FUND EQUITY INDEX EQUITY EQUITY GROWTH EQUITY FUND FUND FUND STOCK FUND FUND - ----------------------------------------------------------------------------------------------------------------------------- Bonds X - ----------------------------------------------------------------------------------------------------------------------------- U.S. Stocks X X X X X X - ----------------------------------------------------------------------------------------------------------------------------- Foreign Stocks X X - ----------------------------------------------------------------------------------------------------------------------------- TAX SENSITIVE VALUE INCOME GROWTH STOCK STOCK FUND FUND - -------------------------- Bonds - -------------------------- U.S. Stocks X X - -------------------------- Foreign Stocks - --------------------------
Each Fund may also invest in other securities, use other strategies and engage in other investment practices, which are described in detail in our Statement of Additional Information. Of course, we cannot guarantee that any Fund will achieve its investment goal. The investments listed above and the investments and strategies described throughout 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 Equity Fund also may invest in investment grade fixed income securities and mid- to large-cap common stocks. When a Fund is investing for temporary defensive purposes, it is not pursuing its investment goal. INVESTMENT ADVISORS The Investment Advisors make investment decisions for the Funds and continuously review, supervise and administer their Funds' respective investment program. The Board of Trustees supervises the Advisors and establishes policies that the Advisors must follow in their management activities. STI Capital Management, N.A. (STI), P.O. Box 3808, Orlando, Florida 32802, serves as the Advisor to the Capital Growth, Value Income Stock, Small Cap Equity, Mid-Cap Equity, Balanced, and International Equity Funds. As of May 31, 1998, STI Capital had approximately $11.7 billion in assets under management. For the fiscal year ended May 31, 1998, STI Capital received advisory fees of: BALANCED FUND............................ .83% CAPITAL GROWTH FUND...................... 1.04% INTERNATIONAL EQUITY FUND................ 1.24% MID-CAP EQUITY FUND...................... 1.04% SMALL CAP EQUITY FUND.................... 1.05% VALUE INCOME STOCK FUND.................. .80%
Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Advisor to the Small Cap Growth Stock, Sunbelt Equity and Tax Sensitive Growth Stock Fund. As of May 31, 1998, Trusco had approximately $22 billion in assets under management. For the fiscal year ended May 31, 1998, Trusco received advisory fees of 1.04%. STI and Trusco co-manage the International Equity Index Fund. For the fiscal year ended May 31, 1998, STI and Trusco received and shared advisory fees of .77%. The Advisors may use their affiliates as brokers for Fund transactions. PORTFOLIO MANAGERS Mr. Anthony Gray has served as Chairman and Chief Investment Officer of STI since 1979. He has managed the Capital Growth Fund since it began operating in June 1992. He has more than 30 years of investment experience. Mr. Mills Riddick, CFA, has served as Managing Director of STI since 1994. He has managed the Value Income Stock Fund since April 1995. PROSPECTUS 23 EACH FUND'S PRINCIPAL INVESTMENTS He has more than 15 years of investment experience, and has been a portfolio manager at STI since 1989. Prior to joining STI, Mr. Riddick served as a broker with Drexel Burnham Lambert. Mr. Brett Barner, CFA, has served as Vice President of STI since 1994. He has managed the Small Cap Equity Fund since it began operating in January 1997. He has more than 10 years of investment experience and has been a portfolio manager with STI since 1990. Prior to joining STI, Mr. Barner served as a consultant with Drexel Burnham Lambert and Shearson Lehman Brothers. Mr. Elliott A. Perny has served as Senior Executive Vice President of STI since September 1992. He has managed the Mid-Cap Equity Fund since October 1996. He has more than 25 years of investment experience, and has served as a portfolio manager at STI since 1991. Prior to joining STI, Mr. Perny served as a portfolio manager at Florida National Bank and Atlantic Bank. The Balanced Fund is co-managed by Mr. Anthony R. Gray and Mr. L. Earl Denney, CFA. Mr. Gray manages the equity portion of the Fund. Mr. Denney, CFA, has served as Senior Vice President of STI since 1983, has more than 20 years of investment experience. Prior to joining STI, Mr. Denney served as a fixed income portfolio manager with American National Bank. Mr. James Foster has served as Vice President of Trusco since 1989. He has managed the Sunbelt Equity Fund since it began operating in January 1994. He has more than 27 years of investment experience. Mr. Ned Dau has served as Managing Director of STI since 1997. He has managed the International Equity Fund since May 1997. He has more than years of investment experience. Prior to joining STI, he was a senior international equity analyst for American Express Financial Advisors from 1996 to 1997 and for the Principal Financial Group from 1992 to 1995. PURCHASING FUND SHARES HOW TO PURCHASE FUND SHARES You may purchase Investor and Flex Shares directly from us by: - - mail - - telephone - - wire - - direct deposit, or - - Automated Clearing House (ACH). SIMPLY SPEAKING . . . 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). To purchase shares directly from us, please call 1-800-874-4770. Write your check, payable in U.S. dollars, to "STI Classic Funds" and include the name of the appropriate Fund(s) on the check. We cannot accept third-party checks, credit cards, credit card checks or cash. You may also purchase shares through Investment Consultants of certain correspondent banks of SunTrust Banks, Inc. (SunTrust), or other financial institutions that have executed dealer agreements with us. We may reject any purchase order if we determine that accepting the order would not be in the best interests of the STI Classic Funds or its shareholders. The price per share (the offering price) will be the net asset value per share (NAV) next determined after we receive your purchase order plus, in the case of Investor Shares, the applicable front-end sales charge. We calculate each Fund's 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, if you want to receive the current Business Day's NAV, generally we must receive your purchase order before 4:00 p.m. Eastern time. 24 PROSPECTUS PURCHASING, SELLING AND EXCHANGING FUND SHARES SIMPLY SPEAKING . . . FOR CUSTOMERS OF OTHER FINANCIAL INSTITUTIONS If you purchase, sell or exchange Fund shares through a financial institution (rather than directly from us), you may have to transmit your purchase, sale and exchange requests to your financial institution 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 us. For more information about how to purchase, sell or exchange Fund shares through your financial institution, you should contact your financial institution directly. HOW WE CALCULATE NAV In calculating NAV, we generally value a Fund's portfolio at market price. If market prices are unavailable or we think that they are unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. Some Funds hold portfolio 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 NAV of these Funds' shares may change on days when you cannot purchase or sell Fund shares. SIMPLY SPEAKING . . . NET ASSET VALUE NAV for one Fund share is the value of that share's portion of all of the assets in the Fund. MINIMUM PURCHASES To purchase Investor Shares for the first time, you must invest at least $2,000 in any Fund. To purchase Flex Shares for the first time, you must invest at least $10,000 in any Fund ($2,000 for retirement plans). To purchase additional shares of any Fund, you must invest at least $1,000 or, if you pay by a statement coupon, $100. We may accept investments of smaller amounts, for either class of shares, at our 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 us at 1-800-428-6970 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 up to $100,000 once or twice a month. If you are buying Flex Shares, you should plan on investing at least $10,000 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. SALES CHARGES FRONT-END SALES CHARGES - INVESTOR SHARES The amount of any front-end sales charge included in your offering price varies, depending on the amount of your investment:
YOUR SALES CHARGE AS A PERCENTAGE YOUR SALES CHARGE OF AS A PERCENTAGE OF IF YOUR INVESTMENT IS: OFFERING PRICE YOUR NET INVESTMENT - ------------------------------------------------------------------- LESS THAN $100,000 3.75% 3.90% $100,000 BUT LESS THAN $250,000 3.25% 3.36% $250,000 BUT LESS THAN $1,000,000 2.50% 2.56% $1,000,000 AND OVER 1.50% 1.52%
PROSPECTUS 25 PURCHASING, SELLING AND EXCHANGING FUND SHARES WAIVER OF FRONT-END SALES CHARGE - INVESTOR SHARES The front-end sales charge will be waived on Investor Shares purchased: (1) through reinvestment of dividends and distributions; (2) through a SunTrust Securities, Inc. asset allocation account; (3) by persons repurchasing shares they redeemed within the last 60 days (see Repurchase of Investor Shares); (4) by employees, and members of their immediate family, of SunTrust and its affiliates; (5) 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; (6) 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 (7) through dealers, retirement plans, asset allocation programs and financial institutions that, under their dealer agreements with the Distributor or otherwise, do not receive any or receive a reduced 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), equal to or less than the value of any amount of Investor Shares (for which you paid a front-end sales charge) that you redeemed within the past 60 days. In effect, this allows you to repurchase shares that you may have had to redeem, without repaying the front-end sales charge. To exercise this privilege, we must receive your purchase order within 60 days of your redemption. In addition, you must notify us 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. We 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. We 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 us with your account number(s) and, if applicable, the account numbers for your spouse and/or children (and provide the children's ages). We 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. We will only consider the value of Investor Shares sold subject to a sales charge. To be entitled to a reduced sales charge based on shares you intend to purchase over the 13-month period, you must send us a Letter of Intent. As a result, neither Investor Shares of the Money Market Funds nor Investor Shares purchased with dividends or distributions will be included in the calculation. 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 us to hold in escrow 3.75% of the total 26 PROSPECTUS PURCHASING, SELLING AND EXCHANGING FUND SHARES amount you intend to purchase. If you do not complete the total intended purchase at the end of the 13-month period, the 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, we will combine same day purchases of Investor Shares (that are subject to a sales charge) made by you, your spouse and your minor children (under age 21). This combination also applies to Investor Shares you purchase with a Letter of Intent. CONTINGENT DEFERRED SALES CHARGES - FLEX SHARES You do not pay a front-end sales charge when you purchase Flex Shares. But if you sell your shares within the first year after your purchase, you will pay a contingent deferred sales charge equal to 2.00% of either (1) the NAV of the shares at the time of purchase, or (2) NAV of the shares next calculated after we receive your sale request, whichever is less. The sales charge does not apply to Flex Shares you purchase through reinvestment of dividends or distributions. So, you never pay a deferred sales charge on any increase in your investment above the initial offering price. This sales charge does not apply to exchanges of Flex Shares of one Fund for Flex Shares of another Fund. The contingent deferred sales charge will be waived if you sell your Flex Shares for the following reasons: (1) to make certain withdrawals from a retirement plan (not including IRAs); (2) because of death or disability; or (3) for certain payments under the Systematic Withdrawal Plan (which is discussed below). SIMPLY SPEAKING . . . OFFERING PRICE OF FUND SHARES The offering price of Investor Shares is the NAV next calculated after we receive your request, plus the front-end sales load. The offering price of Flex Shares is simply the next calculated NAV. SELLING FUND SHARES HOW TO SELL YOUR FUND SHARES You may sell (sometimes called "redeem") your shares on any Business Day by contacting us directly by mail or telephone. You may also sell your shares by contacting your financial institution by mail or telephone. To sell your shares by telephone, the amount of your sale must be at least $1,000. If you would like to sell $25,000 or more of your shares, please notify us in writing and include a signature guarantee (a notarized signature is not sufficient). The sale price of each share will be the next NAV determined after we receive your request less, in the case of Flex Shares, any applicable deferred sales charge. SIMPLY SPEAKING . . . TELEPHONE TRANSACTIONS Purchasing, selling and exchanging Fund shares over the telephone is extremely convenient, but not without risk. Although we have certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, we are not responsible for any losses or costs incurred by following telephone instructions we reasonably believe to be genuine. If you or your financial institution transact with us over the telephone, you will generally bear the risk of any loss. PROSPECTUS 27 PURCHASING, SELLING AND EXCHANGING FUND SHARES SYSTEMATIC WITHDRAWAL PLAN If you have at least $10,000 in your account, you may use the systematic withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual or annual automatic withdrawals of at least $50 from any Fund. The proceeds of each withdrawal will be mailed to you by check or, if you have an account with a SunTrust affiliated bank, electronically transferred to your account. RECEIVING YOUR MONEY Normally, we will send your sale proceeds within five Business Days after we receive your request. Your proceeds can be wired to your bank account (subject to a $7.00 fee) or sent to you by check. If you recently purchased your shares by check or through ACH, redemption proceeds may not be available until your check has cleared (which may take up to 15 Business Days). REDEMPTIONS IN KIND We generally pay sale proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) we might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). Although it is highly unlikely that your shares would ever be redeemed in kind, you would probably have to pay brokerage 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, $2,000 for Investor Shares and $10,000 for Flex Shares, you may be required to sell your shares. You will always be given at least 60 days' written notice to give you time to add to your account and avoid selling your shares. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES We may suspend your right to sell your shares if the NYSE restricts trading, the SEC declares an emergency or for other reasons. More information about this is in our Statement of Additional Information. EXCHANGING FUND SHARES HOW TO EXCHANGE YOUR SHARES You may exchange your shares on any Business Day by contacting us directly by mail or telephone. You may also exchange shares through your financial institution by mail or telephone. Exchange requests must be for an amount of at least $1,000. 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. SIMPLY SPEAKING . . . EXCHANGES When you exchange shares, you are really selling your shares and buying other Fund shares. So, your sale price and purchase price will based on the NAV next calculated after we receive 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. 28 PROSPECTUS PURCHASING, SELLING AND EXCHANGING FUND SHARES FLEX SHARES You may exchange Flex Shares of any Fund for Flex Shares of any other Fund, or for Investor Shares of the Money Market Funds. No contingent deferred sales charge is imposed on redemptions of Money Market Funds shares you acquire in an exchange, provided you hold your shares for at least one year from your initial purchase. If you exchange Flex Shares for Investor Shares of a Money Market Fund, you may only exchange those Money Market Fund Investor Shares for Flex Shares. PROSPECTUS 29 HISTORICAL FINANCIAL INFORMATION FINANCIAL HIGHLIGHTS The tables that follow present performance information about Investor and Flex Shares of the Funds. 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 has been audited by Arthur Andersen LLP, independent public accountants. Their report, along with each Fund's financial statements, appears in our annual report that accompanies our Statement of Additional Information. You can obtain our annual report, which contains more performance information, at no charge by calling 1-800-874-4700. SIMPLY SPEAKING . . . FINANCIAL HIGHLIGHTS Study these tables to see how each Fund performed since it began investment operations.
NET REALIZED AND UNREALIZED DISTRIBUTIONS NET ASSET NET GAINS DISTRIBUTIONS FROM VALUE INVESTMENT (LOSSES) FROM NET REALIZED NET ASSET BEGINNING INCOME ON INVESTMENT CAPITAL VALUE END TOTAL OF PERIOD (LOSS) INVESTMENTS INCOME GAINS OF PERIOD RETURN (A) ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ------------- BALANCED FUND - ------------- Investor Shares 1998........................... $11.99 $ 0.28 $ 2.19 $(0.29) $(1.03) $13.14 21.72% 1997........................... 11.60 0.29 1.48 (0.29) (1.09) 11.99 16.27 1996........................... 10.30 0.30 1.41 (0.30) (0.11) 11.60 16.88 1995........................... 9.79 0.28 0.51 (0.28) -- 10.30 8.29 1994(1)........................ 10.00 0.03 (0.24) -- -- 9.79 (2.10)** Flex Shares 1998........................... $11.90 $ 0.20 $ 2.16 $(0.21) $(1.03) $13.02 20.85% 1997........................... 11.53 0.22 1.45 (0.21) (1.09) 11.90 15.40 1996(2)........................ 10.36 0.24 1.29 (0.25) (0.11) 11.53 15.58* - -------------------- CAPITAL GROWTH FUND - -------------------- Investor Shares 1998........................... $15.06 $(0.01) $ 3.95 $ -- $(2.57) $16.43 28.71% 1997........................... 14.89 0.03 3.10 (0.02) (2.94) 15.06 23.74 1996........................... 12.17 0.03 3.32 (0.04) (0.59) 14.89 28.18 1995........................... 11.98 0.09 0.57 (0.07) (0.40) 12.17 5.93 1994........................... 11.93 0.09 0.31 (0.09) (0.26) 11.98 3.26 Flex Shares 1998........................... $14.96 $(0.04) $ 3.87 $ -- $(2.57) $16.22 28.12% 1997........................... 14.84 (0.01) 3.07 -- (2.94) 14.96 23.24 1996(3)........................ 12.20 0.02 3.26 (0.05) (0.59) 14.84 27.48* - ------------------------ INTERNATIONAL EQUITY FUND - ------------------------ Investor Shares 1998........................... $13.58 $ 0.02 $ 2.64 $ -- $(1.32) $14.92 21.39% 1997........................... 11.38 (0.01) 2.56 -- (0.35) 13.58 22.85 1996(4)........................ 10.44 0.04 0.90 -- -- 11.38 9.00** Flex Shares 1998........................... $13.47 $ 0.07 $ 2.46 $ -- $(1.32) $14.68 20.54% 1997........................... 11.37 (0.04) 2.49 -- (0.35) 13.47 21.98 1996(4)........................ 10.44 0.02 0.91 -- -- 11.37 8.91** - ------------------------------ INTERNATIONAL EQUITY INDEX FUND - ------------------------------ Investor Shares 1998........................... $11.26 $ 0.16 $ 2.53 $(0.07) $(0.68) $13.20 25.25% 1997........................... 10.88 0.03 0.72 (0.07) (0.30) 11.26 7.12 1996........................... 10.20 0.05 0.85 (0.13) (0.09) 10.88 8.90 1995(5)........................ 10.00 0.05 0.17 (0.01) (0.01) 10.20 2.18** Flex Shares 1998........................... $11.24 $ 0.17 $ 2.44 $ -- $(0.68) $13.17 24.50% 1997........................... 10.87 (0.05) 0.72 -- (0.30) 11.24 6.41 1996(6)........................ 10.24 -- 0.82 (0.10) (0.09) 10.87 8.32** RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME (LOSS) INVESTMENT AVERAGE NET TO AVERAGE NET RATIO OF INCOME ASSETS ASSETS NET ASSETS EXPENSES TO (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO END OF AVERAGE NET AVERAGE WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE ------------ ------------ ---------- -------------- -------------- -------- - ------------- BALANCED FUND - ------------- Investor Shares 1998........................... $ 8,313 1.26% 2.21% 1.59% 1.88% 154% 1997........................... 6,012 1.25 2.58 1.64 2.19 197 1996........................... 4,896 1.25 2.70 1.89 2.06 155 1995........................... 3,765 1.25 3.17 1.80 2.62 157 1994(1)........................ 2,311 1.25* 2.46* 4.91* (1.20)* 106 Flex Shares 1998........................... $ 27,625 2.02% 1.41% 2.23% 1.20% 154% 1997........................... 6,067 2.01 1.84 2.45 1.40 197 1996(2)........................ 3,131 2.00* 1.85* 2.97* 0.88* 155 - -------------------- CAPITAL GROWTH FUND - -------------------- Investor Shares 1998........................... $271,044 1.81% (0.03%) 2.01% (0.23%) 194% 1997........................... 218,660 1.80 0.19 2.02 (0.03) 141 1996........................... 191,078 1.80 0.24 2.08 (0.04) 156 1995........................... 160,875 1.80 0.73 2.10 0.43 128 1994........................... 170,795 1.80 0.64 2.11 0.33 124 Flex Shares 1998........................... $106,670 2.26% (0.46%) 2.37% (0.57%) 194% 1997........................... 36,753 2.27 (0.29) 2.43 (0.45) 141 1996(3)........................ 10,969 2.27* (0.29)* 2.68* (0.70)* 156 - ------------------------ INTERNATIONAL EQUITY FUND - ------------------------ Investor Shares 1998........................... $ 17,383 1.82% 0.24% 1.91% 0.15% 108% 1997........................... 10,674 1.81 0.18 2.05 (0.06) 139 1996(4)........................ 3,448 1.81* 1.73* 3.14* 0.40* 113 Flex Shares 1998........................... $ 21,164 2.52% (0.46%) 2.58% (0.52%) 108% 1997........................... 8,375 2.51 (0.27) 3.03 (0.79) 139 1996(4)........................ 953 2.51* 1.08* 5.86* (2.27)* 113 - ------------------------------ INTERNATIONAL EQUITY INDEX FUND - ------------------------------ Investor Shares 1998........................... $ 7,141 1.46% 0.50% 1.84% 0.12% 1% 1997........................... 5,592 1.45 0.28 1.88 (0.15) 2 1996........................... 5,597 1.45 0.48 2.06 (0.13) 30 1995(5)........................ 3,960 1.45* 0.67* 2.44* (0.32)* 10 Flex Shares 1998........................... $ 1,469 2.11% (0.03%) 3.52% (1.44%) 1% 1997........................... 900 2.10 (0.39) 3.69 (1.98) 2 1996(6)........................ 917 2.10* (0.24)* 4.14* (2.28)* 30
* Annualized. ** Return is for period indicated and has not been annualized. (1) Commenced operations on January 4, 1994. (2) Commenced operations on June 14, 1995. 30 PROSPECTUS HISTORICAL FINANCIAL INFORMATION (3) Commenced operations on June 1, 1995. (4) Commenced operations on January 2, 1996. (5) Commenced operations on June 6, 1994. (6) Commenced operations on June 8, 1995. (A) Total return figures do not reflect applicable sales loads.
NET REALIZED AND UNREALIZED DISTRIBUTIONS NET ASSET NET GAINS DISTRIBUTIONS FROM VALUE INVESTMENT (LOSSES) FROM NET REALIZED NET ASSET BEGINNING INCOME ON INVESTMENT CAPITAL VALUE END TOTAL OF PERIOD (LOSS) INVESTMENTS INCOME GAINS OF PERIOD RETURN (A) ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ----------------------- MID-CAP EQUITY FUND (B) - ----------------------- Investor Shares 1998........................... $13.17 $(0.03) $ 2.49 $ -- $(1.96) $13.67 20.56% 1997........................... 12.74 (0.03) 1.69 (0.01) (1.22) 13.17 13.76 1996........................... 10.99 0.03 2.62 (0.03) (0.87) 12.74 24.93 1995........................... 9.84 0.03 1.15 (0.03) -- 10.99 11.96 1994(7)........................ 10.00 0.01 (0.17) -- -- 9.84 (1.60)** Flex Shares 1998........................... $13.04 $(0.04) $ 2.38 $ -- $(1.96) $13.42 19.80% 1997........................... 12.69 (0.07) 1.64 -- (1.22) 13.04 13.06 1996(8)........................ 11.13 -- 2.45 (0.02) (0.87) 12.69 23.00* - --------------------- SMALL CAP EQUITY FUND - --------------------- Flex Shares 1998(9)........................ $11.28 $ 0.03 $ 2.17 $(0.06) $(0.62) $12.80 22.29%** - ------------------- SUNBELT EQUITY FUND - ------------------- Investor Shares 1998........................... $13.06 $(0.07) $ 2.98 $ -- $(1.20) $14.77 23.25% 1997........................... 13.95 (0.14) 0.24 -- (0.99) 13.06 1.05 1996........................... 9.96 (0.11) 4.30 -- (0.20) 13.95 2.58 1995........................... 9.69 (0.05) 0.36 -- (0.04) 9.96 3.20 1994(10)....................... 10.00 (0.02) (0.29) -- -- 9.69 (3.10)** Flex Shares 1998........................... $13.00 $(0.09) $ 2.89 $ -- $(1.20) $14.60 22.48 1997........................... 13.97 (0.14) 0.16 -- (0.99) 13.00 0.46 1996(8)........................ 10.20 (0.07) 4.04 -- (0.20) 13.97 39.86* - ------------------------ VALUE INCOME STOCK FUND - ------------------------ Investor Shares 1998........................... $13.68 $ 0.20 $ 2.62 $(0.21) $(2.42) $13.87 22.71% 1997........................... 13.13 0.25 2.32 (0.26) (1.76) 13.68 21.69 1996........................... 11.58 0.30 2.71 (0.30) (1.16) 13.13 27.39 1995........................... 10.52 0.28 1.56 (0.27) (0.51) 11.58 18.71 1994........................... 10.23 0.26 0.67 (0.27) (0.37) 10.52 9.27 Flex Shares 1998........................... $13.61 $ 0.12 $ 2.57 $(0.13) $(2.42) $13.75 21.76% 1997........................... 13.08 0.18 2.29 (0.18) (1.76) 13.61 20.91 1996(11)....................... 11.59 0.26 2.65 (0.26) (1.16) 13.08 26.52* RATIO OF NET RATIO OF RATIO OF INVESTMENT NET EXPENSES TO INCOME (LOSS) INVESTMENT AVERAGE NET TO AVERAGE NET RATIO OF INCOME ASSETS ASSETS NET ASSETS EXPENSES (LOSS) TO (EXCLUDING (EXCLUDING PORTFOLIO END OF TO AVERAGE AVERAGE WAIVERS AND WAIVERS AND TURNOVER PERIOD (000) NET ASSETS NET ASSETS REIMBURSEMENTS) REIMBURSEMENTS) RATE ------------ ---------- ---------- -------------- -------------- ---------- - ----------------------- MID-CAP EQUITY FUND (B) - ----------------------- Investor Shares 1998........................... $ 24,930 1.61% (0.75%) 1.84% (0.98%) 129% 1997........................... 20,245 1.60 (0.21) 1.85 (0.46) 152 1996........................... 17,971 1.60 0.25 1.96 (0.11) 116 1995........................... 7,345 1.60 0.43 2.27 (0.24) 66 1994(7)........................ 3,004 1.60* 0.74* 4.60* (2.26)* 8 Flex Shares 1998........................... $ 19,042 2.21% (1.37%) 2.47% (1.63%) 129% 1997........................... 10,120 2.20 (0.85) 2.58 (1.23) 152 1996(8)........................ 5,029 2.20* (0.37)* 3.04* (1.21)* 116 - --------------------- SMALL CAP EQUITY FUND - --------------------- Flex Shares 1998(9)........................ $ 40,613 2.06%* 0.01%* 2.35%* (0.28%)* 55% - ------------------- SUNBELT EQUITY FUND - ------------------- Investor Shares 1998........................... $ 30,860 1.61% (1.35%) 1.86% (1.60%) 70% 1997........................... 28,095 1.60 (1.10) 1.84 (1.34) 72 1996........................... 29,002 1.60 (0.79) 1.93 (1.12)* 106 1995........................... 22,180 1.60 (0.57) 1.98 (0.95) 80 1994(10)....................... 16,077 1.60* (0.63)* 2.04* (1.07)* 21 Flex Shares 1998........................... $ 8,070 2.21% (1.96%) 2.58% (2.33%) 70% 1997........................... 5,689 2.20 (1.72) 2.69 (2.21) 72 1996(8)........................ 2,705 2.20* (1.43)* 3.62* (2.85)* 106 - ------------------------ VALUE INCOME STOCK FUND - ------------------------ Investor Shares 1998........................... $210,591 1.27% 1.47% 1.27% 1.47% 99% 1997........................... 165,999 1.30 2.01 1.31 2.00 105 1996........................... 130,597 1.30 2.47 1.37 2.40 134 1995........................... 92,256 1.30 2.80 1.41 2.69 126 1994........................... 60,589 1.25 2.80 1.44 2.61 149 Flex Shares 1998........................... $180,530 2.01% 0.78% 2.01% 0.78% 99% 1997........................... 73,466 2.00 1.33 2.03 1.30 105 1996(11)....................... 26,298 2.00* 1.72* 2.15* 1.57* 134
* Annualized. ** Return is for the period indicated and has not been annualized. (7) Commenced operations on February 1, 1994. (8) Commenced operations on June 5, 1995. (9) Commenced operations on June 5, 1997. (10) Commenced operations on January 4, 1994. (11) Commenced operations on June 1, 1995. (A) Total return figures do not reflect applicable sales loads. (B) During the fiscal year ended May 31, 1996, the Aggressive Growth Fund changed its name to the Mid-Cap Equity Fund. PROSPECTUS 31 HOW FUND SHARES ARE DISTRIBUTED 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. For Investor Shares, maximum distribution fees, as a percentage of average daily net assets, are as follows: Balanced Fund .28% Capital Growth Fund .68% International Equity Fund .33% International Equity Index Fund .38% Mid-Cap Equity Fund .43% Sunbelt Equity Fund .43% Value Income Stock Fund .33%
For Flex Shares, the maximum distribution fee is 1.00% of the average daily net assets of each Fund. 32 PROSPECTUS OTHER INFORMATION DIVIDENDS AND DISTRIBUTIONS Each Fund distributes its income quarterly, except the International Equity and International Equity Index Funds. These Funds distribute income annually. The Funds make distributions of capital gains, if any, at least annually. 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 us in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after we receive your written notice. To cancel your election, simply send us written notice. SIMPLY SPEAKING . . . THE "RECORD DATE" If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. TAXES PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Capital gains distributions may be taxable at different rates depending on the length of time a Fund holds its portfolio securities. YOU MAY BE TAXED ON EACH SALE OR EXCHANGE OF FUND SHARES. The Funds use a tax management technique known as "highest in, first out." Using this technique, the portfolio holdings that have experienced the smallest gain or largest loss are sold first in an effort to minimize capital gains and enhance after-tax returns. MORE INFORMATION ABOUT TAXES IS IN OUR STATEMENT OF ADDITIONAL INFORMATION. SIMPLY SPEAKING . . . FUND DISTRIBUTIONS Distributions you receive from a Fund may be taxable whether or not you reinvest them. PROSPECTUS 33 NOTES 34 PROSPECTUS NOTES PROSPECTUS 35 NOTES 36 PROSPECTUS HOW TO OBTAIN MORE INFORMATION INVESTMENT ADVISORS STI Capital Management, N.A. Trusco Capital Management, Inc. DISTRIBUTOR SEI Investments Distribution Co. LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) More detailed information about the STI Classic Funds is included in our SAI. The SAI has been filed 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 SEMIANNUAL REPORTS These reports list the Funds' holdings and contain information from the Funds' managers about fund strategies and recent market conditions and trends. TO OBTAIN MORE INFORMATION: BY TELEPHONE: Call 1-800-874-4770 BY MAIL: Write to us c/o SEI Investments Distribution Co. Oaks, Pennsylvania 19456. BY E-MAIL: xxxxxxxxxxxxxxxx BY INTERNET: http://www.suntrust.com FROM THE SEC: You can also obtain these documents, and other information about the STI Classic Funds, from 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 call 1-800-SEC-0330). 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 20549-6009. The Fund's Investment Company Act registration number is 811-06557. [GRAPHIC] STI CLASSIC FUNDS-MONEY MARKET FUNDS INVESTOR SHARES PROSPECTUS October 1, 1998 PRIME QUALITY MONEY MARKET FUND TAX-EXEMPT MONEY MARKET FUND U.S. GOVERNMENT SECURITIES MONEY MARKET FUND INVESTMENT ADVISOR TO THE FUNDS: TRUSCO CAPITAL MANAGEMENT, INC. (the "Advisor") ----------------- STI Classic Funds ----------------- The Securities and Exchange Commission has not approved any Fund shares or determined whether this prospectus is accurate or complete. It is a crime for anyone to tell you otherwise. PROSPECTUS HOW TO READ THIS PROSPECTUS The STI Classic Funds is a mutual fund family that offers different classes of shares in separate investment portfolios (Funds). The Funds have individual investment goals and strategies. This prospectus gives you important information about the Investor Shares of the Money Market Funds that you should know before investing. Please read this prospectus and keep it for future reference. We arranged the prospectus into different sections so that you can easily review this important information. On the next page, we discuss general information you should know about investing in the Funds. IF YOU WOULD LIKE MORE DETAILED INFORMATION ABOUT EACH FUND, PLEASE SEE: 2 PRIME QUALITY MONEY MARKET FUND 4 TAX-EXEMPT MONEY MARKET FUND 6 U.S. GOVERNMENT SECURITIES MONEY MARKET FUND IF YOU WOULD LIKE MORE INFORMATION ABOUT THE FOLLOWING TOPICS, PLEASE SEE: 8 EACH FUND'S PRINCIPAL INVESTMENTS 8 THE ADVISOR 9 PURCHASING, SELLING AND EXCHANGING FUND SHARES 12 HISTORICAL FINANCIAL INFORMATION ABOUT EACH FUND 13 HOW FUND SHARES ARE DISTRIBUTED 14 DISTRIBUTIONS OF DIVIDENDS AND CAPITAL GAINS 14 TAXES 18 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS
FOR INFORMATION ABOUT KEY TERMS AND CONCEPTS, LOOK FOR OUR "SIMPLY SPEAKING" EXPLANATIONS. - -------------------------------------------------------------------------------- FUND SUMMARY INVESTMENT STRATEGY WHAT ARE THE RISKS OF INVESTING? PERFORMANCE INFORMATION WHAT IS AN INDEX? FUND FEES AND EXPENSES FUND INVESTMENTS INVESTMENT ADVISOR PURCHASING FUND SHARES - -------------------------------------------------------------------------------- OCTOBER 1, 1998 PROSPECTUS 1 INTRODUCTION Each Fund is a mutual fund. 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. Like other investments, you could lose money on your investment in a Fund. Your investment in a Fund is not a bank deposit. It is not insured or guaranteed by the FDIC or any government agency. Each Money Market Fund tries to maintain a constant price per share of $1.00, but we cannot guarantee this. Each Fund has its own investment goal and strategies for reaching that goal. But, we cannot guarantee that a Fund will achieve its goal. A Fund's goal may be changed without shareholder approval. Before investing, make sure that the Fund's goal matches your own. The Investment Advisor invests each Fund's assets in a way that the Advisor believes will help the Fund achieve its goal. The Advisor's judgments about the stock markets, economy and companies, or selecting investments may not reflect actual market movements, economic conditions or company performance. 2 PROSPECTUS PRIME QUALITY MONEY MARKET FUND FUND SUMMARY INVESTMENT GOAL High current income, while preserving capital and liquidity INVESTMENT FOCUS Money market instruments PRINCIPAL INVESTMENT Attempts to identify money market instruments with the most attractive risk/return STRATEGY trade-of INVESTOR PROFILE Conservative investors who want to receive current income from their investment
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, we try to increase income without adding undue risk. We analyze maturity, yields, market sectors and credit risk. Investments are made in money market instruments with the most attractive risk/return trade-off. MONEY MARKET FUNDS Money market funds invest in high quality, short-term debt securities, commonly known as money market instruments. These include CDs, bankers' acceptances, commercial paper, U.S. Treasury securities, some municipal securities, and repurchase agreements. Money market funds follow strict rules about credit risk, maturity and diversification of its investments. An investment in a money market fund is not a bank deposit. Although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in a money market fund. 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.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1993 2.60% 1994 3.60% 1995 5.30% 1996 4.82% 1997 4.97%
BEST QUARTER WORST QUARTER 1.33% .64% (6/30/95) (6/30/93)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.47%. PROSPECTUS 3 PRIME QUALITY MONEY MARKET FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE IBC/ DONOGHUE FIRST TIER AVERAGE.
SINCE FUND INCEPTION 1 YEAR 5 YEARS (6/8/92) PRIME QUALITY MONEY MARKET FUND 4.97% 4.25% 4.11% IBC/DONOGHUE FIRST TIER AVERAGE 5.01% 4.32% 4.25%
TO OBTAIN YIELD INFORMATION FOR THE FUND, CALL 1-800-814-3397. SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The IBC/Donoghue First Tier Average is a widely recognized index of [ ]. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees .65% Distribution and Service (12b-1) Fees .20% Other Expenses .17% --------- Total Annual Fund Operating Expenses 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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $104 $325 $563 $1248
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, administration and custody services. These expenses are deducted from the Fund's income. The expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor and the Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES ARE .51%, .13% AND .77%, RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisor" and "How Fund Shares are Distributed". 4 PROSPECTUS TAX-EXEMPT MONEY MARKET FUND 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 Attempts to increase income without added risk by analyzing credit quality STRATEGY INVESTOR PROFILE Conservative investors who want to receive current tax-exempt income from their investment
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, we analyze the credit quality and structure of each security to minimize risk. We actively manage the Fund's average maturity based on current interest rates and our outlook of the market. MONEY MARKET FUNDS Money market funds invest in high quality, short-term debt securities, commonly known as money market instruments. These include CDs, bankers' acceptances, commercial paper, U.S. Treasury securities, some municipal securities, and repurchase agreements. Money market funds follow strict rules about credit risk, maturity and diversification of its investments. An investment in a money market fund is not a bank deposit. Although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in a money market fund. 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.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1993 1.90% 1994 2.37% 1995 3.36% 1996 2.94% 1997 3.11%
BEST QUARTER WORST QUARTER .89% .42% (6/30/95) (3/31/93)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 1.47%. PROSPECTUS 5 TAX-EXEMPT MONEY MARKET FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE IBC/ DONOGHUE TAX-FREE STOCKBROKER & GENERAL PURPOSE AVERAGE.
SINCE FUND INCEPTION 1 YEAR 5 YEARS (6/8/92) TAX-EXEMPT MONEY MARKET FUND 3.11% 2.73% 2.68% IBC/DONOGHUE TAX-FREE STOCKBROKER & GENERAL PURPOSE AVERAGE 3.14% 2.77% 2.77%
TO OBTAIN YIELD INFORMATION FOR THE FUND, CALL 1-800-814-3397 SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The IBC/Donoghue Tax-Free Stockbroker & General Purpose Average is a widely recognized index of [ ]. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees .55% Distribution and Service (12b-1) Fees .15% Other Expenses .15% --------- Total Annual Fund Operating Expenses .85%
- -------------------------------------------------- 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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $87 $271 $471 $1049
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, administration and custody services. These expenses are deducted from the Fund's income. The expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor and the Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES ARE .49%, .10% AND .74%, RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisor" and "How Fund Shares are Distributed". 6 PROSPECTUS U.S. GOVERNMENT SECURITIES MONEY MARKET FUND 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 Attempts to increase income without adding undue risk by analyzing yields STRATEGY INVESTOR PROFILE Conservative investors who want to receive current income
INVESTMENT STRATEGY The U.S. Government Securities Money Market Fund invests exclusively in U.S. Treasury bills, notes, bonds and components of these securities, government agency securities, and repurchase agreements involving these securities. In selecting investments for the Fund, we try to increase income without adding undue risk by analyzing yields. We actively manage the maturity of the Fund and its portfolio to maximize the Fund's yield based on current market interest rates and our outlook on the market. MONEY MARKET FUNDS Money market funds invest in high quality, short-term debt securities, commonly known as money market instruments. These include CDs, bankers' acceptances, commercial paper, U.S. Treasury securities, some municipal securities, and repurchase agreements. Money market funds follow strict rules about credit risk, maturity and diversification of its investments. An investment in a money market fund is not a bank deposit. Although a money market fund seeks to keep a constant price per share of $1.00, you may lose money by investing in a money market fund. 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.* EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 1993 2.52% 1994 3.48% 1995 5.25% 1996 4.66% 1997 4.85%
BEST QUARTER WORST QUARTER 1.32% .61% (6/30/95) (6/30/93)
*THE PERFORMANCE INFORMATION SHOWN ABOVE IS BASED ON A CALENDAR YEAR. THE FUND'S TOTAL RETURN FROM 1/1/98 TO 6/30/98 WAS 2.38%. PROSPECTUS 7 U.S. GOVERNMENT SECURITIES MONEY MARKET FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE IBC/ DONOGHUE U.S. TREASURY & REPO AVERAGE.
SINCE FUND INCEPTION 1 YEAR 5 YEARS (6/8/92) U.S. GOVERNMENT SECURITIES MONEY MARKET FUND 4.85% 4.15% 4.00% IBC/DONOGHUE U.S. TREASURY & REPO AVERAGE 4.89% 4.21% 4.13%
TO OBTAIN YIELD INFORMATION FOR THE FUND, CALL 1-800-814-3397. SIMPLY SPEAKING . . . 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. An index does not have an investment advisor and does not pay any commissions or expenses. If an index had expenses, its performance would be lower. The IBC/Donoghue U.S. Treasury & Repo Average is a widely recognized index of [ ]. FUND FEES AND EXPENSES This table describes the Fund's fees and expenses that you may pay indirectly if you hold shares of the Fund. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees .65% Distribution and Service (12b-1) Fees .17% Other Expenses .15% --------- Total Annual Fund Operating Expenses .97%
- -------------------------------------------------- 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 each period. The Example also assumes that each year your investment has a 5% return and Fund expenses remain the same. Although your actual costs and returns might be different, your approximate costs of investing $10,000 in the Fund would be: 1 YEAR 3 YEARS 5 YEARS 10 YEARS $99 $309 $536 $1190
SIMPLY SPEAKING . . . FUND EXPENSES Unlike an index, every mutual fund has operating expenses to pay for professional advisory, administration and custody services. These expenses are deducted from the Fund's income. The expenses in the table above are shown as a percentage of the Fund's net assets. The table shows the highest fees and expenses that could be currently charged to the Fund. Actual fees and expenses are lower because the Advisor and the Distributor are voluntarily waiving a portion of their fees. ACTUAL INVESTMENT ADVISORY FEES, DISTRIBUTION FEES AND TOTAL OPERATING EXPENSES ARE .50%, .12% AND .77%, RESPECTIVELY. The Advisor and Distributor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisor" and "How Fund Shares are Distributed". 8 PROSPECTUS EACH FUND'S PRINCIPAL INVESTMENT FUND INVESTMENTS The table below shows each Fund's principal investments. In other words, the table describes the type or types of investments that we believe will most likely help each Fund achieve its investment goal.
PRIME QUALITY TAX-EXEMPT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND - ------------------------------------------------------------------------------------------------------------------------ Bank Obligations X - ------------------------------------------------------------------------------------------------------------------------ Commercial Paper X X - ------------------------------------------------------------------------------------------------------------------------ Corporate Obligations X - ------------------------------------------------------------------------------------------------------------------------ Foreign Securities (U.S. Dollar denominated) X - ------------------------------------------------------------------------------------------------------------------------ Mortgage-Backed Securities X - ------------------------------------------------------------------------------------------------------------------------ Municipal Securities X - ------------------------------------------------------------------------------------------------------------------------ U.S. Government Securities X X - ------------------------------------------------------------------------------------------------------------------------
Each Fund also may invest in other securities, use other strategies and engage in other investment practices, which are described in detail in our Statement of Additional Information. Of course, we cannot guarantee that any Fund will achieve its investment goal. INVESTMENT ADVISOR The Investment Advisor makes investment decisions for the Funds and continuously reviews, supervises and administers its Funds' respective investment programs. The Board of Trustees supervises the Advisor and establishes policies that the Advisor must follow in its day-to-day management activities. Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Advisor to the Prime Quality Money Market Fund, U.S. Government Securities Money Market Fund and Tax-Exempt Money Market Fund. As of May 31, 1998, Trusco had approximately $22 billion in assets under management. For the fiscal year ended May 31, 1998, Trusco received advisory fees of: PRIME QUALITY MONEY MARKET FUND.......... .51% TAX-EXEMPT MONEY MARKET FUND............. .49% U.S. GOVERNMENT SECURITIES MONEY MARKET FUND................................... .50%
The Advisor may use their affiliates as brokers for Fund transactions. PROSPECTUS 9 PURCHASING, SELLING AND EXCHANGING FUND SHARES PURCHASING FUND SHARES HOW TO PURCHASE FUND SHARES You may purchase Investor Shares directly from us by: - - mail - - telephone - - wire - - direct deposit, or - - Automated Clearing House (ACH). SIMPLY SPEAKING . . . 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 on federal holidays. To purchase shares directly from us, please call 1-800-874-4770. Write your check, payable in U.S. dollars, to "STI CLASSIC FUNDS" and include the name of the appropriate Fund(s) on the check. We cannot accept third-party checks, credit cards, credit card checks or cash. You may also purchase shares through Investment Consultants of certain correspondent banks of SunTrust Banks, Inc. (SunTrust), or other financial institutions that have executed dealer agreements with us. We may reject any purchase order if we determine that accepting the order would not be in the best interests of the STI Classic Funds or its shareholders. The price per share (the offering price) will be the net asset value per share (NAV) next determined after we receive your purchase order. We expect that the NAV of each Fund will remain constant at $1.00 per share. We calculate each Fund's 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). Your purchase order will be effective on the Business Day we receive it if: - - we receive your order before 11:00 a.m. Eastern time for the Tax-Exempt Money Market Fund or before 1:00 p.m. Eastern time for the Prime Quality and U.S. Government Securities Money Market Funds; and - - we receive federal funds (readily available) before we calculate NAV (normally 4:00 p.m. Eastern time). Otherwise, your purchase order will be effective the following Business Day, as long as we receive funds before we calculate NAV the following day. SIMPLY SPEAKING . . . FOR CUSTOMERS OF OTHER FINANCIAL INSTITUTIONS If you purchase, sell or exchange Fund shares through a financial institution (rather than directly from us), you may have to transmit your purchase, sale and exchange requests to your financial institution 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 us. For more information about how to purchase, sell or exchange Fund shares through your financial institution, you should contact your financial institution directly. HOW WE CALCULATE NAV In calculating NAV, we generally value a Fund's portfolio using the amortized cost valuation method, which is described in detail in our Statement of Additional Information. If we think that amortized cost is unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. We expect each Fund's NAV to remain constant at $1.00 per share, although we cannot guarantee this. 10 PROSPECTUS PURCHASING, SELLING AND EXCHANGING FUND SHARES SIMPLY SPEAKING . . . NET ASSET VALUE NAV for one Fund share is the value of that share's portion of all of the assets in the Fund. MINIMUM PURCHASES To purchase Investor Shares for the first time, you must invest at least $2,000 in any Fund. To purchase additional shares of any Fund, you must invest at least $1,000 or, if you pay by a statement coupon, $100. We may accept investments of smaller amounts at our 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 us at 1-800-428-6970 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 up to $100,000 once or twice a month. The Distributor may close your account if you do not meet this minimum investment requirement at the end of two years. SELLING FUND SHARES HOW TO SELL YOUR FUND SHARES You may sell (sometimes called "redeem") your shares on any Business Day by contacting us directly by mail or telephone. You may also sell your shares by contacting your financial institution by mail or telephone. To sell your shares by telephone, the amount of your sale must be at least $1,000. If you would like to sell $25,000 or more of your shares, please notify us in writing and include a signature guarantee (a notarized signature is not sufficient). The sale price of each share will be the next NAV determined after we receive your request. Your sale order will be effective that same Business Day if we receive your order before: - - 11:00 a.m. Eastern time for the Tax-Exempt Money Market Fund; or - - 1:00 p.m. Eastern time for the Prime Quality Money Market and U.S. Government Securities Money Market Funds. SIMPLY SPEAKING . . . TELEPHONE TRANSACTIONS Purchasing, selling and exchanging Fund shares over the telephone is extremely convenient, but not without risk. Although we have certain safeguards and procedures to confirm the identity of callers and the authenticity of instructions, we are not responsible for any losses or costs incurred by following telephone instructions we reasonably believe to be genuine. If you or your financial institution transact with us over the telephone, you will generally bear the risk of any loss. 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 PROSPECTUS 11 PURCHASING, SELLING AND EXCHANGING FUND SHARES withdrawal will be mailed to you by check or, if you have an account with a SunTrust affiliated bank, electronically transferred to your account. RECEIVING YOUR MONEY Normally, we will send your sale proceeds within five Business Days after we receive your request. Your proceeds can be wired to your bank account (subject to a $7.00 fee) or sent to you by check. If you recently purchased your shares by check or through ACH, redemption proceeds may not be available until your check has cleared (which may take up to 15 Business Days). REDEMPTIONS IN KIND We generally pay sale proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Fund's remaining shareholders) we might pay all or part of your redemption proceeds in liquid securities with a market value equal to the redemption price (redemption in kind). Although it is highly unlikely that your shares would ever be redeemed in kind, you would probably have to pay brokerage 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 $2,000 required minimum you may be required to sell your shares. You will always be given at least 60 days' written notice to give you time to add to your account and avoid selling your shares. SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES We may suspend your right to sell your shares if the NYSE restricts trading, the SEC declares an emergency or for other reasons. More information about this is in our Statement of Additional Information. EXCHANGING FUND SHARES HOW TO EXCHANGE YOUR SHARES You may exchange your shares on any Business Day by contacting us directly by mail or telephone. You may also exchange shares through your financial institution by mail or telephone. Exchange requests must be for an amount of at least $1,000. 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. Shares you exchange for the first time from a Money Market Fund (which has no sales charge) into a Fund with a sales charge are subject to that sales charge. Similarly, shares you exchange for the first time into a Fund with a higher sales charge are subject to an incremental sales charge (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. SIMPLY SPEAKING . . . 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 we receive your exchange request. 12 PROSPECTUS HISTORICAL FINANCIAL INFORMATION FINANCIAL HIGHLIGHTS The tables that follow present performance information about Investor Shares of each Fund. This information is intended to help you understand each Fund's financial performance for the past five years, or, if shorter, the period of the Fund's operations. Some of this information reflects financial information for a single Fund share. The total returns in the table represent the rate that you would have earned (or lost) on an investment in a Fund, assuming you reinvested all of your dividends and distributions. This information has been audited by Arthur Andersen, LLP, independent public accountants. Their report, along with each Fund's financial statements, appears in our annual report that accompanies our Statement of Additional Information. You can obtain our annual report, which contains more performance information, at no charge by calling 1-800-874-4700. SIMPLY SPEAKING . . . FINANCIAL HIGHLIGHTS Study these tables to see how each Fund performed since it began investment operations.
NET ASSET NET REALIZED DISTRIBUTIONS VALUE NET GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING OF INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED VALUE END PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS OF PERIOD ------------ --------- ------------ ------------- ------------- ---------- - --------------------------------- PRIME QUALITY MONEY MARKET FUND - --------------------------------- Investor Shares 1998..................................... $ 1.00 $0.05 $ -- $(0.05) $ -- $1.00 1997..................................... 1.00 0.05 -- (0.05) -- 1.00 1996..................................... 1.00 0.05 -- (0.05) -- 1.00 1995..................................... 1.00 0.05 -- (0.05) -- 1.00 1994..................................... 1.00 0.03 -- (0.03) -- 1.00 - ------------------------------- TAX-EXEMPT MONEY MARKET FUND - ------------------------------- Investor Shares 1998..................................... $ 1.00 $0.03 $ -- $(0.03) $ -- $1.00 1997..................................... 1.00 0.03 -- (0.03) -- 1.00 1996..................................... 1.00 0.03 -- (0.03) -- 1.00 1995..................................... 1.00 0.03 -- (0.03) -- 1.00 1994..................................... 1.00 0.02 -- (0.02) -- 1.00 - ---------------------------------------------- U.S. GOVERNMENT SECURITIES MONEY MARKET FUND - ---------------------------------------------- Investor Shares 1998..................................... $ 1.00 $0.05 $ -- $(0.05) $ -- $1.00 1997..................................... 1.00 0.05 -- (0.05) -- 1.00 1996..................................... 1.00 0.05 -- (0.05) -- 1.00 1995..................................... 1.00 0.04 -- (0.04) -- 1.00 1994..................................... 1.00 0.03 -- (0.03) -- 1.00 RATIO OF RATIO OF NET NET RATIO OF INVESTMENT RATIO OF INVESTMENT EXPENSES TO INCOME TO NET EXPENSES INCOME AVERAGE NET AVERAGE NET ASSETS TO TO ASSETS ASSETS END OF AVERAGE AVERAGE (EXCLUDING (EXCLUDING TOTAL PERIOD NET NET WAIVERS AND WAIVERS AND RETURN (000) ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) ------ --------- -------- -------- ------------- ------------- - --------------------------------- PRIME QUALITY MONEY MARKET FUND - --------------------------------- Investor Shares 1998..................................... 5.04 % $411,821 0.76% 4.93% 0.98% 4.71% 1997..................................... 4.84 283,544 0.75 4.74 0.97 4.52 1996..................................... 5.08 215,696 0.75 4.94 1.00 4.69 1995..................................... 4.62 157,616 0.75 4.55 1.01 4.29 1994..................................... 2.71 129,415 0.75 2.67 0.99 2.43 - ------------------------------- TAX-EXEMPT MONEY MARKET FUND - ------------------------------- Investor Shares 1998..................................... 3.09 % $134,538 0.62% 3.04% 0.83% 2.83% 1997..................................... 2.97 102,013 0.62 2.92 0.83 2.71 1996..................................... 3.16 95,223 0.62 3.10 0.85 2.87 1995..................................... 3.00 87,647 0.55 3.00 0.87 2.68 1994..................................... 1.96 61,675 0.54 1.93 0.88 1.59 - --------------------------------------------- U.S. GOVERNMENT SECURITIES MONEY MARKET FUND - --------------------------------------------- Investor Shares 1998..................................... 4.90 % $ 58,753 0.76% 4.79% 0.96% 4.59% 1997..................................... 4.69 63,178 0.75 4.59 0.96 4.38 1996..................................... 4.99 58,608 0.75 4.88 0.99 4.64 1995..................................... 4.51 46,639 0.75 4.51 1.02 4.24 1994..................................... 2.63 32,395 0.75 2.54 0.97 2.32
PROSPECTUS 13 HOW FUND SHARES ARE DISTRIBUTED 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. Maximum distribution fees, as a percentage of average daily net assets, are as follows: Prime Quality Money Market Fund .20% Tax-Exempt Money Market Fund .15% U.S. Government Securities Money Market Fund .17%
14 PROSPECTUS OTHER INFORMATION DIVIDENDS AND DISTRIBUTIONS Each Fund declares daily and distributes its income monthly. The Funds make distributions of capital gains, if any, at least annually. 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 us in writing prior to the date of the distribution. Your election will be effective for dividends and distributions paid after we receive your written notice. To cancel your election, simply send us written notice. SIMPLY SPEAKING . . . THE "RECORD DATE" If you own Fund shares on a Fund's record date, you will be entitled to receive the distribution. TAXES PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL, STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues that affect the Funds and their shareholders. This summary is based on current tax laws, which may change. Each Fund will distribute substantially all of its income and capital gains, if any. The dividends and distributions you receive may be subject to federal, state and local taxation, depending upon your tax situation. Capital gains distributions may be taxable at different rates depending on the length of time a Fund holds its portfolio securities. YOU MAY BE TAXED ON EACH SALE OR EXCHANGE OF FUND SHARES. The Tax-Exempt Money Market Fund intends 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 by this Fund may be taxable. The Funds use a tax management technique known as "highest in, first out." Using this technique, the portfolio holdings which experienced the smallest gain or largest loss are sold first in an effort to minimize capital gains and enhance after-tax returns. MORE INFORMATION ABOUT TAXES IS IN OUR STATEMENT OF ADDITIONAL INFORMATION. SIMPLY SPEAKING . . . FUND DISTRIBUTIONS Distributions you receive from a Fund may be taxable whether or not you reinvest them. PROSPECTUS 15 NOTES 16 PROSPECTUS NOTES PROSPECTUS 17 NOTES 18 PROSPECTUS HOW TO OBTAIN MORE INFORMATION INVESTMENT ADVISOR Trusco Capital Management, Inc. DISTRIBUTOR SEI Investments Distribution Co. LEGAL COUNSEL Morgan, Lewis & Bockius LLP More information about the Funds is available without charge through the following: STATEMENT OF ADDITIONAL INFORMATION (SAI) More detailed information about the STI Classic Funds is included in our SAI. The SAI has been filed 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 SEMIANNUAL REPORTS These reports list the Funds' holdings and contain information from the Funds' managers about fund strategies and recent market conditions and trends. TO OBTAIN MORE INFORMATION: BY TELEPHONE: Call 1-800-874-4770 BY MAIL: Write to us c/o SEI Investments Distribution Co. Oaks, Pennsylvania 19456. BY E-MAIL: xxxxxxxxxxxxxxxx BY INTERNET: http://www.suntrust.com FROM THE SEC: You can also obtain these documents, and other information about the STI Classic Funds, from 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 call 1-800-SEC-0330). 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 20549-6009. The Fund's Investment Company Act registration number is 811-06557. CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND INVESTMENT ADVISOR TO THE FUNDS: TRUSCO CAPITAL MANAGEMENT, INC. The STI Classic Funds (the "Trust") is a mutual fund that offers shares in a number of separate investment portfolios. This Prospectus sets forth concisely the information about the Shares of the Classic Institutional Cash Management Money Market Fund and the Classic Institutional U.S. Treasury Securities Money Market Fund (each a "Fund" and, together, the "Classic Institutional Money Market Funds"). THE CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND SEEKS TO MANAGE ITS INVESTMENTS IN A MANNER CONSISTENT WITH THE CRITERIA FOR OBTAINING AN AAA RATING BY MOODY'S INVESTORS SERVICE AND/OR AN AAA RATING BY STANDARD & POOR'S CORPORATION. Investors are advised to read this Prospectus and retain it for future reference. A Statement of Additional Information relating to the Funds dated the same date as this Prospectus has been filed with the Securities and Exchange Commission and is available without charge through the Distributor, SEI Investments Distribution Co., Oaks, Pennsylvania 19456 or by calling 1-800-874-4770. The Statement of Additional Information is incorporated into this Prospectus by reference. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. AN INVESTMENT IN A MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT A MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. THE TRUST'S SHARES ARE NOT SPONSORED, ENDORSED, OR GUARANTEED BY, AND DO NOT CONSTITUTE OBLIGATIONS OR DEPOSITS OF, THE ADVISOR OR ANY OF ITS AFFILIATES OR CORRESPONDENTS INCLUDING SUNTRUST BANKS, INC., ARE NOT GUARANTEED OR INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY, AND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. OCTOBER 1, 1998 2 (THIS PAGE INTENTIONALLY LEFT BLANK) 3 No person has been authorized to give any information or to make any representations not contained in this Prospectus, or in the Trust's Statement of Additional Information in connection with the offering made by this Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Trust or SEI Investments Distribution Co. (the "Distributor"). This Prospectus does not constitute an offering by the Trust or by the Distributor in any jurisdiction in which such offering may not lawfully be made. Shares of the Classic Institutional Money Market Funds are offered primarily to various types of institutional investors ("Shareholders"), including SunTrust Banks, Inc. and its affiliates and correspondents, for the investment of funds for which they act in a fiduciary, agency, investment advisory or custodial capacity. TABLE OF CONTENTS Expense Summary...................... 4 Financial Highlights................. 5 The Trust............................ 6 Funds and Investment Objectives...... 6 Investment Policies and Strategies... 6 General Investment Policies and Strategies.......................... 7 Investment Risks..................... 7 Investment Limitations............... 8 Performance Information.............. 9 Purchase of Fund Shares.............. 9 Redemption of Fund Shares............ 10 Dividends and Distributions.......... 10 Tax Information...................... 11 STI Classic Funds Information........ 12 The Trust............................ 12 Board of Trustees.................... 12 Investment Advisor................... 12 Banking Laws......................... 13 Distribution......................... 13 Administration....................... 14 Transfer Agent and Dividend Disbursing Agent.................... 14 Custodian............................ 14 Legal Counsel........................ 14 Independent Public Accountants....... 14 Other Information.................... 14 Voting Rights........................ 14 Reporting............................ 15 Shareholder Inquiries................ 15 Description of Permitted Investments......................... 15 Appendix............................. A-1
4 EXPENSE SUMMARY Below is a summary of the estimated annual operating expenses for shares of each Classic Institutional Money Market Fund. A hypothetical example based on the summary is also shown. Actual expenses may vary. ANNUAL OPERATING EXPENSES (as a percentage of average net assets)
CLASSIC INSTITUTIONAL CLASSIC INSTITUTIONAL CASH MANAGEMENT U.S. TREASURY SECURITIES MONEY MARKET FUND MONEY MARKET FUND - ---------------------------------------------------------------------------------------------------------- Management Fees (after voluntary reductions)(1)............. .11% .03% All Other Expenses (after voluntary reductions)............. .09% .17% - ---------------------------------------------------------------------------------------------------------- Total Operating Expenses (after voluntary reductions)(2).... .20% .20% - ---------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------
(1) The Advisor is waiving, on a voluntary basis, a portion of its fee from each Fund. The Advisor reserves the right to terminate its waiver at any time in its sole discretion. Absent such waivers and reimbursements, Advisory Fees for the Funds would be as follows: Classic Institutional Cash Management Money Market Fund--.20%, Classic Institutional U.S. Treasury Securities Money Market Fund-- .20%. See "Investment Advisors." A person that purchases shares through an account with a financial institution may be charged separate fees by the financial institution. (2) Absent the voluntary waivers described above, Total Operating Expenses for the Funds would be as follows: Classic Institutional Cash Management Money Market Fund--.31%, Classic Institutional U.S. Treasury Securities Money Market Fund--.39%.
CLASSIC INSTITUTIONAL CLASSIC INSTITUTIONAL CASH MANAGEMENT U.S. TREASURY SECURITIES MONEY MARKET FUND MONEY MARKET FUND - --------------------------------------------------------------------------------------------------------------------- An investor would pay the following expenses on a $1,000 investment assuming: (1) a 5% annual return and (2) redemption at the end of each time period: One Year....................................................... $ 3.20 $ 4.00 Three Years.................................................... 10.00 12.50 Five Years..................................................... 17.40 21.90 Ten Years...................................................... 39.30 49.30 - --------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------
THE EXAMPLE IS BASED UPON THE ESTIMATED TOTAL OPERATING EXPENSES OF A FUND AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose of this table is to assist the investor in understanding the various costs and expenses that may be directly or indirectly borne by investors in the Trust. 5 FINANCIAL HIGHLIGHTS The table that follows presents information about the investment results of the Classic Institutional Money Market Funds. The financial highlights for the Funds for the periods from inception through May 31, 1998 have been audited by Arthur Andersen LLP, independent public accountants, whose report appears in STI Classic Fund's annual report and accompanies the Statement of Additional Information. The annual report for the Fund, which contains more information about performance, is available at no charge by calling 1-800-874-4770. For the Period From Inception Through May 31, 1998 For a Share Outstanding Throughout the Period
NET ASSET NET REALIZED DISTRIBUTIONS VALUE NET GAINS FROM NET DISTRIBUTIONS NET ASSET BEGINNING INVESTMENT (LOSSES) ON INVESTMENT FROM REALIZED VALUE END TOTAL OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN ----------- ----------- ------------- ------------- ------------- ----------- ----------- - --------------------------------------------------------- CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND - --------------------------------------------------------- Institutional Shares 1998................... $ 1.00 $ 0.05 $ -- $ (0.05 ) $ -- $ 1.00 5.63% 1997(A)................ 1.00 0.02 -- (0.02 ) -- 1.00 2.51* - -------------------------------------------------------------- CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND - -------------------------------------------------------------- Institutional Shares 1998................... $ 1.00 $ 0.05 $ -- $ (0.05 ) $ -- $ 1.00 5.50% 1997(A)................ 1.00 0.02 -- (0.02 ) -- 1.00 2.46* RATIO OF NET RATIO OF NET RATIO OF EXPENSES INVESTMENT INCOME RATIO OF INVESTMENT TO AVERAGE NET TO AVERAGE NET NET ASSETS EXPENSES TO INCOME TO ASSETS (EXCLUDING ASSETS (EXCLUDING END OF AVERAGE NET AVERAGE NET WAIVERS AND WAIVERS AND PERIOD (000) ASSETS ASSETS REIMBURSEMENTS) REIMBURSEMENTS) ------------ ------------- ------------- ------------------- ------------------- - --------------------------- CLASSIC INSTITUTIONAL CASH - --------------------------- Institutional Shares 1998................... $ 374,802 0.16 % 5.49 % 0.30 % 5.35 % 1997(A)................ 395,673 0.06 5.49 0.52 5.03 - --------------------------- CLASSIC INSTITUTIONAL U.S. - --------------------------- Institutional Shares 1998................... $ 140,334 0.18 % 5.34 % 0.38 % 5.14 % 1997(A)................ 20,238 0.09 5.27 0.51 4.85
(A) Commenced operations on December 12, 1996. * Total return is for the period indicated and has not been annualized. 6 THE TRUST STI CLASSIC FUNDS (the "Trust") is a diversified, open-end management investment company that provides a convenient and economical means of investing in several professionally managed portfolios of securities. The Trust currently offers units of beneficial interest ("shares") in a number of separate Funds. This Prospectus relates to the Classic Institutional Money Market Funds described below. FUNDS AND INVESTMENT OBJECTIVES THE CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND seeks to provide as high a level of current income as is consistent with preservation of capital and liquidity by investing exclusively in high quality money market instruments issued by corporations and the U.S. Government. THE CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND seeks to provide as high a level of current income as is consistent with preservation of capital and liquidity by investing exclusively in bills, notes and bonds issued by the U.S. Treasury and repurchase agreements ("U.S. Treasury obligations") with approved dealers collateralized by U.S. Treasury obligations. It is a fundamental policy of each Classic Institutional Money Market Fund to use its best efforts to maintain a constant net asset value of $1.00 per share. There can be no assurance that either Fund will achieve its investment objective or maintain a net asset value of $1.00 per share on a continuous basis. Each Classic Institutional Money Market Fund intends to comply with federal regulations applicable to money market funds using the amortized cost method for calculating net asset value, which require each Fund to invest only in U.S. dollar denominated obligations, to maintain an average maturity on a dollar-weighted basis of 90 days or less and to acquire eligible securities that present minimal credit risk and have a maturity of 397 days or less. The Classic Institutional U.S. Treasury Securities Money Market Fund seeks to manage its investments in a manner consistent with the criteria for obtaining an Aaa rating by Moody's Investors Service ("Moody's") and/or an AAA rating by Standard & Poor's Corporation ("S&P"). These requirements will also limit the Classic Institutional U.S. Treasury Securities Money Market Fund's ability to generate high current income. For a further discussion of these rules, see "Description of Permitted Investments." INVESTMENT POLICIES AND STRATEGIES CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND The Classic Institutional Cash Management Money Market Fund will invest in money market instruments denominated in U.S. dollars consisting of: (i) U.S. Treasury obligations; (ii) receipts; (iii) obligations issued or guaranteed as to principal and interest by agencies and instrumentalities of the U.S. Government; (iv) commercial paper issued by domestic and foreign issuers rated in the highest short-term rating category by one or more nationally recognized statistical rating organizations (an "NRSRO") as described in the "Appendix" or, if not rated, determined by the Advisor to be of comparable quality; (v) high quality obligations (including certificates of deposit, time deposits, bankers' acceptances, Eurodollar and Yankee bank obligations) of U.S. commercial banks (including foreign branches of such banks), and U.S. and London branches of foreign banks or savings and loan and thrift institutions that are 7 members of the Federal Reserve System, the Federal Deposit Insurance Corporation, or savings and loan associations; (vi) high quality short-term corporate obligations issued by companies with commercial paper meeting the ratings indicated in (iv) above, or, if not rated, determined by the Advisor to be of comparable quality; (vii) repurchase agreements involving such obligations; (viii) high quality obligations of supranational entities satisfying the credit ratings described in (iv) above, or, if not rated, determined by the Advisor to be of comparable quality; (ix) high quality medium term notes; (x) municipal securities; (xi) mortgage-backed securities and (xii) asset-backed securities. The Fund may not invest more than 25% of its total assets in obligations issued by foreign branches of U.S. banks and London branches of foreign banks. The Fund may purchase securities subject to standby commitments. The Fund may also purchase restricted securities. As a money market fund, the Fund is subject to limitations on the percentage of its assets that may be invested in any one issuer and on the percentage that may be invested in securities carrying the second highest rating assigned by the requisite NRSROs. CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND The Classic U.S. Treasury Securities Money Market Fund will invest exclusively in U.S. Treasury obligations and any repurchase agreements with dealers will be selected pursuant to guidelines adopted by the Trust's Board of Trustees and collateralized by U.S. Treasury obligations. The Fund, however, seeks to invest exclusively in securities that would qualify to be rated in the highest ratings category of an NRSRO, such as S&P or Moody's. As a result, the Fund's ability to maintain an average dollar-weighted portfolio maturity to the maximum extent permitted by Rule 2a-7 will be limited, and the Fund's performance may be affected adversely. GENERAL INVESTMENT POLICIES AND STRATEGIES In the event that a security owned by a Fund is downgraded below the stated rating categories, the Advisor will review and take appropriate action with regard to the security. Each of the Funds may engage in securities lending and will limit such practice to 33 1/3% of its total assets. No Fund may purchase additional securities while its outstanding borrowings exceed 5% of its assets. It is a non-fundamental policy of each Fund to invest no more than 10% of its net assets in illiquid securities. An illiquid security is a security which cannot be disposed of in the usual course of business within seven days at a price approximating its carrying value. Rule 144A securities and Section 4(2) commercial paper that meet the criteria established by the Board of Trustees of the Trust may be considered liquid. For additional information regarding permitted investments, see "Description of Permitted Investments" in this Prospectus and in the Statement of Additional Information. INVESTMENT RISKS FOREIGN SECURITIES Investing in the securities of foreign companies involves special risks and considerations not typically associated with investing in U.S. companies. These risks and considerations include differences in accounting, auditing and financial reporting standards, generally higher commission rates on foreign portfolio 8 transactions, the possibility of expropriation or confiscatory taxation, adverse changes in investment or exchange control regulations, political instability which could affect U.S. investment in foreign countries and potential restrictions of the flow of international capital and currencies. Foreign companies may also be subject to less government regulation than U.S. companies. Moreover, the dividends payable on the foreign securities may be subject to foreign withholding taxes, thus reducing the net amount of income available for distribution to the Fund's Shareholders. Foreign securities often trade with less frequency and volume than domestic securities and, therefore, may exhibit greater price volatility. GOVERNMENT SECURITIES Guarantees of a Fund's securities by the U.S. Government, its agencies or instrumentalities guarantee only the payment of principal and interest on the guaranteed securities, and do not guarantee the securities' yield or value or the yield or value of a Fund's shares. MORTGAGE-BACKED SECURITIES Mortgage-backed securities are subject to the risk of prepayment of the underlying mortgages. During periods of declining interest rates, prepayment of mortgages underlying these securities can be expected to accelerate. When the mortgage-backed securities held by a Fund are prepaid, the Fund generally will reinvest the proceeds in securities with a yield that reflects prevailing interest rates, which may be lower than the prepaid security. ZERO COUPON OBLIGATIONS Each Fund may invest, subject to its investment objective and policies, in zero coupon obligations. Zero coupon obligations are sold at original issue discount and do not make periodic payments. Zero coupon obligations may be subject to greater fluctuations in value due to interest rate changes than interest bearing obligations. A Fund will be required to include the imputed interest in zero coupon obligations in its current income. Because each Fund distributes all of its net investment income to Shareholders, the Fund may have to sell portfolio securities to distribute the income attributable to these obligations and securities at a time when the Advisor would not have chosen to sell such obligations or securities. INVESTMENT LIMITATIONS The following investment limitations constitute fundamental policies of each Fund. Fundamental policies cannot be changed with respect to a Fund without the consent of the holders of a majority of the Fund's outstanding shares. The term "majority of the outstanding shares" means the vote of (i) 67% or more of a Fund's shares present at a meeting, if more than 50% of the outstanding shares of the Fund are present or represented by proxy, or (ii) more than 50% of a Fund's outstanding shares, whichever is less. Each Fund may not: 1. Purchase securities of any issuer (except securities issued or guaranteed by the United States, its agencies or instrumentalities and repurchase agreements involving such securities) if as a result more than 5% of the total assets of a Fund would be invested in the securities of such issuer; provided, however, that a Fund may invest up to 25% of its assets in "first tier" securities of a single issuer for a period of up to three business days. 2. Purchase any securities which would cause more than 25% of the total assets of a Fund to be invested in the securities of one or more 9 issuers conducting their principal business activities in the same industry, provided that this limitation does not apply to investments in obligations issued or guaranteed by the U.S. Government, its agencies and instrumentalities, repurchase agreements involving such securities and, with respect to only the Classic Institutional Cash Management Money Market Fund, obligations issued by domestic branches of U.S. banks or U.S. branches of foreign banks subject to the same regulations as U.S. banks. For purposes of this limitation, (i) utility companies will be divided according to their services, for example, gas, gas transmission, electric and telephone will each be considered a separate industry; (ii) financial service companies will be classified according to the end users of their services, for example, automobile finance, bank finance and diversified finance will each be considered a separate industry; and (iii) supranational entities will be considered to be a separate industry. The foregoing percentages will apply at the time of the purchase of a security. Additional investment limitations are set forth in the Statement of Additional Information. PERFORMANCE INFORMATION From time to time each Classic Institutional Money Market Fund may advertise its "current yield" and "effective yield." Both yield figures are based on historical earnings and are not intended to indicate future performance. The "current yield" of a Fund refers to the income generated by an investment in the Fund over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in a Fund is assumed to be reinvested. The "effective yield" will be slightly higher than the "current yield" because of the compounding effect of this assumed reinvestment. PURCHASE OF FUND SHARES Shares of the Fund are sold primarily to various types of institutional investors, including subsidiaries of SunTrust Banks, Inc. ("SunTrust"), for the investment of funds for which they act in a fiduciary, agency, investment advisory or custodial capacity. Shares are sold without a sales charge, although the institutional investors may charge their customer accounts for services provided in connection with the purchase of shares. The minimum initial investment is $10,000,000. Institutional investors may impose an earlier cut-off time for receipt of purchase orders directed through them to allow for processing and transmittal of the reorders to Federated Services Company (the "Transfer Agent") for effectiveness the same day. Information concerning these services and any charges will be provided to customers by the institutional investors. Shares will be held of record by the institutional investors, although customers may have or be given the right to vote the shares depending upon the terms of their relationship with the institutional investor. Confirmations of share purchases and redemptions will be sent to the institutional investor as the shareholder of record. Shares may be purchased on days on which the New York Stock Exchange is open for business (a "Business Day"). However, shares cannot be purchased or redeemed for same day settlement on days the Federal Reserve is closed. 10 Purchase orders for the Funds will be effective as of the Business Day received by the Transfer Agent and eligible to receive dividends declared the same day if the Transfer Agent receives the order before 1:00 p.m. Eastern time, and the Custodian receives federal funds before 4:00 p.m. Eastern time on such day. Otherwise, purchase orders for the Funds will be effective the next Business Day provided the Custodian receives readily available funds before 4:00 p.m. Eastern time on the next such Business Day. The purchase price is the net asset value per share next computed after the order is received and accepted by the Trust. The net asset value per share is calculated as of the regularly scheduled close of normal trading on the New York Stock Exchange (currently 4:00 p.m. Eastern time) each Business Day based on the amortized cost method described in the Statement of Additional Information and is expected to remain constant at $1.00 per share. The Trust reserves the right to reject a purchase order when the Distributor determines that it is not in the best interest of the Trust and/or Shareholder(s). Neither the Trust's Transfer Agent nor the Trust will be responsible for any loss, liability, cost or expense for acting upon telephone or wire instructions reasonably believed to be genuine. The Trust maintains procedures, including identification methods and other means, for ascertaining the identity of callers and authenticity of instructions. REDEMPTION OF FUND SHARES An order to redeem shares must be transmitted to the Transfer Agent by the institutional investor as the record owner of shares. Institutional investors may establish procedures for their customers to request redemption of shares held in their account with the institutional investor. Customers should contact their institutional investor for information concerning these procedures. Redemption orders must be received by the Transfer Agent on a Business Day before 1:00 p.m. Eastern time. Redemption orders received after the time noted above will be executed the following day. The Trust reserves the right to wire redemption proceeds within five Business Days after receiving the redemption orders if, in the judgment of the Advisor, an earlier payment could adversely impact a Fund. The Trust intends to pay cash for all shares redeemed, but under abnormal conditions which make payment in cash unwise, payment may be made wholly or partly in liquid portfolio securities with a market value equal to the redemption price. In such circumstances, an investor may incur brokerage costs in converting such securities to cash. DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (exclusive of capital gains) of each of the Classic Institutional Money Market Funds are declared on each Business Day to Shareholders at the close of business on the day of declaration. Net income for dividend purposes consists of: (i) interest accrued and original issue discount earned on the Fund's assets, (ii) plus the amortization of market discount and minus the amortization of market premium on such assets, (iii) less accrued expenses directly attributable to the Fund and the general expenses of the Trust prorated to the Fund on the basis of its relative net assets. Shares begin earning dividends on the Business Day the purchase order is effective and continue earning dividends through and including the Business Day before the redemption order is effective. Dividends are 11 paid within ten Business Days after the end of each month in the form of additional shares of the same Fund unless the Shareholder has elected prior to the date of distribution to receive payment in cash. Such election, or any revocation thereof, must be made in writing at least 15 days prior to the date of distribution to the Transfer Agent and will become effective with respect to dividends paid after its receipt. Dividends are paid within ten Business Days after a Shareholder's complete redemption of its shares in a Fund. TAX INFORMATION The following summary of federal income tax consequences is based on current tax laws and regulations, which may be changed by legislative, judicial or administrative action. No attempt has been made to present a detailed explanation of the federal, state, or local income tax treatment of each Fund or its Shareholders. Accordingly, Shareholders are urged to consult their tax advisors regarding specific questions as to federal, state and local income taxes. TAX STATUS OF EACH FUND Each Fund is treated as a separate entity for federal tax purposes, and is not combined with the Trust's other Funds. Each Fund intends to qualify for the special tax treatment afforded regulated investment companies by the Internal Revenue Code of 1986, as amended (the "Code"), so that it will be relieved of federal income tax on that part of its net investment income and net capital gains (the excess of long-term capital gains over net short-term capital loss) which is distributed to Shareholders. Each Fund intends to make sufficient distributions prior to the end of each calendar year to avoid liability for the federal excise tax applicable to regulated investment companies. TAX STATUS OF DISTRIBUTIONS The Institutional Money Market Funds will each distribute all of their net investment income (including, for this purpose, net short-term capital gains) to Shareholders. Dividends from net investment income will be taxable to Shareholders as ordinary income whether received in cash or in additional shares. Each Fund will make annual reports to Shareholders of the federal income tax status of all distributions. Dividends declared by a Fund in October, November or December of any year and payable to Shareholders of record on a date in that month will be deemed to have been paid by the Fund and received by the Shareholders on December 31, of that year, if paid by the Fund any time during the following January. Income received on direct U.S. obligations is exempt from tax at the state level when received directly by a Fund and may be exempt, depending on the state, when received by a Shareholder provided certain state specific conditions are satisfied. Not all states permit such income dividends to be tax-exempt and some require that a certain minimum percentage of an investment company's income be derived from state tax-exempt interest. Each Fund will inform Shareholders annually of the percentage of income and distributions derived from direct U.S. obligations. Shareholders should consult their tax advisors to determine whether any portion of the income dividends received from a Fund is considered tax exempt in their particular states. A sale, exchange or redemption of Fund shares is a taxable event to the Shareholder. 12 STI CLASSIC FUNDS INFORMATION THE TRUST The Trust was organized as a Massachusetts business trust under a Declaration of Trust dated January 15, 1992. The Declaration of Trust permits the Trust to offer separate portfolios of shares and different classes of each Fund. All consideration received by the Trust for shares of any Fund and all assets of such Fund belong to that Fund and would be subject to liabilities related thereto. The Trust pays its expenses, including fees of its service providers, audit and legal expenses, expenses of preparing prospectuses, proxy solicitation material and reports to Share- holders, costs of custodial services and registering the shares under federal and state securities laws, pricing, insurance expenses, litigation and other extraordinary expenses, brokerage costs, interest charges, taxes and organization expenses. BOARD OF TRUSTEES The management and affairs of the Trust are supervised by the Trustees under the laws governing business trusts in the Commonwealth of Massachusetts. The Trustees have approved contracts under which, as described below, certain companies provide essential management services to the Trust. INVESTMENT ADVISOR Trusco Capital Management, Inc. ("Trusco") serves as the Advisor to the Institutional Money Market Funds. As of May 31, 1998, Trusco had approximately $22 billion in assets under management. The principal business address of Trusco is 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303. The Advisor is an indirect wholly-owned subsidiary of SunTrust Banks, Inc. ("SunTrust"), a southeastern regional bank holding company with assets of $76 billion as of June 30, 1998. SunTrust ranks among the twenty largest U.S. banking companies. Its three principal subsidiaries, SunTrust Banks of Florida, Inc., SunTrust Banks of Georgia, Inc. and SunTrust Banks of Tennessee, Inc., provide a wide range of personal and corporate banking, trust, and investment services through more than 600 locations in the three-state area. Total discretionary assets under management with SunTrust Banks, Inc. equalled approximately $103 billion as of June 30, 1998. The Trust and the Advisor have entered into an advisory agreement (the "Advisory Agreement"). Under the Advisory Agreement, the Advisor makes the investment decisions for the assets of the Funds and continuously reviews, supervises and administers each Fund's investment program. The Advisor discharges its responsibilities subject to the supervision of, and policies established by, the Trustees of the Trust. STI CLASSIC FUNDS ARE NOT DEPOSITS, ARE NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY, AND ARE NOT ENDORSED OR GUARANTEED BY AND DO NOT CONSTITUTE OBLIGATIONS OF SUNTRUST BANKS, INC. OR ANY OF ITS AFFILIATES. INVESTMENTS IN THE FUNDS INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. RETURNS AND PRINCIPAL VALUES WILL FLUCTUATE AND SHARES AT REDEMPTION MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THERE IS NO GUARANTEE THAT ANY STI CLASSIC FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. With respect to each Fund, the Advisor may execute brokerage or other agency transactions through affiliates of the Advisor. For the services provided and expenses incurred pursuant to the Advisory Agreement: Trusco is entitled to receive advisory fees 13 computed daily and paid monthly at the annual rate of .20% of the average daily net assets of each Fund. From time to time, the Advisor may waive (either voluntarily or pursuant to applicable state limitations) advisory fees payable by a Fund. Currently, the Advisor has agreed to voluntary reductions in its fees in amounts necessary to maintain the total operating expenses at the amounts set forth in the Expense Summary. Voluntary reductions of fees may be terminated at anytime. For the fiscal year ended May 31, 1998, the Advisor received advisory fees computed daily and paid monthly at the annual rate of .07% of the average daily net assets of the Institutional Cash Management Money Market Fund, and received advisory fees computed daily and paid monthly at the annual rate of .01% of the Institutional U.S. Treasury Securities Money Market Fund. BANKING LAWS Banking laws and regulations, including the Glass-Steagall Act as presently interpreted by the Board of Governors of the Federal Reserve System, currently (a) prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or its affiliates from sponsoring, organizing, controlling, or distributing the shares of a registered, open-end investment company continuously engaged in the issuance of its shares, and generally prohibit banks from underwriting securities, but (b) do not prohibit such a bank holding company or affiliate or banks generally from acting as an investment advisor, transfer agent, or custodian to such an investment company or from purchasing shares of such a company as agent for and upon the order of a customer. The Advisor believes that it may perform the services for STI Classic Funds contemplated by its Advisory Agreement described in this Prospectus without violation of applicable banking laws or regulations. However, future changes in legal requirements relating to the permissible activities of banks and their affiliates, as well as future interpretations of present requirements, could prevent the Advisor from continuing to perform services for the Funds. If the Advisor was prohibited from providing services to the Funds, the Board of Trustees would consider selecting another qualified firm. Any new investment advisory agreements would be subject to Shareholder approval. If current restrictions preventing a bank or its affiliates from legally sponsoring, organizing, controlling, or distributing shares of an investment company were relaxed, the Advisor, or its affiliates, would consider the possibility of offering to perform additional services for STI Classic Funds. It is not possible, of course, to predict whether or in what form such legislation might be enacted or the terms upon which the Advisor, or such affiliates, might offer to provide such services. In addition, state securities laws on this issue may differ from the interpretations of federal law expressed herein and banks and financial institutions may be required to register as dealers pursuant to state law. DISTRIBUTION SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary of SEI Investments Company ("SEI Investments"), and the Trust are parties to a distribution agreement. No compensation is paid to the Distributor for distribution services. Shares of the Classic Institutional Money Market Funds are offered primarily to institutional investors, 14 including affiliates and correspondents for the investment of funds in which they act in a fiduciary, agency or custodial capacity. Each Fund may execute brokerage or other agency transactions through the Distributor for which the Distributor receives compensation. ADMINISTRATION SEI Fund Resources (the "Administrator") serves as Administrator to the Trust. The Administrator provides the Trust with certain administrative services, other than investment advisory services, including regulatory reporting, all necessary office space, equipment, personnel, and facilities. The Administrator is entitled to a fee, which is calculated daily and paid monthly, at an annual rate as follows:
AVERAGE AGGREGATE DAILY NET ASSETS FEE - --------------------------------------------- --------- $1 - $1 billion .12% over $1 billion to $5 billion .09% over $5 billion to $8 billion .07% over $8 billion to $10 billion .065% over $10 billion .06%
From time to time, the Administrator may voluntarily waive all or a portion of its fee to limit the net expenses of the Funds to the amounts in the Funds' Expense Summary. TRANSFER AGENT AND DIVIDEND DISBURSING AGENT Federated Services Company, Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779 is the transfer agent for the shares of the Trust and dividend disbursing agent for the Trust. CUSTODIAN SunTrust Bank, Atlanta, c/o STI Trust & Investment Operations, Inc., 303 Peachtree Street N.E., 14th Floor, Atlanta, Georgia 30308 serves as custodian of the assets of each Fund. The custodian holds cash, securities and other assets of the Funds as required by the Investment Company Act of 1940. LEGAL COUNSEL Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, serves as legal counsel to the Trust. INDEPENDENT PUBLIC ACCOUNTANTS The independent public accountants to the Trust are Arthur Andersen LLP, Philadelphia, Pennsylvania. OTHER INFORMATION VOTING RIGHTS Each share held entitles the Shareholder of record to one vote. Each Fund or class of a Fund will vote separately on matters relating solely to that Fund or class. As a Massachusetts business trust, the Trust is not required to hold annual meetings of Shareholders but approval will be sought for certain changes in the operation of the Trust and for the election of Trustees under certain circumstances. In addition, a Trustee may be removed by the remaining Trustees or by Shareholders at a special meeting called upon written request of Shareholders owning at least 10% of the outstanding shares of the Trust. In the event that such a meeting is requested the Trust will provide appropriate assistance and information to the Shareholders requesting the meeting. 15 REPORTING The Trust issues unaudited financial information and audited financial statements annually. The Trust furnishes proxy statements and other reports to Shareholders of record. SHAREHOLDER INQUIRIES Shareholders may contact their financial institution's representative in order to obtain information on account statements, procedures and other related information. DESCRIPTION OF PERMITTED INVESTMENTS The following is a description of the permitted investments for the Funds. Further discussion is contained in the Statement of Additional Information. ASSET-BACKED SECURITIES -- Asset-backed securities are securities secured by non-mortgage assets such as company receivables, truck and auto loans, leases and credit card receivables. Such securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in the underlying pools of assets. Such securities also may be debt instruments, which are also known as collateralized obligations and are generally issued as the debt of a special purpose entity, such as a trust, organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are not issued or guaranteed by the U.S. Government or its agencies or instrumentalities, however, the payment of principal and interest on such obligations may be guaranteed up to certain amounts and for a certain period by a letter of credit issued by a financial institution (such as a bank or insurance company) unaffiliated with the issuers of such securities. The purchase of asset-backed securities raises risk considerations peculiar to the financing of the instruments underlying such securities. For example, there is a risk that another party could acquire an interest in the obligations superior to that of the holders of the asset-backed securities. There also is the possibility that recoveries on repossessed collateral may not, in some cases, be available to support payments on those securities. Asset-backed securities entail prepayment risk, which may vary depending on the type of asset, but is generally less than the prepayment risk associated with mortgage-backed securities. In addition, credit card receivables are unsecured obligations of the card holder. The market for asset-backed securities is at a relatively early stage of development. Accordingly, there may be a limited secondary market for such securities. BANKERS' ACCEPTANCES -- Bankers' acceptances are bills of exchange or time drafts drawn on and accepted by a commercial bank. Bankers' acceptances are used by corporations to finance the shipment and storage of goods. Maturities are generally six months or less. CERTIFICATES OF DEPOSIT -- Certificates of deposit are interest bearing instruments with a specific maturity. They are issued by banks and savings and loan institutions in exchange for the deposit of funds and normally can be traded in the secondary market prior to maturity. Certificates of deposit with penalties for early withdrawal will be considered illiquid. COMMERCIAL PAPER -- Commercial paper is a term used to describe unsecured short-term promissory notes issued by banks, municipalities, corporations and other entities. Maturities on these issues vary from a few to 270 days. 16 EURODOLLAR AND YANKEE BANK OBLIGATIONS -- Eurodollar bank obligations are U.S. dollar-denominated certificates of deposit or time deposits issued outside the United States by foreign branches of U.S. banks or by foreign banks. Yankee bank obligations are U.S. dollar denominated obligations issued in the United States by foreign banks. ILLIQUID SECURITIES -- Illiquid securities are securities that cannot be disposed of within seven business days at approximately the price at which they are being carried on the Fund's books. An illiquid security includes a demand instrument with a demand notice period exceeding seven days, where there is no secondary market for such security, and repurchase agreements with durations (or maturities) over seven days in length. MEDIUM TERM NOTES -- Medium term notes are periodically or continuously offered corporate or agency debt that differs from traditionally underwritten corporate bonds only in the process by which they are issued. MORTGAGE-BACKED SECURITIES -- Mortgage-backed securities are instruments that entitle the holder to a share of all interest and principal payments from mortgages underlying the security. The mortgages backing these securities include conventional thirty-year fixed rate mortgages, graduated payment mortgages, and adjustable rate mortgages. During periods of declining interest rates, prepayment of mortgages underlying mortgage-backed securities can be expected to accelerate. Prepayment of mortgages which underlie securities purchased at a premium often results in capital losses, while prepayment of mortgages purchased at a discount often results in capital gains. Because of these unpredictable prepayment characteristics, it is often not possible to predict accurately the average life or realized yield of a particular issue. GOVERNMENT PASS-THROUGH SECURITIES: These are securities that are issued or guaranteed by a U.S. Government agency representing an interest in a pool of mortgage loans. The primary issuers or guarantors of these mortgage-backed securities are GNMA, FNMA and FHLMC. FNMA and FHLMC obligations are not backed by the full faith and credit of the U.S. Government as GNMA certificates are, but FNMA and FHLMC securities are supported by the instrumentalities' right to borrow from the U.S. Treasury. GNMA, FNMA and FHLMC each guarantees timely distributions of interest to certificate holders. GNMA and FNMA also each guarantees timely distributions of scheduled principal. FHLMC has in the past guaranteed only the ultimate collection of principal of the underlying mortgage loan; however, FHLMC now issues mortgage-backed securities (FHLMC Gold PCs) which also guarantee timely payment of monthly principal reductions. Government and private guarantees do not extend to the securities' value, which is likely to vary inversely with fluctuations in interest rates. COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"): CMOs are debt obligations or multiclass pass-through certificates issued by agencies or instrumentalities of the U.S. Government or by private originators or investors in mortgage loans. In a CMO, series of bonds or certificates are usually issued in multiple classes. Principal and interest paid on the underlying mortgage assets may be allocated among the several classes of a series of a CMO in a variety of ways. Each class of a CMO, often referred to as a "tranche," is issued with a specific fixed or floating coupon rate and has a stated maturity or final distribution date. Principal payments on the underlying mortgage assets may cause CMOs to be retired substantially 17 earlier than their stated maturities or final distribution dates, resulting in a loss of all or part of any premium paid. REMICS: A REMIC is a CMO that qualifies for special tax treatment under the Internal Revenue Code and investes in certain mortgages principally secured by interests in real property. Investors may purchase beneficial interests in REMICs, which are known as "regular" interests, or "residual" interests. Guaranteed REMIC pass-through certificates ("REMIC Certificates") issued by FNMA or FHLMC represent beneficial ownership interests in a REMIC trust consisting principally of mortgage loans or FNMA, FHLMC or GNMA-guaranteed mortgage pass-through certificates. For FHLMC REMIC Certificates, FHLMC guarantees the timely payment of interest, and also guarantees the payment of principal as payments are required to be made on the underlying mortgage participation certificates. FNMA REMIC Certificates are issued and guaranteed as to timely distribution of principal and interest by FNMA. MUNICIPAL SECURITIES -- Municipal securities consist of (i) debt obligations issued by or on behalf of public authorities to obtain funds to be used for various public facilities, for refunding outstanding obligations, for general operating expenses, and for lending such funds to other public institutions and facilities, and (ii) certain private activity and industrial development bonds issued by or on behalf of public authorities to obtain funds to provide for the construction, equipment, repair or improvement of privately operated facilities. Municipal securities include both municipal notes and municipal bonds. Municipal notes include general obligation notes, tax-exempt commercial paper tax anticipation notes, revenue anticipation notes, bond anticipation notes, certificates of indebtedness, demand notes and construction loan notes and participation interests in municipal notes. Municipal bonds include general obligation bonds, revenue or special obligation bonds, private activity and industrial development bonds and participation interests in municipal bonds. General obligation bonds are backed by the taxing power of the issuing municipality. Revenue bonds are backed by the revenues of a project or facility (tolls from a bridge, for example). Certificates of participation represent an interest in an underlying obligation or commitment, such as an obligation issued in connection with a leasing arrangement. The payment of principal and interest on private activity and industrial development bonds generally is dependent solely on the ability of a facility's user to meet its financial obligations and the pledge, if any, of real and personal property as security for such payment. TAXABLE MUNICIPAL SECURITIES -- Taxable municipal securities are municipal securities the interest on which is not exempt from federal income tax. Taxable municipal securities include "private activity bonds" that are issued by or on behalf of states or political subdivisions thereof to finance privately-owned or operated facilities for business and manufacturing, housing, sports, and pollution control and to finance activities of and facilities for charitable institutions. Private activity bonds are also used to finance public facilities such as airports, mass transit systems, ports, parking lots, and low income housing. The payment of the principal and interest on private activity bonds is not backed by a pledge of tax revenues, and is dependent solely on the ability of the facility's user to meet its financial obligations, and may be secured by a pledge of real and personal property so financed. Interest on these bonds may not be exempt from federal income tax. 18 RECEIPTS -- Receipts are interests in separately traded interest and principal component parts of U.S. Treasury obligations that are issued by banks and brokerage firms and are created by depositing U.S. Treasury obligations into a special account at a custodian bank. The custodian holds the interest and principal payments for the benefit of the registered owners of the certificates or receipts. The custodian arranges for the issuance of the certificates or receipts evidencing ownership and maintains the register. Receipts are sold as zero coupon securities which means that they are sold at a substantial discount and redeemed at face value at their maturity date without interim cash payments of interest or principal. This discount is amortized over the life of the security and such amortization will constitute the income earned on the security for both accounting and tax purposes. Because of these features, receipts may be subject to greater price volatility than interest paying U.S. Treasury obligations. See also "Taxes". REPURCHASE AGREEMENTS -- Repurchase agreements are agreements by which a Fund obtains a security and simultaneously commits to return the security to the seller at an agreed upon price on an agreed upon date within a number of days from the date of purchase. The custodian will hold the security as collateral for the repurchase agreement. A Fund bears a risk of loss in the event the other party defaults on its obligations and the Fund is delayed or prevented from exercising its right to dispose of the collateral or if the Fund realizes a loss on the sale of the collateral. A Fund will enter into repurchase agreements only with financial institutions deemed to present minimal risk of bankruptcy during the term of the agreement based on established guidelines. Repurchase agreements are considered loans under the Investment Company Act of 1940. RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS -- Investments by a money market fund are subject to limitations imposed under regulations adopted by the Securities and Exchange Commission. Under these regulations, money market funds may only acquire obligations that present minimal credit risk and that are "eligible securities," which means they are (i) rated, at the time of investment, by at least two NRSROs organizations (one if it is the only organization rating such obligation) in the highest rating category or, if unrated, determined to be of comparable quality (a "first tier security"), or (ii) rated according to the foregoing criteria in the second highest rating category or, if unrated, determined to be of comparable quality ("second tier security"). A security is not considered to be unrated if its issuer has outstanding obligations of comparable priority and securities that have a short-term rating. In the case of taxable money market funds, investments in second tier securities are subject to the further constraints in that (i) no more than 5% of a Fund's assets may be invested in second tier securities and (ii) any investment in securities of any one such issuer is limited to the greater of 1% of the Fund's total assets or $1 million. A taxable money market fund may also hold more than 5% of its assets in first tier securities of a single issuer for three "business days" (that is, any day other than a Saturday, Sunday or customary business holiday). RESTRICTED SECURITIES -- Restricted securities are securities that may not be sold freely to the public absent registration under the Securities Act of 1933 or an exemption from registration. Rule 144A securities are securities that have not been registered under the Securities Act of 1933 but which may be traded between certain institutional investors including investment companies. The Trust's Board of Trustees is responsible for developing 19 guidelines and procedures for determining the liquidity of restricted securities, and for monitoring the Advisor's implementation of the guidelines and procedures. SECURITIES LENDING -- In order to generate additional income, a Fund may lend securities which it owns pursuant to agreements requiring that the loan be continuously secured by collateral consisting of cash, securities of the U.S. Government or its agencies equal to at least 100% of the market value of the securities lent. A Fund continues to receive interest on the securities lent while simultaneously earning interest on the investment of cash collateral. Collateral is marked to market daily. There may be risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the securities fail financially or become insolvent. STANDBY COMMITMENTS AND PUTS -- Securities subject to standby commitments or puts permit the holder thereof to sell the securities at a fixed price prior to maturity. Securities subject to a standby commitment or put may be sold at any time at the current market price. However, unless the standby commitment or put was an integral part of the security as originally issued, it may not be marketable or assignable; therefore, the standby commitment or put would only have value to the Fund owning the security to which it relates. In certain cases, a premium may be paid for a standby commitment or put, which premium will have the effect of reducing the yield otherwise payable on the underlying security. The Fund will limit standby commitment or put transactions to institutions believed to present minimal credit risk. SUPRANATIONAL AGENCY OBLIGATIONS -- Supranational entities are entities established through the joint participation of several governments, and include the Asian Development Bank, Inter-American Development Bank, International Bank for Reconstruction and Development (World Bank), African Development Bank, European Economic Community, European Investment Bank and Nordic Investment Bank. TIME DEPOSITS -- Time deposits are non-negotiable receipts issued by a bank in exchange for the deposit of funds. Like a certificate of deposit, it earns a specified rate of interest over a definite period of time; however, it cannot be traded in the secondary market. Time deposits are considered to be illiquid securities. U.S. GOVERNMENT AGENCIES -- Obligations issued or guaranteed by agencies of the U.S. Government, including, among others, the Federal Farm Credit Bank, the Federal Housing Administration and the Small Business Administration, and obligations issued or guaranteed by instrumentalities of the U.S. Government, including, among others, the Federal Home Loan Mortgage Corporation, the Federal Land Banks and the U.S. Postal Service. Some of these securities are supported by the full faith and credit of the U.S. Treasury (e.g., Government National Mortgage Association securities), others are supported by the right of the issuer to borrow from the Treasury (e.g., Federal Farm Credit Bank securities), while still others are supported only by the credit of the instrumentality (e.g., Fannie Mae securities). Guarantees of principal by agencies or instrumentalities of the U.S. Government may be a guarantee of payment at the maturity of the obligation so that in the event of a default prior to maturity there might not be a market and thus no means of realizing on the obligation prior to maturity. Guarantees as to the timely payment of principal and interest do not extend to the value or yield of these securities nor to the value of the Fund's shares. 20 U.S. TREASURY OBLIGATIONS -- U.S. Treasury obligations consist of bills, notes and bonds issued by the U.S. Treasury and separately traded interest and principal component parts of such obligations that are transferable through the Federal book-entry system known as Separately Traded Registered Interest and Principal Securities ("STRIPS") and Coupon Under Book Entry Safekeeping ("CUBES"). VARIABLE AND FLOATING RATE INSTRUMENTS -- Certain obligations may carry variable or floating rates of interest, and may involve a conditional or unconditional demand feature. Such instruments bear interest at rates which are not fixed, but which vary with changes in specified market rates or indices. The interest rates on these securities may be reset daily, weekly, quarterly or some other reset period, and may have a floor or ceiling on interest rate changes. There is a risk that the current interest rate on such obligations may not accurately reflect existing market interest rates. A demand instrument with a demand notice exceeding seven days may be considered illiquid if there is no secondary market for such security. WHEN-ISSUED AND DELAYED DELIVERY SECURITIES -- When-issued or delayed delivery basis transactions involve the purchase of an instrument with payment and delivery taking place in the future. Delivery of and payment for these securities may occur a month or more after the date of the purchase commitment. A Fund will segregate liquid high grade debt securities or cash in an amount at least equal to these commitments. The interest rate realized on these securities is fixed as of the purchase date and no interest accrues to the Fund before settlement. These securities are subject to market fluctuation due to changes in market interest rates and it is possible that the market value at the time of settlement could be higher or lower than the purchase price if the general level of interest rates has changed. Although a Fund generally purchases securities on a when-issued or forward commitment basis with the intention of actually acquiring securities for its portfolio, a Fund may dispose of a when-issued security or forward commitment prior to settlement if it deems appropriate. ZERO COUPON OBLIGATIONS -- Zero coupon obligations are debt securities that do not bear any interest, but instead are issued at a deep discount from par. The value of a zero coupon obligation increases over time to reflect the interest accreted. Such obligations will not result in the payment of interest until maturity, and will have greater price volatility than similar securities that are issued at par and pay interest periodically. A-1 APPENDIX X. COMMERCIAL PAPER AND SHORT-TERM RATINGS The following descriptions of commercial paper ratings have been published by Standard & Poor's Corporation ("S&P"), Moody's Investors Services, Inc. ("Moody's"), Fitch Investors Service, Inc. ("Fitch"), Duff and Phelps ("Duff") and IBCA Limited ("IBCA"), respectively. Commercial paper rated A by S&P is regarded by S&P as having the greatest capacity for timely payment. Issues rated A are further refined by use of the numbers 1+ and 1. Issues rated A-1+ are those with an "overwhelming degree" of credit protection. Those rated A-1 reflect a "very strong" degree of safety regarding timely payment. Those rated A-2 reflect a safety regarding timely payment but not as high as A-1. Commercial paper issues rated Prime-1 and Prime-2 by Moody's are judged by Moody's to have superior ability and strong ability for repayment, respectively. The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of assurance for timely payment. The rating Fitch-2 (Very Good Grade) is the second highest commercial paper rating assigned by Fitch which reflects an assurance of timely payment only slightly less in degree than the strongest issues. The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper rated Duff-1 is regarded as having very high certainty of timely payment with excellent liquidity factors which are supported by ample asset protection. Risk factors are minor. Paper rated Duff-2 is regarded as having good certainty of timely payment, good access to capital markets and sound liquidity factors and company fundamentals. Risk factors are small. The designation A1 by IBCA indicates that the obligation is supported by a very strong capacity for timely repayment. Those obligations rated A1+ are supported by the highest capacity for timely repayment. Obligations rated A2 are supported by a strong capacity for timely repayment, although such capacity may be susceptible to adverse changes in business, economic or financial conditions. (THIS PAGE INTENTIONALLY LEFT BLANK) STI CLASSIC FUNDS ORGANIZATIONAL OVERVIEW * INVESTMENT ADVISOR Trusco Capital Management, Inc. 50 Hurt Plaza Suite 1400 Atlanta, GA 30303 * DISTRIBUTOR SEI Investments Distribution Co. Oaks, PA 19456 * ADMINISTRATOR SEI Fund Resources Oaks, PA 19456 * TRANSFER AGENT Federated Services Company Federated Investors Tower Pittsburgh, PA 15222-3779 * CUSTODIAN SunTrust Bank, Atlanta c/o STI Trust & Investment Operations, Inc. 303 Peachtree Street N.E. 14th Floor Atlanta, GA 30308 * LEGAL COUNSEL Morgan, Lewis & Bockius LLP 1800 M Street, N.W. Washington, D.C. 20036 * INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen, LLP 1601 Market Street Philadelphia, PA 19103
DISTRIBUTOR SEI Investments Distribution Co. PROSPECTUS CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND INVESTMENT ADVISOR TRUSCO CAPITAL MANAGEMENT, INC. OCTOBER 1, 1997 [LOGO] STI CLASSIC FUNDS INVESTMENT ADVISORS: STI CAPITAL MANAGEMENT, N.A. TRUSCO CAPITAL MANAGEMENT, INC. SUNTRUST BANK, ATLANTA This Statement of Additional Information is not a prospectus. It is intended to provide additional information regarding the activities and operations of the STI Classic Funds (the "Trust") and should be read in conjunction with the Trust's prospectuses dated October 1, 1998. Prospectuses may be obtained through the Distributor, SEI Investments Distribution Co., One Freedom Valley Road, Oaks, Pennsylvania 19456. TABLE OF CONTENTS PAGE THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-2 DESCRIPTION OF PERMITTED INVESTMENTS . . . . . . . . . . . . . . . . . . . .B-3 INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . B-19 INVESTMENT ADVISORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-21 THE ADMINISTRATOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-24 THE DISTRIBUTOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-25 THE TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-31 THE CUSTODIAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-31 INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . B-31 LEGAL COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-31 TRUSTEES AND OFFICERS OF THE TRUST . . . . . . . . . . . . . . . . . . . . B-31 PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . B-35 COMPUTATION OF YIELD . . . . . . . . . . . . . . . . . . . . . . . . . . . B-35 CALCULATION OF TOTAL RETURN. . . . . . . . . . . . . . . . . . . . . . . . B-39 PURCHASING SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-43 REDEEMING SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-44 DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . B-44 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-45 FUND TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-48 TRADING PRACTICES AND BROKERAGE. . . . . . . . . . . . . . . . . . . . . . B-48 DESCRIPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . B-53 SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . B-53 LIMITATION OF TRUSTEES' LIABILITY. . . . . . . . . . . . . . . . . . . . . B-54 YEAR 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-54 5% AND 25% SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . B-55 EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-64 October 1, 1998 THE TRUST STI Classic Funds (the "Trust") is a diversified, open-end management investment company established under Massachusetts law as a Massachusetts business trust under a Declaration of Trust dated January 15, 1992. The Declaration of Trust permits the Trust to offer separate series ("Funds") of units of beneficial interest ("shares") and different classes of shares of each Fund. Shareholders at present may purchase shares of the Trust's money market funds through two separate classes (Trust Shares and Investor Shares) and shares of the Trust's other funds through three separate classes (Trust Shares, Investor Shares and Flex Shares), which provide for variations in sales charges, distribution costs, transfer agent fees, voting rights and dividends. Except for these differences, each Trust Share, Investor Share and Flex Share, if any, of each Fund represents an equal proportionate interest in that portfolio. See "Description of Shares." This Statement of Additional Information relates to the:
TRUST SHARES INVESTOR SHARES FLEX SHARES MONEY MARKET FUNDS Prime Quality Money Market Fund X X U.S. Government Securities Money Market Fund X X Tax-Exempt Money Market Fund X X BOND FUNDS Investment Grade Tax-Exempt Bond Fund X X X Short-Term U.S. Treasury Securities Fund X X X Short-Term Bond Fund X X X U.S. Government Securities Fund X X X Limited-Term Federal Mortgage Securities Fund X X X TAX-EXEMPT BOND FUNDS Investment Grade Tax-Exempt Bond Fund X X X Florida Tax-Exempt Bond Fund X X X Georgia Tax-Exempt Bond Fund X X X EQUITY FUNDS Capital Growth Fund X X X Value Income Stock Fund X X X Mid-Cap Equity Fund X X X Sunbelt Equity Fund X X X International Equity Index Fund X X X International Equity Fund X X X Small Cap Equity Fund X X Emerging Markets Equity Fund X Small Cap Growth Stock Fund X X Tax Sensitive Growth Stock Fund X X BALANCED FUND
B-2
TRUST SHARES INVESTOR SHARES FLEX SHARES Balanced Fund X X X
These various series are collectively referred to herein as the "Funds." The Trust pays its expenses, including fees of its service providers, audit and legal expenses, expenses of preparing prospectuses, proxy solicitation material and reports to shareholders, costs of custodial services, and registering the shares under federal and state securities laws, pricing, insurance expenses, litigation, and other extraordinary expenses, brokerage costs, interest charges, taxes, and organization expenses. DESCRIPTION OF PERMITTED INVESTMENTS AMERICAN DEPOSITARY RECEIPTS (ADRS), EUROPEAN DEPOSITARY RECEIPTS (EDRS) AND GLOBAL DEPOSITORY RECEIPTS (GDRS) ADRs, EDRs, and GDRs are securities, typically issued by a U.S. financial institution or a non-U.S. financial institution in the case of an EDR or GDR (a "depositary"). The institution has ownership interests in a security, or a pool of securities, issued by a foreign issuer and deposited with the depositary. ADRs, EDRs and GDRs may be available through "sponsored" or "unsponsored" facilities. A sponsored facility is established jointly by the issuer of the security underlying the receipt and a depositary. An unsponsored facility may be established by a depositary without participation by the issuer of the underlying security. Holders of unsponsored depositary receipts generally bear all the costs of the unsponsored facility. The depositary of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the issuer of the deposited security or to pass through, to the holders of the receipts, voting rights with respect to the deposited securities. ASSET-BACKED SECURITIES Asset-backed securities are securities backed by non-mortgage assets such as company receivables, truck and auto loans, leases and credit card receivables. Other asset-backed securities may be created in the future. These securities may be traded over-the-counter and typically have a short-intermediate maturity structure depending on the paydown characteristics of the underlying financial assets which are passed through to the security holder. These securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in the underlying pool of assets. Asset-backed securities may also be debt obligations, which are known as collateralized obligations and are generally issued as the debt of a special purpose entity, such as a trust, organized solely for the purpose of owning these assets and issuing debt obligations. Asset-backed securities are not issued or guaranteed by the U.S. Government, its agencies or instrumentalities; however, the payment of principal and interest on such obligations may be guaranteed up to certain amounts and, for a certain period, by a letter of credit issued by a financial institution (such as a bank or insurance company) unaffiliated with the issuers of such securities. The purchase of asset-backed securities raises risk considerations peculiar to the financing of the instruments underlying such securities. For example, there is a risk that another party could acquire an interest in the obligations superior to that of the holders of the asset-backed securities. There also is the possibility that recoveries on repossessed collateral may not, in some cases, be available to support payments on those securities. Asset-backed securities entail prepayment risk, which may vary depending on the type of asset, but is generally less than the prepayment risk associated with mortgage-backed securities. In addition, credit card receivables are unsecured obligations of the card holder. B-3 The market for asset-backed securities is at a relatively early stage of development. Accordingly, there may be a limited secondary market for such securities. BANK OBLIGATIONS Bank obligations are short-term obligations issued by U.S. and foreign banks, including bankers' acceptances, certificates of deposit, custodial receipts, and time deposits. Eurodollar and Yankee Bank Obligations are U.S. dollar-denominated certificates of deposit or time deposits issued outside the U.S. by foreign branches of U.S. banks or by foreign banks. COMMON AND PREFERRED STOCKS Common and preferred stocks represent units of ownership in a corporation. Owners of common stock typically are entitled to vote on important matters. Owners of preferred stock ordinarily do not have voting rights, but are entitled to dividends at a specified rate. Preferred stock has a prior claim to common stockholders with respect to dividends. CONVERTIBLE SECURITIES Convertible securities are securities issued by corporations that are exchangeable for a set number of another security at a prestated price. The market value of a convertible security tends to move with the market value of the underlying stock. The value of a convertible security is also affected by prevailing interest rates, the credit quality of the issuer, and any call option provisions. CUSTODIAL RECEIPTS The custodian arranges for the issuance of the certificates or receipts evidencing ownership and maintains the register. Receipts include "Treasury Receipts" ("TRs"), "Treasury Investment Growth Receipts" ("TIGRs"), and "Certificates of Accrual on Treasury Securities" ("CATS"). TRs, TIGRs and CATS are sold as zero coupon securities. DEBT SECURITIES Debt securities represent money borrowed that obligates the issuer (E.G., a corporation, municipality, government, government agency) to repay the borrowed amount at maturity (when the obligation is due and payable) and usually to pay the holder interest at specific times (E.G., bonds, notes, debentures). DOLLAR ROLLS Dollar rolls are transactions in which securities are sold for delivery in the current month and the seller contracts to repurchase substantially similar securities on a specified future date. Any difference between the sale price and the purchase price (plus interest earned on the cash proceeds of the sale) is applied against the past interest income on the securities sold to arrive at an implied borrowing rate. Dollar rolls may be renewed prior to cash settlement and initially may involve only a firm commitment agreement by the Fund to buy a security. B-4 If the broker-dealer to whom the Fund sells the security becomes insolvent, the Fund's right to repurchase the security may be restricted. Other risks involved in entering into dollar rolls include the risk that the value of the security may change adversely over the term of the dollar roll and that the security the Fund is required to repurchase may be worth less than the security that the Fund originally held. To avoid any leveraging concerns, the Fund will place U.S. Government or other liquid, high grade assets in a segregated account in an amount sufficient to cover its repurchase obligation. THE EURO On January 1, 1999, the European Monetary Union (EMU) plans to implement a new currency unit, the Euro, which is expected to reshape financial markets, banking systems and monetary policies in Europe and other parts of the world. The countries initially expected to convert or tie their currencies to the Euro include Austria, Belgium, France, Germany, Luxembourg, the Netherlands, Ireland, Finland, Italy, Portugal, and Spain. Implementation of this plan will mean that financial transactions and market information, including share quotations and company accounts, in participating countries will be denominated in Euros. Approximately 46% of the stock exchange capitalization of the total European market may be reflected in Euros, and participating governments will issue their bonds in Euros. Monetary policy for participating countries will be uniformly managed by a new central bank, the European Central Bank (ECB). Although it is not possible to predict the impact of the Euro implementation plan on the Funds, the transition to the Euro may change the economic environment and behavior of investors, particularly in European markets. For example, investors may begin to view those countries participating in the EMU as a single entity, and the Advisors may need to adapt investment strategies accordingly. The process of implementing the Euro also may adversely affect financial markets worldwide and may result in changes in the relative strength and value of the U.S. dollar or other major currencies, as well as possible adverse tax consequences. The transition to the Euro is likely to have a significant impact on fiscal and monetary policy in the participating countries and may produce unpredictable effects on trade and commerce generally. These resulting uncertainties could create increased volatility in financial markets world-wide. FOREIGN SECURITIES Foreign securities include equity securities of foreign entities, obligations of foreign branches of U.S. banks and of foreign banks, including, without limitation, European Certificates of Deposit, European Time Deposits, European Bankers' Acceptances, Canadian Time Deposits, Europaper and Yankee Certificates of Deposit, and investments in Canadian Commercial Paper and foreign securities. These instruments have investment risks that differ in some respects from those related to investments in obligations of U.S. domestic issuers. Such risks include future adverse political and economic developments, the possible imposition of withholding taxes on interest or other income, possible seizure, nationalization, or expropriation of foreign deposits, the possible establishment of exchange controls or taxation at the source, greater fluctuations in value due to changes in exchange rates, or the adoption of other foreign governmental restrictions which might adversely affect the payment of principal and interest on such obligations. Such investments may also entail higher custodial fees and sales commissions than domestic investments. Foreign issuers of securities or obligations are often subject to accounting treatment and engage in business practices different from those respecting domestic issuers of similar securities or obligations. Foreign branches of U.S. banks and foreign banks may be subject to less stringent reserve requirements than those applicable to domestic branches of U.S. banks. In making investment decisions for the Fund, the Advisor evaluates the risks associated with investing Fund assets in a particular country, including risks stemming from a country's financial infrastructure and settlement practices; B-5 the likelihood of expropriation, nationalization or confiscation of invested assets; prevailing or developing custodial practices in the country; the country's laws and regulations regarding the safekeeping, maintenance and recovery of invested assets, the likelihood of government-imposed exchange control restrictions which could impair the liquidity of Fund assets maintained with custodians in that country, as well as risks from political acts of foreign governments ("country risks"). Of course, the Advisor cannot assure that the Fund will not suffer losses resulting from investing in foreign countries. Holding Fund assets in foreign countries through specific foreign custodians presents additional risks, including but not limited to the risks that a particular foreign custodian or depository will not exercise proper care with respect to Fund assets or will not have the financial strength or adequate practices and procedures to properly safeguard Fund assets. By investing in foreign securities, the Funds attempt to take advantage of differences between both economic trends and the performance of securities markets in the various countries, regions and geographic areas as prescribed by each Fund's investment objective and policies. During certain periods the investment return on securities in some or all countries may exceed the return on similar investments in the United States, while at other times the investment return may be less than that on similar U.S. securities. Shares of the International Equity Index, International Equity, and Emerging Markets Equity Funds, when included in appropriate amounts in a portfolio otherwise consisting of domestic securities, may provide a source of increased diversification. The International Equity Index, International Equity, and Emerging Markets Equity Funds seek increased diversification by combining securities from various countries and geographic areas that offer different investment opportunities and are affected by different economic trends. The international investments of the International Equity Index, International Equity, and Emerging Markets Equity Funds may reduce the effect that events in any one country or geographic area will have on its investment holdings. Of course, negative movement by a Fund's investments in one foreign market represented in its portfolio may offset potential gains from the Fund's investments in another country's markets. Emerging countries are all countries that are considered to be developing or emerging countries by the World Bank or the International Finance Corporation, as well as countries classified by the United Nations or otherwise regarded by the international financial community as developing. Currently, the countries excluded from this category are Ireland, Spain, New Zealand, Australia, the United Kingdom, Italy, the Netherlands, Belgium, Austria, France, Canada, Germany, Denmark, the United States, Sweden, Finland, Norway, Japan, and Switzerland. FORWARD FOREIGN CURRENCY CONTRACTS Forward foreign currency contracts involve obligations to purchase or sell a specific currency amount at a future date, agreed upon by the parties, at a price set at the time of the contract. A Fund may also enter into a contract to sell, for a fixed amount of U.S. dollars or other appropriate currency, the amount of foreign currency approximating the value of some or all of the Fund's securities denominated in the foreign currency. A Fund may realize a gain or loss from currency transactions. FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS Futures contracts provide for the future sale by one party and purchase by another party of a specified amount of a specific security at a specified future time and at a specified price. An option on a futures contract gives the purchase the right, in exchange for a premium, to assume a position in a futures contract at a specified exercise price during the term of the option. B-6 A Fund may use futures contracts, and related options for bona fide hedging purposes, to offset changes in the value of securities held or expected to be acquired. They may also be used to minimize fluctuations in foreign currencies or to gain exposure to a particular market or instrument. A Fund will minimize the risk that it will be unable to close out a futures contract by only entering into futures contracts which are traded on national futures exchanges and for which there appears to be a liquid secondary market. Index futures are futures contracts for various indices that are traded on registered securities exchanges. An index futures contract obligates the seller to deliver (and the purchaser to take) an amount of cash equal to a specific dollar amount times the difference between the value of a specific index at the close of the last trading day of the contract and the price at which the agreement is made. Although futures contracts by their terms call for actual delivery or acceptance of the underlying securities, in most cases the contracts are closed out before the settlement date without the making or taking of delivery. Closing out an open futures position is done by taking an opposite position ("buying" a contract which has previously been "sold" or "selling" a contract which has previously been "purchased") in an identical contract to terminate the position. Brokerage commissions are incurred when a futures contract is bought or sold. Futures traders are required to make a good faith margin deposit in cash or government securities with or for the account of a broker or custodian to initiate and maintain open secondary market will exist for any particular futures contract at any specific time. Thus, it may not be possible to close a futures position. In the event of adverse price movements, a Fund would continue to be required to make daily cash payments to maintain its required margin. In such situations, if a Fund has insufficient cash, it may have to sell portfolio securities to meet daily margin requirements at a time when it may be disadvantageous to do so. In addition, the Funds may be required to make delivery of the instruments underlying the futures contracts they hold. The inability to close options and futures positions also could have an adverse impact on the ability to effectively hedge the underlying securities. The risk of loss in trading futures contracts can be substantial, due both to the low margin deposits required and the extremely high degree of leverage involved in futures pricing. As a result, a relatively small price movement in a futures contract may result in immediate and substantial loss (or gain) to a Fund. For example, if at the time of purchase, 10% of the value of the futures contract is deposited as margin, a subsequent 10% decrease in the value of the futures contract would result in a total loss of the margin deposit, before any deduction for the transaction costs, if the account were then closed out. A 15% decrease would result in a loss equal to 150% of the original margin deposit if the contract were closed out. Thus, a purchase or sale of a futures contract may result in losses in excess of the amount invested in the contract. However, because the Funds will be engaged in futures transactions only for hedging purposes, the Advisors do not believe that the Funds will generally be subject to the risks of loss frequently associated with futures transactions. The Funds presumably would have sustained comparable losses if, instead of the futures contract, they had invested in the underlying financial instrument and sold it after the decline. The risk of loss from the purchase of options is less as compared with the purchase or sale of futures contracts because the maximum amount at risk is the premium paid for the option. Utilization of futures transactions by the Funds does involve the risk of imperfect or no correlation where the securities underlying futures contracts have different maturities than the fund securities being hedged. It is also possible that the Funds could both lose money on futures contracts and experience a decline in value of its fund securities. There is also the risk of loss by the Funds of margin deposits in the event of the bankruptcy of a broker with whom the Funds have an open position in a futures contract or related option. Most futures exchanges limit the amount of fluctuation permitted in futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or B-7 down from the previous day's settlement price at the end of a trading session. Once the daily limit has been reached in a particular type of contract, no trades may be made on that day at a price beyond that limit. The daily limit governs only price movement during a particular trading day and therefore does not limit potential losses because the limit may prevent the liquidation of unfavorable positions. Futures contract prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of future positions and subjecting some futures traders to substantial losses. GICs A GIC is a general obligation of the issuing insurance company and not a separate account. The purchase price paid for a GIC becomes part of the general assets of the issuer, and the contract is paid at maturity from the general assets of the issuer. Generally, GICs are not assignable or transferable without the permission of the issuing insurance company. For this reason, an active secondary market in GICs does not currently exist and GICs are considered to be illiquid investments. HIGH YIELD SECURITIES High yield securities, commonly referred to as junk bonds, are debt obligations rated below investment grade, I.E., below BBB by Standard & Poor's Corporation ("S&P") or Baa by Moody's Investors Service, Inc. ("Moody's"), or their unrated equivalents. The risks associated with investing in high yield securities include: (1) High yield, lower rated bonds involve greater risk of default or price declines than investments in investment grade securities (E.G., securities rated BBB or higher by S&P or Baa or higher by Moody's) due to changes in the issuer's creditworthiness. (2) The market for high risk, high yield securities may be thinner and less active, causing market price volatility and limited liquidity in the secondary market. This may limit the ability of a Fund to sell these securities at their fair market values either to meet redemption requests, or in response to changes in the economy or the financial markets. (3) Market prices for high risk, high yield securities may also be affected by investors' perception of the issuer's credit quality and the outlook for economic growth. Thus, prices for high risk, high yield securities may move independently of interest rates and the overall bond market. (4) The market for high risk, high yield securities may be adversely affected by legislative and regulatory developments. HEDGING TECHNIQUES Hedging in an investment strategy designed to offset investment risks. Hedging activities include, among other things, the use of options and futures. There are risks associated with hedging activities, including: (1) the success of a hedging strategy may depend on an ability to predict movements in the prices of individual securities, fluctuations in markets, and movements in interest rates; (2) there may be an imperfect or no correlation between the changes in market value of the securities held by a Fund and the prices of futures and option on futures; (3) there may not be a liquid secondary market for a futures contract or option; and (4) trading restrictions or limitations may be imposed by an exchange, and government regulations may restrict trading in futures contracts and options. ILLIQUID SECURITIES Illiquid securities are securities that cannot be disposed of within seven days at approximately the price at which they are being carried on a Fund's books. B-8 INVESTMENT COMPANY SHARES The Funds may purchase shares of other mutual funds to the extent consistent with applicable law. Investment companies typically incur fees that are separate from those fees incurred directly by the Funds. A Fund's purchase of such investment company securities results in the layering of expenses, such that you would indirectly bear a proportionate share of investment company operating expenses, such as advisory fees. INVESTMENT GRADE OBLIGATIONS Investment grade obligations are debt obligations rated BBB by S&P or Baa by Moody's, or their unrated equivalents. These securities are deemed to have speculative characteristics. LOAN PARTICIPATIONS Loan participations are interest in loans to U.S. corporations which are administered by the lending bank or agent for a syndicate of lending banks. In a loan participation, the borrower corporation is the issuer of the participation interest except to the extent the Fund derives its rights from the intermediary bank. Because the intermediary bank does not guarantee a loan participation, a loan participation is subject to the credit risks associated with the underlying corporate borrower. In the event of bankruptcy or insolvency of the corporate borrower, a loan participation may be subject to certain defenses that can be asserted by the borrower as a result of improper conduct by the intermediary bank. In addition, in the event the underlying corporate borrower fails to pay principal and interest when due, the Fund may be subject to delays, expenses, and risks that are greater than those that would have been involved if the Fund had purchased a direct obligation of the borrower. Under the terms of a Loan Participation, the Fund may be regarded as a creditor of the intermediary bank (rather than of the underlying corporate borrower), so that the Fund may also be subject to the risk that the intermediary bank may become insolvent. The secondary market for loan participations is limited and any such participation purchased by the Fund may be regarded as illiquid. MORTGAGE-BACKED SECURITIES Mortgage-backed securities are instruments that entitle the holder to a share of all interest and principal payments from mortgages underlying the security. The mortgages backing these securities include conventional thirty-year fixed rate mortgages, graduated payment mortgages, adjustable rate mortgages, and floating mortgages. GOVERNMENT PASS-THROUGH SECURITIES These are securities that are issued or guaranteed by a U.S. Government agency representing an interest in a pool of mortgage loans. The primary issuers or guarantors of these mortgage-backed securities are the Government National Mortgage Association ("GNMA"), Fannie Mae, and the Federal Home Loan Mortgage Corporation ("FHLMC"). Fannie Mae and FHLMC obligations are not backed by the full faith and credit of the U.S. Government as GNMA certificates are, but Fannie Mae and FHLMC securities are supported by the instrumentalities' right to borrow from the U.S. Treasury. GNMA, Fannie Mae, and FHLMC each guarantees timely distributions of interest to certificate holders. GNMA and Fannie Mae also guarantee timely distributions of scheduled principal. In the past, FHLMC has only guaranteed the ultimate collection of principal of the underlying mortgage loan; however, FHLMC now issues mortgage- B-9 backed securities (FHLMC Gold PCS) which also guarantee timely payment of monthly principal reductions. Government and private guarantees do not extend to the securities' value, which is likely to vary inversely with fluctuations in interest rates. Obligations of GNMA are backed by the full faith and credit of the United States Government. Obligations of Fannie Mae and FHLMC are not backed by the full faith and credit of the United States Government but are considered to be of high quality since they are considered to be instrumentalities of the United States. The market value and interest yield of these mortgage-backed securities can vary due to market interest rate fluctuations and early prepayments of underlying mortgages. These securities represent ownership in a pool of federally insured mortgage loans with a maximum maturity of 30 years. However, due to scheduled and unscheduled principal payments on the underlying loans, these securities have a shorter average maturity and, therefore, less principal volatility than a comparable 30-year bond. Since prepayment rates vary widely, it is not possible to accurately predict the average maturity of a particular mortgage-backed security. The scheduled monthly interest and principal payments relating to mortgages in the pool will be "passed through" to investors. Government mortgage-backed securities differ from conventional bonds in that principal is paid back to the certificate holders over the life of the loan rather than at maturity. As a result, there will be monthly scheduled payments of principal and interest. In addition, there may be unscheduled principal payments representing prepayments on the underlying mortgages. Although these securities may offer yields higher than those available from other types of U.S. Government securities, mortgage-backed securities may be less effective than other types of securities as a means of "locking in" attractive long-term rates because of the prepayment feature. For instance, when interest rates decline, the value of these securities likely will not rise as much as comparable debt securities due to the prepayment feature. In addition, these prepayments can cause the price of a mortgage-backed security originally purchased at a premium to decline in price to its par value, which may result in a loss. PRIVATE PASS-THROUGH SECURITIES Private pass-through securities are mortgage-backed securities issued by a non-governmental agency, such as a trust. While they are generally structured with one or more types of credit enhancement, private pass-through securities generally lack a guarantee by an entity having the credit status of a governmental agency or instrumentality. The two principal types of private mortgage-backed securities are collateralized mortgage obligations ("CMOs") and real estate mortgage investment conduits ("REMICs"). CMOs CMOs are securities collateralized by mortgages, mortgage pass-throughs, mortgage pay-through bonds (bonds representing an interest in a pool of mortgages where the cash flow generated from the mortgage collateral pool is dedicated to bond repayment), and mortgage-backed bonds (general obligations of the issuers payable out of the issuers' general funds and additionally secured by a first lien on a pool of single family detached properties). CMOs are rated in one of the two highest categories by S&P or Moody's. Many CMOs are issued with a number of classes or series which have different expected maturities. Investors purchasing such CMOs are credited with their portion of the scheduled payments of interest and principal on the underlying mortgages plus all unscheduled prepayments of principal based on a predetermined priority schedule. Accordingly, the CMOs in the longer maturity series are less likely than other mortgage pass-throughs to be prepaid prior to their stated maturity. Although some of the mortgages underlying CMOs may be supported by various types of insurance, and some CMOs may be backed by B-10 GNMA certificates or other mortgage pass-throughs issued or guaranteed by U.S. Government agencies or instrumentalities, the CMOs themselves are not generally guaranteed. REMICs REMICs are private entities formed for the purpose of holding a fixed pool of mortgages secured by an interest in real property. REMICs are similar to CMOs in that they issue multiple classes of securities and are rated in one of the two highest categories by S&P or Moody's. Investors may purchase beneficial interests in REMICs, which are known as "regular" interests, or "residual" interests. Guaranteed REMIC pass-through certificates ("REMIC Certificates") issued by Fannie Mae or FHLMC represent beneficial ownership interests in a REMIC trust consisting principally of mortgage loans or Fannie Mae, FHLMC or GNMA-guaranteed mortgage pass-through certificates. For FHLMC REMIC Certificates, FHLMC guarantees the timely payment of interest. GNMA REMIC Certificates are backed by the full faith and credit of the U.S. Government. STRIPPED MORTGAGE-BACKED SECURITIES Stripped mortgage-backed securities are securities that are created when a U.S. Government agency or a financial institution separates the interest and principal components of a mortgage-backed security and sells them as individual securities. The holder of the "principal-only" security (PO) receives the principal payments made by the underlying mortgage-backed security, while the holder of the "interest-only" security (IO) receives interest payments from the same underlying security. The prices of stripped mortgage-backed securities may be particularly affected by changes in interest rates. As interest rates fall, prepayment rates tend to increase, which tends to reduce prices of IOs and increase prices of POs. Rising interest rates can have the opposite effect. DETERMINING MATURITIES OF MORTGAGE-BACKED SECURITIES Due to prepayments of the underlying mortgage instruments, mortgage-backed securities do not have a known actual maturity. In the absence of a known maturity, market participants generally refer to an estimated average life. The Advisors believe that the estimated average life is the most appropriate measure of the maturity of a mortgage-backed security. Accordingly, in order to determine whether such security is a permissible investment for a Fund, it will be deemed to have a remaining maturity equal to its average life as estimated by that Fund's Advisor. An average life estimate is a function of an assumption regarding anticipated prepayment patterns. The assumption is based upon current interest rates, current conditions in the relevant housing markets and other factors. The assumption is necessarily subjective, and thus different market participants could produce somewhat different average life estimates with regard to the same security. There can be no assurance that the average life as estimated by an Advisor will be the actual average life. MUNICIPAL FORWARDS B-11 Municipal forwards are forward commitments for the purchase of tax-exempt bonds with a specified coupon to be delivered by an issuer at a future date, typically exceeding 45 days but normally less than one year after the commitment date. Municipal forwards are normally used as a refunding mechanism for bonds that may only be redeemed on a designated future date (see "When-Issued Securities and Municipal Forwards" for more information). MUNICIPAL LEASE OBLIGATIONS Municipal lease obligations are securities issued by state and local governments and authorities to finance the acquisition of equipment and facilities. They make take the form of a lease, an installment purchase contract, an conditional sales contract, or a participation interest in any of the above. MUNICIPAL SECURITIES MUNICIPAL BONDS include general obligation bonds, revenue or special obligation bonds, private activity and industrial development bonds and participation interests in municipal bonds. General obligation bonds are backed by the taxing power of the issuing municipality. Revenue bonds are backed by the revenues of a project or facility (for example, tolls from a bridge). Certificates of participation represent an interest in an underlying obligation or commitment, such as an obligation issued in connection with a leasing arrangement. The payment of principal and interest on private activity and industrial development bonds generally is totally dependent on the ability of a facility's user to meet its financial obligations and the pledge, if any, of real and personal property as security for the payment. MUNICIPAL NOTES consist of general obligation notes, tax anticipation notes (notes sold to finance working capital needs of the issuer in anticipation of receiving taxes on a future date), revenue anticipation notes (notes sold to provide needed cash prior to receipt of expected non-tax revenues from a specific source), bond anticipation notes, certificates of indebtedness, demand notes and construction loan notes. A Fund's investments in any of the notes described above will be limited to those obligations (i) where both principal and interest are backed by the full faith and credit of the United States, (ii) which are rated MIG-2 or V-MIG-2 at the time of investment by Moody's, (iii) which are rated SP-2 at the time of investment by S&P, or (iv) which, if not rated by S&P or Moody's, are in the Advisor's judgement, of at least comparable quality to MIG-2, VMIG-2 or SP-2. Municipal bonds must be rated at least BBB or better by S&P or at least Baa or better by Moody's at the time of purchase for the Tax-Exempt Bond Funds or in one of the two highest short-term rating categories by S&P or Moody's for the Tax-Exempt Money Market Fund or, if not rated by S&P or Moody's, must be deemed by the Advisor to have essentially the same characteristics and quality as bonds having the above ratings. A Fund may purchase industrial development and pollution control bonds if the interest paid is exempt from Federal income tax. These bonds are issued by or on behalf of public authorities to raise money to finance various privately-operated facilities for business and manufacturing, housing, sports and pollution control. These bonds are also used to finance public facilities such as airports, mass transit systems, ports and parking. The payment of the principal and interest on such bonds is dependent solely on the ability of the facility's user to meet its financial obligations and the pledge, if any, of real and personal property so financed as security for such payment. OTHER TYPES OF TAX-EXEMPT INSTRUMENTS which are permissible investments include floating rate notes. Investments in such floating rate instruments will normally involve industrial development or revenue bonds which provide that the rate of interest is set as a specific percentage of a designated base rate (such B-12 as the prime rate) at a major commercial bank, and that the Fund can demand payment of the obligation at all times or at stipulated dates on short notice (not to exceed 30 days) at par plus accrued interest. Such obligations are frequently secured by letters of credit or other credit support arrangements provided by banks. The quality of the underlying credit or of the bank, as the case may be, must, in the Advisor's opinion be equivalent to the long-term bond or commercial paper ratings stated above. The Advisor will monitor the earning power, cash flow and liquidity ratios of the issuers of such instruments and the ability of an issuer of a demand instrument to pay principal and interest on demand. The Funds may also purchase participation interests in municipal securities (such as industrial development bonds and municipal lease/purchase agreements). A participation interest gives a Fund an undivided interest in the underlying municipal security. If it is unrated, the participation interest will be backed by an irrevocable letter of credit or guarantee of a credit-worthy financial institution or the payment obligations otherwise will be collateralized by U.S. Government securities. Participation interests may have fixed, variable or floating rates of interest and may include a demand feature. A participation interest without a demand feature or with a demand feature exceeding seven days may be deemed to be an illiquid security subject to the Funds' investment limitations restricting their purchases of illiquid securities. A Fund may purchase other types of tax-exempt instruments as long as they are of a quality equivalent to the bond or commercial paper ratings stated above. Opinions relating to the validity of municipal securities and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance. Neither the Funds nor an Advisor will review the proceedings relating to the issuance of municipal securities or the basis for such opinions. OPTIONS A Fund may write call options on a covered basis only, and will not engage in option writing strategies for speculative purposes. A call option gives the purchaser of such option the right to buy, and the writer, in this case the Fund, the obligation to sell the underlying security at the exercise price during the option period. The advantage to the Funds of writing covered calls is that the Funds receive a premium which is additional income. However, if the security rises in value, the Funds may not fully participate in the market appreciation. During the option period, a covered call option writer may be assigned an exercise notice by the broker-dealer through whom such call option was sold requiring the writer to deliver the underlying security against payment of the exercise price. This obligation is terminated upon the expiration of the option period or at such earlier time in which the writer effects a closing purchase transaction. A closing purchase transaction is one in which the Fund, when obligated as a writer of an option, terminates its obligation by purchasing an option of the same series as the option previously written. A closing purchase transaction cannot be effected with respect to an option once the option writer has received an exercise notice for such option. Closing purchase transactions will ordinarily be effected to realize a profit on an outstanding call option, to prevent an underlying security from being called, to permit the sale of the underlying security or to enable a Fund to write another call option on the underlying security with either a different exercise price or expiration date or both. A Fund may realize a net gain or loss from a closing purchase transaction depending upon whether the net amount of the original premium received on the call option is more or less than the cost of effecting the closing purchase transaction. Any loss incurred in a closing purchase transaction may be partially or entirely offset by the premium B-13 received from a sale of a different call option on the same underlying security. Such a loss may also be wholly or partially offset by unrealized appreciation in the market value of the underlying security. If a call option expires unexercised, a Fund will realize a short-term capital gain in the amount of the premium on the option, less the commission paid. Such a gain, however, may be offset by depreciation in the market value of the underlying security during the option period. If a call option is exercised, a Fund will realize a gain or loss from the sale of the underlying security equal to the difference between the cost of the underlying security, and the proceeds of the sale of the security plus the amount of the premium on the option, less the commission paid. The market value of a call option generally reflects the market price of an underlying security. Other principal factors affecting market value include supply and demand, interest rates, the price volatility of the underlying security, and the time remaining until the expiration date. The Funds will write call options only on a covered basis, which means that a Fund will own the underlying security subject to a call option at all times during the option period. Unless a closing purchase transaction is effected, a Fund would be required to continue to hold a security which it might otherwise wish to sell, or deliver a security it would want to hold. Options written by the Funds will normally have expiration dates between one and nine months from the date written. The exercise price of a call option may be below, equal to, or above the current market value of the underlying security at the time the option is written. OTHER INVESTMENTS The Funds are not prohibited from investing in bank obligations issued by clients of SEI Investments Company ("SEI Investments"), the parent company of the Administrator and the Distributor. The purchase of Fund shares by these banks or their customers will not be a consideration in deciding which bank obligations the Funds will purchase. The Funds will not purchase obligations issued by the Advisors. PAY-IN-KIND SECURITIES Pay-In-Kind securities are debt obligations or preferred stock, that pay interest or dividends in the form of additional debt obligations or preferred stock. REPURCHASE AGREEMENTS Repurchase agreements are agreements by which a person (E.G., a Fund) obtains a security and simultaneously commits to return the security to the seller (a primary securities dealer as recognized by the Federal Reserve Bank of New York or a national member bank as defined in Section 3(d)(1) of the Federal Deposit Insurance Act, as amended) at an agreed upon price (including principal and interest) on an agreed upon date within a number of days (usually not more than seven) from the date of purchase. The resale price reflects the purchase price plus an agreed upon market rate of interest which is unrelated to the coupon rate or maturity of the underlying security. A repurchase agreement involves the obligation of the seller to pay the agreed upon price, which obligation is, in effect, secured by the value of the underlying security. Repurchase agreements are considered to be loans by a Fund for purposes of its investment limitations. The repurchase agreements entered into by a Fund will provide that the underlying security at all times shall have a value at least equal to 102% of the resale price stated in the agreement (the Advisors monitor compliance with this requirement). Under all repurchase agreements entered into by a Fund, the appropriate Custodian or its agent must B-14 take possession of the underlying collateral. However, if the seller defaults, a Fund could realize a loss on the sale of the underlying security to the extent that the proceeds of the sale including accrued interest are less than the resale price provided in the agreement including interest. In addition, even though the Bankruptcy Code provides protection for most repurchase agreements, if the seller should be involved in bankruptcy or insolvency proceedings, a Fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if the Fund is treated as an unsecured creditor and required to return the underlying security to the seller's estate. RESTRICTED SECURITIES Restricted securities are securities that may not be sold to the public without registration under the Securities Act of 1933 (the "1933 Act") or an exemption from registration. Permitted investments for the Funds include restricted securities, and each such Fund may invest up to 15% of its net assets (10% for the Money Market Funds) in illiquid securities, subject to each Fund's investment limitations on the purchase of illiquid securities. Restricted securities, including securities eligible for re-sale under 1933 Act Rule 144A, that are determined to be liquid are not subject to this limitation. This determination is to be made by a Fund's Advisor pursuant to guidelines adopted by the Board of Trustees. Under these guidelines, the particular Advisor will consider the frequency of trades and quotes for the security, the number of dealers in, and potential purchasers for, the securities, dealer undertakings to make a market in the security, and the nature of the security and of the marketplace trades. In purchasing such Restricted Securities, each Advisor intends to purchase securities that are exempt from registration under Rule 144A under the 1933 Act. SECURITIES LENDING Each Fund may lend securities pursuant to agreements which require that the loans be continuously secured by collateral at all times equal to 100% of the market value of the loaned securities which consists of: cash, securities of the U.S. Government or its agencies, or any combination of cash and such securities. Such loans will not be made if, as a result, the aggregate amount of all outstanding securities loans for a Fund exceed one-third of the value of the Fund's total assets taken at fair market value. A Fund will continue to receive interest on the securities lent while simultaneously earning interest on the investment of the cash collateral in U.S. Government securities. However, a Fund will normally pay lending fees to such broker-dealers and related expenses from the interest earned on invested collateral. There may be risks of delay in receiving additional collateral or risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the securities fail financially. However, loans are made only to borrowers deemed by the appropriate Advisor to be of good standing and when, in the judgment of that Advisor, the consideration which can be earned currently from such securities loans justifies the attendant risk. Any loan may be terminated by either party upon reasonable notice to the other party. The Funds may use the Distributor or a broker-dealer affiliate of an Advisor as a broker in these transactions. SHORT-TERM OBLIGATIONS Short-term obligations are debt obligations maturing (becoming payable) in 397 days or less, including commercial paper and short-term corporate obligations. Short-term corporate obligations are short-term obligations issued by corporations. B-15 STANDBY COMMITMENTS AND PUTS The Funds may purchase securities at a price which would result in a yield to maturity lower than that generally offered by the seller at the time of purchase when they can simultaneously acquire the right to sell the securities back to the seller, the issuer or a third party (the "writer") at an agreed-upon price at any time during a stated period or on a certain date. Such a right is generally denoted as a "standby commitment" or a "put." The purpose of engaging in transactions involving puts is to maintain flexibility and liquidity to permit the Funds to meet redemptions and remain as fully invested as possible in municipal securities. The Funds reserve the right to engage in put transactions. The right to put the securities depends on the writer's ability to pay for the securities at the time the put is exercised. A Fund would limit its put transactions to institutions which the Advisor believes present minimal credit risks, and the Advisor would use its best efforts to initially determine and continue to monitor the financial strength of the sellers of the options by evaluating their financial statements and such other information as is available in the marketplace. It may, however be difficult to monitor the financial strength of the writers because adequate current financial information may not be available. In the event that any writer is unable to honor a put for financial reasons, a Fund would be a general creditor (I.E., on a parity with all other unsecured creditors) of the writer. Furthermore, particular provisions of the contract between the Fund and the writer may excuse the writer from repurchasing the securities; for example, a change in the published rating of the underlying securities or any similar event that has an adverse effect on the issuer's credit or a provision in the contract that the put will not be exercised except in certain special cases, for example, to maintain portfolio liquidity. The Fund could, however, at any time sell the underlying portfolio security in the open market or wait until the portfolio security matures, at which time it should realize the full par value of the security. The securities purchased subject to a put may be sold to third persons at any time, even though the put is outstanding, but the put itself, unless it is an integral part of the security as originally issued, may not be marketable or otherwise assignable. Therefore, the put would have value only to the Fund. Sale of the securities to third parties or lapse of time with the put unexercised may terminate the right to put the securities. Prior to the expiration of any put option, the Fund could seek to negotiate terms for the extension of such an option. If such a renewal cannot be negotiated on terms satisfactory to the Fund, the Fund could, of course, sell the portfolio security. The maturity of the underlying security will generally be different from that of the put. There will be no limit to the percentage of portfolio securities that the Fund may purchase subject to a standby commitment or put, but the amount paid directly or indirectly for all standby commitments or puts which are not integral parts of the security as originally issued held in the Fund will not exceed 1/2 of 1% of the value of the total assets of such Fund calculated immediately after any such put is acquired. STRIPS Separately Traded Interest and Principal Securities ("STRIPS") are component parts of U.S. Treasury Securities traded through the Federal Book-Entry System. An Advisor will only purchase STRIPS that it determines are liquid or, if illiquid, do not violate the affected Fund's investment policy concerning investments in illiquid securities. Consistent with Rule 2a-7 under the Investment Company Act of 1940, as amended, (the "1940 Act"), the Money Market Funds' Advisor will only purchase STRIPS for Money Market Funds that have a remaining maturity of 397 days or less; therefore, the Money Market Funds currently may only purchase interest component parts of U.S. Treasury securities. While there is no limitation on the percentage of a Fund's assets that may be comprised of STRIPS, the Money Market Funds' Advisor will monitor the level of such holdings to avoid the risk of impairing shareholders' redemption rights and of deviations in the value of shares of the Money Market Funds. SUPRANATIONAL AGENCY OBLIGATIONS B-16 Supranational agency obligations are obligations of supranational entities established through the joint participation of several governments, including the Asian Development Bank, Inter-American Development Bank, International Bank for Reconstruction and Development (also known as the "World Bank"), African Development Bank, European Economic Community, European Investment Bank, and the Nordic Investment Bank. SWAPS, CAPS, FLOORS, COLLARS Swaps, caps, floors and collars are hedging tools designed to permit the purchaser to preserve a return or spread on a particular investment or portion of its portfolio. They are also used to protect against any increase in the price of securities the Fund anticipates purchasing at a later date. In a typical interest rate swap, one party agrees to make regular payments equal to a floating interest rate times a "notional principal amount." This is done in return for payments equal to a fixed rate times the same amount, for a specific period of time. If a swap agreement provides for payment in different currencies, the parties might agree to exchange the notional principal amount as well. Swaps may also depend on other prices or rates, such as the value of an index or mortgage prepayment rates. In a typical cap or floor agreement, one party agrees to make payments only under specified circumstances. This is usually in return for payment of a fee by the other party. For example, the buyer of an interest rate cap obtains the right to receive payments to the extent that a specific interest rate exceeds an agreed-upon level. Meanwhile, the seller of an interest rate floor is obligated to make payments to the extent that a specified interest rate falls below an agreed-upon level. An interest rate collar combines elements of buying a cap and selling a floor. Swap agreements are subject to risks related to the counterparty's ability to perform, and may decline in value if the counterparty's creditworthiness deteriorates. The Fund may also suffer losses if it is unable to terminate outstanding swap agreements or reduce its exposure through offsetting transactions. Any obligation the Fund may have under these types of arrangements will be covered by setting aside liquid high-grade securities in a segregated account. The Fund will enter into swaps only with counterparties believed to be creditworthy. U.S. GOVERNMENT AGENCY OBLIGATIONS U.S. Government agency obligations are obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government. Agencies of the United States Government which issue obligations consist of, among others, the Export Import Bank of the United States, Farmers Home Administration, Federal Farm Credit Bank, Federal Housing Administration, Government National Mortgage Association ("GNMA"), Maritime Administration, Small Business Administration and The Tennessee Valley Authority. Obligations of instrumentalities of the United States Government include securities issued by, among others, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Intermediate Credit Banks, Federal Land Banks, Fannie Mae and the United States Postal Service as well as government trust certificates. Some of these securities are supported by the full faith and credit of the United States Treasury, others are supported by the right of the issuer to borrow from the Treasury and still others are supported only by the credit of the instrumentality. Guarantees of principal by agencies or instrumentalities of the U.S. Government may be a guarantee of payment at the maturity of the obligation so that in the event of a default prior to maturity there might not be a market and thus no means of realizing the value of the obligation prior to maturity. U.S. TREASURY OBLIGATIONS U.S. Treasury obligations consist of bills, notes and bonds issued by the U.S. Treasury. They also consist of separately traded interest and principal component parts of these obligations that are transferable through the Federal book-entry system known as Separately Traded Registered Interest and Principal Securities (STRIPS). B-17 VARIABLE AND FLOATING RATE SECURITIES Variable and floating rate instruments involve certain obligations that may carry variable or floating rates of interest, and may involve a conditional or unconditional demand feature. Such instruments bear interest at rates which are not fixed, but which vary with changes in specified market rates or indices. The interest rates on these securities may be reset daily, weekly, quarterly, or some other reset period, and may have a set floor or ceiling on interest rate changes. There is a risk that the current interest rate on such obligations may not accurately reflect existing market interest rates. A demand instrument with a demand notice exceeding seven days may be considered illiquid if there is no secondary market for such security. VARIABLE RATE MASTER DEMAND NOTES Variable rate master demand notes permit the investment of fluctuating amounts at varying market rates of interest pursuant to direct arrangements between a Fund, as lender, and a borrower. Such notes provide that the interest rate on the amount outstanding varies on a daily, weekly or monthly basis depending upon a stated short-term interest rate index. Both the lender and the borrower have the right to reduce the amount of outstanding indebtedness at any time. There is no secondary market for the notes and it is not generally contemplated that such instruments will be traded. The quality of the note or the underlying credit must, in the opinion of the appropriate Advisor, be equivalent to the ratings applicable to permitted investments for the particular Fund. The appropriate Advisor will monitor on an ongoing basis the earning power, cash flow and liquidity ratios of the issuers of such instruments and will similarly monitor the ability of an issuer of a demand instrument to pay principal and interest on demand. Variable rate master demand notes may or may not be backed by bank letters of credit. WARRANTS Warrants give holders the right, but not the obligation, to buy shares of a company at a given price, usually higher than the market price, during a specified period. WHEN-ISSUED SECURITIES AND MUNICIPAL FORWARDS When-issued securities are securities that are delivered and paid for normally within 45 days after the date of commitment to purchase. Municipal forwards call for delivery of the underlying municipal security normally after 45 days but before one year after the commitment date. Although a Fund will only make commitments to purchase when-issued securities and municipal forwards with the intention of actually acquiring the securities, a Fund may sell them before the settlement date. When-issued securities are subject to market fluctuation, and accrue no interest to the purchaser during this pre-settlement period. The payment obligation and the interest rate that will be received on the securities are each fixed at the time the purchaser enters into the commitment. Purchasing municipal forwards and when-issued securities entails leveraging and can involve a risk that the yields available in the market when the delivery takes place may actually be higher than those obtained in the transaction itself. In that case, there could be an unrealized loss at the time of delivery. Segregated accounts will be established with the appropriate custodian, and a Fund will maintain high quality, liquid assets in an amount at least equal in value to its commitments to purchase when-issued securities and municipal forwards. If the value of these assets declines, the Fund will place additional liquid assets in the account on a daily basis so that the value of the assets in the account is equal to the amount of such commitments. B-18 ZERO COUPON OBLIGATIONS Zero coupon obligations are debt obligations that do not bear any interest, but instead are issued at a deep discount from face value or par. The value of a zero coupon obligation increases over time to reflect the interest accumulated. Such obligations will not result in the payment of interest until maturity, and will have greater price volatility than similar securities that are issued at face value or par and pay interest periodically. Investors will receive written notification at least thirty days prior to any change in a Fund's investment objective. The pharase "principally invests" as used in the prospectus means that the Fund invests at least 65% of its assets in the securities as described in the sentence. Each tax-exempt fund invests at least 80% of its total assets in securities with income exempt from federal income and alternative minimum taxes. INVESTMENT LIMITATIONS The following are fundamental policies of each Fund and cannot be changed with respect to a Fund without the consent of the holders of a majority of that Fund's outstanding shares. The term "majority of the outstanding shares" means the vote of (i) 67% or more of a Fund's shares present at a meeting, if more than 50% of the outstanding shares of the Fund are present or represented by proxy, or (ii) more than 50% of a Fund's outstanding shares, whichever is less. A Fund may not: 1. Acquire more than 10% of the voting securities of any one issuer. 2. Invest in companies for the purpose of exercising control. 3. Borrow money except for temporary or emergency purposes and then only in an amount not exceeding one-third of the value of total assets. Any borrowing will be done from a bank and, to the extent that such borrowing exceeds 5% of the value of the Fund's assets, asset coverage of at least 300% is required. In the event that such asset coverage shall at any time fall below 300%, the Fund shall, within three days thereafter or such longer period as the Securities and Exchange Commission may prescribe by rules and regulations, reduce the amount of its borrowings to such an extent that the asset coverage of such borrowings shall be at least 300%. This borrowing provision is included solely to facilitate the orderly sale of portfolio securities to accommodate heavy redemption requests if they should occur and is not for investment purposes. All borrowings in excess of 5% of the value of a Fund's total assets will be repaid before making additional investments and any interest paid on such borrowings will reduce income. 4. Make loans, except that (a) a Fund may purchase or hold debt instruments in accordance with its investment objective and policies; (b) a Fund may enter into repurchase agreements, and (c) the Bond Funds, Balanced Fund, U.S. Government Securities Fund, Limited-Term Federal Mortgage Securities Fund, International Equity Index Fund, International Equity Fund, Value Income Stock Fund, Small Cap Equity Fund and Emerging Markets Equity Fund may engage in securities lending as described in the Prospectuses and in this Statement of Additional Information. 5. Pledge, mortgage or hypothecate assets except to secure temporary borrowings permitted by (3) above in aggregate amounts not to exceed 10% of the Fund's total assets, taken at current value at the time of the incurrence of such loan, except as permitted with respect to securities lending. B-19 6. Purchase or sell real estate, real estate limited partnership interests, commodities or commodities contracts (except for financial futures contracts) and interests in a pool of securities that are secured by interests in real estate (except that each Bond Fund may purchase mortgage-backed and other mortgage-related securities, including collateralized mortgage obligations and REMICs). However, subject to their permitted investment spectrum, any Fund may invest in companies which invest in real estate, commodities or commodities contracts. 7. Make short sales of securities, maintain a short position or purchase securities on margin, except that the Trust may obtain short-term credits as necessary for the clearance of security transactions. 8. Act as an underwriter of securities of other issuers except as it may be deemed an underwriter in selling a security. 9. Purchase securities of other investment companies except for money market funds and CMOs and REMICs deemed to be investment companies and then only as permitted by the Investment Company Act of 1940 (the "1940 Act") and the rules and regulations thereunder, except that the Mid-Cap Equity, Sunbelt Equity, Balanced, Georgia Tax-Exempt Bond, Florida Tax-Exempt Bond, U.S. Government Securities, Limited-Term Federal Mortgage Securities, International Equity Index, International Equity, Small Cap Equity and Emerging Market Equity Funds' purchases of investment company shares are not limited to money market funds. Under these rules and regulations, a Fund is prohibited from acquiring the securities of other investment companies if, as a result of such acquisition, the Fund owns more than 3% of the total voting stock of the company; securities issued by any one investment company represent more than 5% of the total assets of a Fund; or securities (other than treasury stock) issued by all investment companies represent more than 10% of the total assets of the Fund. 10. Issue senior securities (as defined in the 1940 Act) except in connection with permitted borrowings as described above or as permitted by rule, regulation or order of the SEC. 11. Purchase securities of any issuer (except securities issued or guaranteed by the United States, its agencies or instrumentalities and repurchase agreements involving such securities) if as a result more than 5% of the total assets of a Fund would be invested in the securities of such issuer; provided, however, that a Fund may invest up to 25% of its total assets without regard to this restriction as permitted by applicable law. 12. Purchase any securities which would cause more than 25% of the total assets of a Fund to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that this limitation does not apply to investments in obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities, repurchase agreements involving such securities or tax-exempt securities issued by governments or political subdivisions of governments and, with respect to only the Money Market Funds, obligations issued by domestic branches of U.S. banks or U.S. branches of foreign banks subject to the same regulations as U.S. banks. For purposes of this limitation, (i) utility companies will be divided to according to their services, for example, gas, gas transmission, electric and telephone will each be considered a separate industry; (ii) financial service companies will be classified according to the end users of their services, for example, automobile finance, bank finance and diversified finance will each be considered a separate industry; and (iii) supranational entities will be considered to be a separate industry. B-20 NON-FUNDAMENTAL POLICIES No Fund may purchase or hold illiquid securities (I.E., securities that cannot be disposed of for their approximate carrying value in seven days or less (which term includes repurchase agreements and time deposits maturing in more than seven days) if, in the aggregate, more than 15% of its net assets (10% for the Prime Quality Money Market, U.S. Government Securities Money Market, and Tax-Exempt Money Market Funds) would be invested in illiquid securities. With the exception of the limitations on liquidity standards, the foregoing percentages will apply at the time of the purchase of a security and shall not be considered violated unless an excess occurs or exists immediately after and as a result of a purchase of such security. INVESTMENT ADVISORS The Trust and STI Capital Management, N.A., Trusco Capital Management, Inc., and SunTrust Bank, Atlanta (the "Advisors") have entered into advisory agreements with the Trust (the "Advisory Agreements"). The Advisors are indirect wholly-owned subsidiaries of SunTrust Banks, Inc. ("SunTrust"). SunTrust is a southeastern regional bank holding company with assets of $ 76 billion as of June 30, 1998. The Advisory Agreements provide that each Advisor shall not be protected against any liability to the Trust or its Shareholders by reason of willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard of its obligations or duties thereunder. Each Advisory Agreement provides that if, for any fiscal year, the ratio of expenses of any Fund (including amounts payable to an Advisor but excluding interest, taxes, brokerage, litigation, and other extraordinary expenses) exceeds limitations established by certain states, the Advisor and/or the Administrator will bear the amount of such excess. The Advisor will not be required to bear expenses of the Trust to an extent which would result in a Fund's inability to qualify as a regulated investment company under provisions of the Internal Revenue Code. The continuance of each Advisory Agreement, after the first two years, must be specifically approved at least annually (i) by the vote of the Trustees, and (ii) by the vote of a majority of the Trustees who are not parties to each Agreement or "interested persons" of any party thereto, cast in person at a meeting called for the purpose of voting on such approval. Each Advisory Agreement will terminate automatically in the event of its assignment, and is terminable at any time without penalty by the Trustees of the Trust or, with respect to the Funds, by a majority of the outstanding shares of the Funds, on not less than 30 days' nor more than 60 days' written notice to the Advisor, or by the Advisor on 90 days' written notice to the Trust. For the fiscal years ended May 31, 1998, 1997, and 1996, the Funds paid the following advisory fees:
- -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- FEES PAID FEES WAIVED OR REIMBURSED --------------------------------------------------------------------------------------- FUND 1998 1997 1996 1998 1997 1996 - -------------------------------------------------------------------------------------------------------------------------- Prime Quality Money Market Fund $ 9,510,944 $ 7,586,108 $ 5,346,850 $ 2,699,560 $ 2,181,008 $ 1,602,546 - --------------------------------------------------------------------------------------------------------------------------
B-21
- -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- FEES PAID FEES WAIVED OR REIMBURSED --------------------------------------------------------------------------------------- FUND 1998 1997 1996 1998 1997 1996 - -------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities Money $ 1,983,590 $ 1,935,898 $ 2,068,133 $ 580,236 $ 518,656 $ 577,384 Market Fund Tax-Exempt Money Market Fund $ 2,219,251 $ 1,687,976 $ 1,422,777 $ 881,321 $ 673,486 $ 685,205 Investment Grade Bond Fund $ 4,852,764 $ 4,147,888 $ 3,868,222 $ 794,236 $ 644,859 $ 709,139 Investment Grade Tax-Exempt Bond $ 1,118,253 $ 1,081,635 $ 917,948 $ 208,488 $ 190,250 $ 202,552 Fund Short-Term Bond Fund $ 554,291 $ 485,613 $ 361,936 $ 164,522 $ 138,732 $ 149,827 Florida Tax-Exempt Bond Fund $ 419,460 $ 220,701 $ 107,618 $ 120,797 $ 72,605 $ 72,476 Georgia Tax-Exempt Bond Fund $ 300,256 $ 181,715 $ 83,243 $ 93,650 $ 63,837 $ 63,991 U.S. Government Securities Fund(1) $ 187,053 $ 91,748 $ 16,097 $ 54,354 $ 58,637 $ 53,312 Short-Term U.S. Treasury $ 150,659 $ 83,694 $ 36,729 $ 77,862 $ 72,064 $ 72,116 Securities Fund Limited-Term Federal Mortgage $ 739,677 $ 540,017 $ 224,595 $ 158,869 $ 150,604 $ 119,538 Securities Fund Capital Growth Fund $17,607,676 $12,775,800 $12,099,047 $ 1,818,241 $ 1,227,247 $ 1,408,275 Sunbelt Equity Fund $ 4,772,466 $ 4,399,351 $ 3,424,453 $ 515,457 $ 442,535 $ 465,317 Value Income Stock Fund $15,826,018 $12,025,425 $ 9,447,738 $ 0 $ 392 $ 318,958 Mid-Cap Equity Fund $ 3,846,835 $ 3,008,690 $ 2,057,932 $ 422,281 $ 318,871 $ 318,958 Balanced Fund $ 1,561,250 $ 1,025,089 $ 823,692 $ 225,921 $ 151,557 $ 166,361 Small Cap Equity Fund $ 3,249,839 $ 273,710 * $ 329,047 $ 48,251 * Emerging Markets Equity Fund $ 442,518 $ 84,210 * $ 90,361 $ 52,769 * International Equity Fund $ 7,131,219 $ 4,336,172 $ 746,780 $ 69,504 $ 157,567 $ 151,947 International Equity Index Fund $ 466,136 $ 578,197 $ 740,676 $ 76,513 $ 80,147 $ 144,349 Small Cap Growth Stock Fund * * * * * * Tax Sensitive Growth Stock Fund * * * * * * - -------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------
*Not in operation during the period. B-22 1 Trusco Capital Management, Inc., advisor to the U.S. Government Securities Fund, reimbursed expenses of $27,216. Each Advisor has agreed to waive its fees or reimburse expenses in order to limit Fund expenses. BANKING LAWS Current interpretations of federal banking laws and regulations: - - prohibit SunTrust and the Advisors from sponsoring, organizing, controlling, or distributing the Funds' shares; but - - do not prohibit SunTrust or the Advisors generally from acting as an investment advisor, transfer agent, or custodian to the Funds or from purchasing Fund shares as agent for and upon the order of a customer. The Advisors believe that they may perform advisory and related services for the Trust without violating applicable banking laws or regulations. However, the legal requirements and interpretations about the permissible activities of banks and their affiliates may change in the future. These changes could prevent the Advisors from continuing to perform services for the Trust. If this happens, the Board of Trustees would consider selecting other qualified firms. Shareholders would approve any new investment advisory agreements would be subject to Shareholder approval. If current restrictions on bank activities with mutual funds were relaxed, the Advisors, or their affiliates, would consider performing additional services for the Trust. We cannot predict whether these changes will be enacted. We also cannot predict the terms that the Advisors, or their affiliates, might offer to provide additional services. THE ADMINISTRATOR The Trust and SEI Investments Mutual Funds Services (the "Administrator") are parties to the Administration Agreement. The Administration Agreement provides that the Administrator shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the matters to which the Administration Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Administrator in the performance of its duties or from reckless disregard by it of its duties and obligations thereunder. The Administration Agreement shall remain in effect for a period of five years after the date of the Agreement and shall continue in effect for successive periods of two years subject to review at least annually by the Trustees of the Trust unless terminated by either party on not less than ninety days' written notice to the other party. The Administrator, a Delaware business trust, has its principal business offices at Oaks, Pennsylvania 19456. SEI Investments Management Corporation ("SIMC"), a wholly-owned subsidiary of SEI Investments Company ("SEI Investments"), is the owner of all beneficial interest in the Administrator. SEI Investments and its subsidiaries and affiliates, including the Administrator, are leading providers of funds evaluation services, trust accounting systems, and brokerage and information services to financial institutions, institutional investors, and money managers. The Administrator and its affiliates also serve as administrator or sub-administrator to the following other mutual funds: The Achievement Funds Trust, The Advisors' Inner Circle Fund, The Arbor Fund, ARK Funds, Armada Funds, Bishop Street Funds, Boston 1784 Funds-Registered Trademark-, CrestFunds, Inc., CUFUND, The Expedition Funds, First American Funds, Inc., First American Investment Funds, Inc., First American Strategy Funds, Inc., HighMark Funds, Monitor Funds, Morgan Grenfell Investment Trust, The Nevis Funds, Inc., Oak Associates Funds, The PBHG Funds, Inc., PBHG Advisor Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds, SEI Asset B-23 Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI Institutional International Investments Trust, SEI Institutional Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Variable Trust, TIP Funds and TIP Institutional Funds. For its administrative services, the Administrator is entitled to a fee, which is calculated daily and paid monthly, at an annual rate of: .12% of the first $1 billion of average aggregate net assets, .09% on the next $4 billion of average aggregate net assets, .07% of the next $3 billion of average aggregate net assets, .065% of the next $2 billion of average aggregate net assets, and .06% thereafter. For the fiscal years ended May 31, 1998, 1997, and 1996, the Funds paid the following administration fees:
- ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ FEES PAID FEES WAIVED ------------------------------------------------------------------------------------------ FUND 1998 1997 1996 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ Prime Quality Money Market Fund $ 784,975 $ 661,962 $ 315,880 $ 570,531 $ 347,518 $ 449,492 U.S. Government Securities Money $ 236,106 $ 212,454 $ 219,380 $ 46,908 $ 41,257 $ 72,463 Market Fund Tax-Exempt Money Market Fund $ 398,493 $ 288,647 $ 274,701 $ 9,560 $ 0 $ 0 Investment Grade Bond Fund $ 549,688 $ 435,278 $ 443,569 $ 0 $ 0 $ 0 Investment Grade Tax-Exempt Bond Fund $ 128,433 $ 115,500 $ 108,204 $ 0 $ 0 $ 0 Florida Tax-Exempt Bond Fund $ 60,551 $ 30,279 $ 19,989 $ 0 $ 0 $ 0 Georgia Tax-Exempt Bond Fund $ 44,095 $ 25,353 $ 16,304 $ 0 $ 0 $ 0 Short-Term Bond Fund $ 80,065 $ 64,664 $ 56,317 $ 0 $ 0 $ 0 U.S. Government Securities Fund $ 23,704 $ 13,641 $ 7,311 $ 0 $ 0 $ 0 Short-Term U.S. Treasury Securities $ 25,973 $ 16,075 $ 12,012 $ 0 $ 0 $ 0 Fund Limited-Term Federal Mortgage $ 99,420 $ 71,264 $ 37,854 $ 0 $ 0 $ 0 Securities Fund Capital Growth Fund $1,218,000 $ 817,905 $ 842,411 $ 0 $ 0 $ 0 Sunbelt Equity Fund $ 329,793 $ 283,101 $ 842,411 $ 0 $ 0 $ 0 Value Income Stock Fund $1,427,644 $1,009,167 $ 845,706 $ 0 $ 0 $ 0 Mid-Cap Equity Fund $ 266,851 $ 194,430 $ 147,613 $ 0 $ 0 $ 0 Balanced Fund $ 136,092 $ 83,063 $ 74,634 $ 0 $ 0 $ 0 Small Cap Equity Fund $ 229,578 $ 18,406 * $ 0 $ 0 * Emerging Markets Equity Fund $ 29,039 $ 6,932 * $ 0 $ 0 * International Equity Fund $ 415,520 $ 240,114 $ 50,404 $ 0 $ 0 $ 0 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
B-24
- ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ FEES PAID FEES WAIVED ------------------------------------------------------------------------------------------ FUND 1998 1997 1996 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ International Equity Index Fund $ 43,285 $ 48,464 $ 70,690 $ 0 $ 0 $ 0 Small Cap Growth Stock Fund * * * * * * Tax Sensitive Growth Stock Fund * * * * * * - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
* Not in operation during the period. THE DISTRIBUTOR SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary of SEI, and the Trust have entered into a distribution agreement (the "Distribution Agreement") dated May 29, 1992. Under the Distribution Agreement, the Distributor must use all reasonable efforts, consistent with its other business, in connection with the continuous offering of Shares of the Trust. The Distributor will receive no compensation for distribution of Trust Shares. In addition, the Investor Shares of the Funds have a distribution plan (the "Investor Plan"), and the Flex Shares of the Funds have a distribution and service plan (the "Flex Plan"). The Distribution Agreement is renewable annually and may be terminated by the Distributor, the disinterested Trustees, or by a majority vote of the outstanding securities of the Trust upon not more than 60 days' written notice by either party. For the fiscal years ended May 31, 1998, 1997, and 1996, the aggregate sales charges payable to the Distributor with respect to the Investor Shares of the Funds were as follows:
- ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- AGGREGATE SALES CHARGE PAYABLE TO AMOUNT RETAINED BY DISTRIBUTOR DISTRIBUTOR ------------------------------------------------------------------------------ FUND 1998 1997 1996 1998 1997 1996 - ----------------------------------------------------------------------------------------------------------------------- Investment Grade Bond Fund $ 54,658 $ 32,358 $ 50,016 $ 0 $ 62 $ 143 Georgia Tax-Exempt Bond Fund $ 7,871 $ 6,999 $ 1,208 $ 0 $ 97 $ 6 Florida Tax-Exempt Bond Fund $ 7,296 $ 3,657 $ 1,386 $ 0 $ 24 $ 14 Short-Term Bond Fund $ 1,056 $ 617 $ 1,204 $ 10 $ 0 $ 0 Investment Grade Tax-Exempt Bond Fund $ 10,402 $ 14,487 $ 12,005 $ 36 $ 20 $ 30 U.S. Government Securities Fund $ 23,873 $ 766 $ 7,279 $ 0 $ 3 $ 0 Short-Term U.S. Treasury Securities $ 547 $ 796 $ 2,641 $ 4 $ 0 $ 9 Fund Limited-Term Federal Mortgage $ 485 $ 882 $ 4,067 $ 0 $ 11 $ 50 Securities Fund - ----------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------
B-25
- ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- AGGREGATE SALES CHARGE PAYABLE TO AMOUNT RETAINED BY DISTRIBUTOR DISTRIBUTOR ------------------------------------------------------------------------------ FUND 1998 1997 1996 1998 1997 1996 - ----------------------------------------------------------------------------------------------------------------------- Capital Growth Fund $560,435 $264,747 $258,267 $ 312 $ 958 $ 243 Sunbelt Equity Fund $ 57,613 $ 36,784 $ 46,854 $ 0 $ 47 $ 61 Value Income Stock Fund $576,856 $335,991 $306,061 $ 361 $ 100 $ 3,104 International Equity Fund $ 93,755 $ 0 $ 29,032 $ 16 $ 0 $ 85 International Equity Index Fund $ 5,285 $ 0 $ 19,058 $ 16 $ 0 $ 50 Mid-Cap Equity Fund $ 83,073 $ 31,167 $ 91,344 $ 26 $ 61 $ 197 Balanced Fund $ 48,373 $ 13,525 $ 16,540 $ 0 $ 0 $ 22 - ----------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------
The following table shows the amount of front-end sales charge that is paid to Investment Consultants (Dealers) as a percentage of the offering price of those Shares:
- ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- DEALERS' REALLOWANCE AS A PERCENTAGE OF OFFERING PRICE --------------------------------------------------------- FUND(S) $100,000 but $250,000 but Less than less than less than $1,000,000 $100,000 $250,000 $1,000,000 and over - ------------------------------------------------------------------------------------------------------------------- Capital Growth, Value Income Stock, Small Cap Equity, 3.375% 2.925% 2.250% 1.350% Mid-Cap Equity, Balanced, Sunbelt Equity, International Equity Index, International Equity, U.S. Government Securities, Investment Grade Tax-Exempt Bond, Investment Grade Bond, and Florida Tax-Exempt Bond and Georgia Tax-Exempt Bond Funds Limited-Term Federal Mortgage Securities Fund 2.250% 1.575% 1.125% None Short-Term Bond Fund 1.800% 1.350% 0.900% None Short-Term U.S. Treasury Securities Fund 0.900% 0.675% 0.450% None - ------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------
For the fiscal years ended May 31, 1998, 1997 and 1996, the aggregate sales charges payable to the Distributor with respect to the Flex Shares of the Funds were as follows:
- ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- AGGREGATE SALES CHARGE PAYABLE TO AMOUNT RETAINED BY DISTRIBUTOR FUND DISTRIBUTOR ------------------------------------------------------------------------------- 1998 1997 1996 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------- Investment Grade Bond Fund $ 10,040 $ 5,684 $ 4,329 $ 0 $ 0 $ 0 - -------------------------------------------------------------------------------------------------------------------------
B-26
- ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- AGGREGATE SALES CHARGE PAYABLE TO AMOUNT RETAINED BY DISTRIBUTOR FUND DISTRIBUTOR ------------------------------------------------------------------------------- 1998 1997 1996 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------- Georgia Tax-Exempt Bond Fund $ 3,920 $ 2,915 $ 2,896 $ 0 $ 0 $ 0 Florida Tax-Exempt Bond Fund $ 2,566 $ 1,632 $ 153 $ 0 $ 0 $ 0 Short-Term Bond Fund $ 1,395 $ 1,678 $ 344 $ 0 $ 0 $ 0 Investment Grade Tax-Exempt Bond Fund $ 2,900 $ 10,407 $ 2,782 $ 0 $ 0 $ 0 U.S. Government Securities Fund $ 2,014 $ 2,823 $ 1,067 $ 0 $ 0 $ 0 Short-Term U.S. Treasury Securities $ 2,377 $ 8,261 $ 3,687 $ 0 $ 0 $ 0 Fund Limited-Term Federal Mortgage $ 2,805 $ 2,067 $ 1,442 $ 0 $ 0 $ 0 Securities Fund Capital Growth Fund $ 60,500 $ 18,958 $ 6,283 $ 0 $ 0 $ 0 Sunbelt Equity Fund $ 4,183 $ 8,144 $ 324 $ 0 $ 0 $ 0 Value Income Stock Fund $ 112,674 $ 41,778 $ 10,574 $ 0 $ 0 $ 0 International Equity Fund $ 23,393 $ 0 $ 60 $ 0 -- $ 0 International Equity Index Fund $ 992 $ 0 $ 392 $ 0 -- $ 0 Mid-Cap Equity Fund $ 8,666 $ 10,239 $ 5,222 $ 0 $ 0 $ 0 Balanced Fund $ 11,758 $ 4,299 $ 713 $ 0 $ 0 $ 0 Small Cap Equity Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ * Small Cap Growth Stock Fund * * * * * * Tax Sensitive Growth Stock Fund * * * * * *
*Not in operation during the period. INVESTOR SHARES AND FLEX SHARES DISTRIBUTION PLANS The Distribution Agreement and the Investor Plan adopted by the Trust provide that Investor Shares of the Fund will pay the Distributor fees of up to the following respective levels: .20% of the average daily net assets of the Prime Quality Money Market Fund; .17% of the average daily net assets of the U.S. Government Securities Money Market Fund; .15% of the average daily net assets of the Tax-Exempt Money Market Fund; .18% of the average daily net assets of the Short-Term U.S. Treasury Securities Fund; .23% of the average daily net assets of the Short-Term Bond Fund; .43% of the average daily net assets of the Investment Grade Bond Fund; .43% of the average daily net assets of the Investment Grade Tax-Exempt Bond Fund; .68% of the average daily net assets of the Capital Growth Fund; .33% of the average daily net assets of the Value Income Stock Fund; .43% of the average daily net assets of the Mid-Cap Equity Fund; .43% of the average daily net assets of the Sunbelt Equity Fund; .28% of the average daily net assets of the Balanced Fund; .18% of the average daily net assets of the Florida Tax- B-27 Exempt Bond Fund; .18% of the average daily net assets of the Georgia Tax-Exempt Bond Fund; .38% of the average daily net assets of the U.S. Government Securities Fund; .38% of the average daily net assets of the International Equity Index Fund; .33% of the average daily net assets of the International Equity Fund; and .23% of the average daily net assets of the Limited-Term Federal Mortgage Securities Fund. The Distribution Agreement and the Flex Plan adopted by the Trust provide that each Flex Shares Fund will pay the Distributor a fee of up to .75% of the average daily net assets of that Fund. The Distributor can use these fees to compensate broker-dealers and service providers, including SunTrust and its affiliates, which provide administrative and/or distribution services to Investor Shares or Flex Shares Shareholders or their customers who beneficially own Investor Shares or Flex Shares. In addition, Flex Shares are subject to a service fee of up to .25% of the average daily net assets of the Flex Shares of each Fund. This service fee will be used for services provided and expenses incurred in maintaining shareholder accounts, responding to shareholder inquiries and providing information on their investments. Services for which broker-dealers and service providers may be compensated include establishing and maintaining customer accounts and records; aggregating and processing purchase and redemption requests from customers; placing net purchase and redemption orders with the Distributor; automatically investing customer account cash balances; providing periodic statements to customers; arranging for wires; answering customer inquiries concerning their investments; assisting customers in changing dividend options, account designations, and addresses; performing sub-accounting functions; processing dividend payments from the Trust on behalf of customers; and forwarding Shareholder communications from the Trust (such as proxies, Shareholder reports, and dividend distribution and tax notices) to these customers with respect to investments in the Trust. Certain state securities laws may require those financial institutions providing such distribution services to register as dealers pursuant to state law. Although banking laws and regulations prohibit banks from distributing shares of open-end investment companies such as the Trust, according to an opinion issued to the staff of the SEC by the Office of the Comptroller of the Currency, financial institutions are not prohibited from acting in other capacities for investment companies, such as providing shareholder services. Should future legislative, judicial, or administrative action prohibit or restrict the activities of financial institutions in connection with providing shareholder services, the Trust may be required to alter materially or discontinue its arrangements with such financial institutions. The Trust has adopted the Investor Plan and the Flex Plan in each case in accordance with the provisions of Rule 12b-1 under the 1940 Act, which Rule regulates circumstances under which an investment company may directly or indirectly bear expenses relating to the distribution of its shares. Continuance of the Investor Plan and the Flex Plan must be approved annually by a majority of the Trustees of the Trust and by a majority of the disinterested Trustees. The Investor Plan and the Flex Plan require that quarterly written reports of amounts spent under the Investor Plan and the Flex Plan, respectively, and the purposes of such expenditures be furnished to and reviewed by the Trustees. The Investor Plan and the Flex Plan may not be amended to increase materially the amount which may be spent thereunder without approval by a majority of the outstanding shares of the affected class of shares of the Trust. All material amendments of the Plans will require approval by a majority of the Trustees of the Trust and of the disinterested Trustees. There is no sales charge on purchases of Flex Shares, but Flex Shares are subject to a contingent deferred sales charge if they are redeemed within one year of purchase. Pursuant to the Distribution Agreement and the Flex Plan, Flex Shares are subject to an ongoing distribution and service fee calculated on each of the Bond Funds', Tax-Exempt Bond Funds', Equity Funds' and Balanced Fund's aggregate average daily net assets attributable to its Flex Shares. B-28 For the fiscal years ended May 31, 1998, 1997 and 1996, the Funds paid the following amounts pursuant to the Investor Plan:
- ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- DISTRIBUTION FEES - AMOUNT PAID ------------------------------------------ FUND 1998 1997 1996 - ----------------------------------------------------------------------------------------------- Prime Quality Money Market Fund $ 465,411 $ 342,798 $ 273,316 U.S. Government Securities Money Market Fund $ 69,957 $ 66,016 $ 44,107 Tax-Exempt Money Market Fund $ 125,986 $ 89,912 $ 80,845 Investment Grade Bond Fund $ 96,090 $ 94,495 $ 78,963 Investment Grade Tax-Exempt Bond Fund $ 76,472 $ 100,819 $ 113,467 Short-Term Bond Fund $ 33 $ 0 $ 5,067 Florida Tax-Exempt Bond Fund $ 0 $ 0 $ 6,021 Georgia Tax-Exempt Bond Fund $ 0 $ 0 $ 5,001 U.S. Government Securities Fund $ 385 $ 1,150 $ 4,218 Short-Term U.S. Treasury Securities Fund $ 0 $ 0 $ 8,499 Limited-Term Federal Mortgage Securities Fund $ 161 $ 0 $ 2,360 Capital Growth Fund $1,442,648 $1,109,436 $ 912,685 Sunbelt Equity Fund $ 90,212 $ 80,282 $ 99,366 Value Income Stock Fund $ 630,527 $ 437,882 $ 304,282 Mid-Cap Equity Fund $ 70,254 $ 56,187 $ 51,485 Balanced Fund $ 5,628 $ 2,390 $ 10,808 International Equity Fund $ 34,499 $ 10,778 $ 0 International Equity Index Fund $ 7,582 $ 8,005 $ 369 - ----------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------
For the fiscal years ended May 31, 1998, 1997 and 1996, the Funds paid the following amounts pursuant to the Flex Plan: B-29
- --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- DISTRIBUTION FEES - AMOUNT PAID ---------------------------------------- FUND 1998 1997 1996 - --------------------------------------------------------------------------------------------- Investment Grade Bond Fund $ 56,167 $ 29,558 $ 9,277 Investment Grade Tax-Exempt Bond Fund $ 39,461 $ 36,489 $ 21,786 Short-Term Bond Fund $ 379 $ 0 $ 0 Florida Tax-Exempt Bond Fund $ 30,177 $ 5,962 $ 2,675 Georgia Tax-Exempt Bond Fund $ 30,028 $ 20,094 $ 7,409 U.S. Government Securities Fund $ 17,051 $ 15,260 $ 4,460 Short-Term U.S. Treasury Securities Fund $ 170 $ 510 $ 321 Limited-Term Federal Mortgage Securities Fund $ 533 $ 0 $ 169 Capital Growth Fund $ 672,585 $ 201,520 $ 37,344 Sunbelt Equity Fund $ 50,902 $ 27,568 $ 1,560 Value Income Stock Fund $1,234,587 $ 433,655 $ 99,703 Mid-Cap Equity Fund $ 123,932 $ 53,907 $ 10,115 Balanced Fund $ 125,786 $ 28,723 $ 6,985 Small Cap Equity Fund $ 155,949 * * International Equity Fund $ 2,090 $ 18,519 $ 0 International Equity Index Fund $ 148,500 $ 0 $ 580 Small Cap Growth Stock Fund * * * Tax Sensitive Growth Stock Fund * * * - --------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------
*Not in operation during the period. THE TRANSFER AGENT Federated Services Company, Federated Investors Tower, Pittsburgh, PA 15222-3779 serves as the Trust's transfer agent. THE CUSTODIAN SunTrust Bank, Atlanta, 303 Peachtree Street N.E., 14th Floor, Atlanta, GA 30308 serves as the custodian for the all of the Funds except for the International Equity, International Equity Index and Emerging Markets Equity Funds. The Bank of New York, One Wall Street, New York, NY 10286 B-30 serves as custodian for the International Equity, International Equity Index and Emerging Markets Equity Funds. INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen, LLP serves as independent public accountants for the Trust. LEGAL COUNSEL Morgan, Lewis & Bockius LLP, 1800 M Street, N.W., Washington, D.C. serves as legal counsel to the Trust. TRUSTEES AND OFFICERS OF THE TRUST The Trustees supervise the management and affairs of the Trust. The Trustees have approved contracts with certain companies that provide the Trust with essential management services. The Trustees and Executive Officers of the Trust, their respective dates of birth, and their principal occupations for the last five years are set forth below. Each may have held other positions with the named companies during that period. The business address of each Trustee and each Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain officers of the Trust also serve as officers of some or all of the following: The Achievement Funds Trust, The Advisors' Inner Circle Fund, The Arbor Fund, ARK Funds, Armada Funds, Bishop Street Funds, Boston 1784 Funds-Registered Trademark-, CrestFunds, Inc., CUFUND, The Expedition Funds, First American Funds, Inc., First American Investment Funds, Inc., First American Strategy Funds, Inc., HighMark Funds, Monitor Funds, Morgan Grenfell Investment Trust, Oak Associates Funds, The PBHG Funds, Inc., PBHG Advisor Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Variable Trust, TIP Funds and TIP Institutional Funds, each of which is an open-end management investment company managed by SEI Fund Management or its affiliates and, except for PBHG Advisor Funds, Inc., are distributed by SEI Investments Distribution Co. DANIEL S. GOODRUM (7/11/26) - Trustee* - Chairman & CEO, SunBank/South Florida, N.A., 1985-1991; Chairman Audit Committee and Director, Holy Cross Hospital; Executive Committee Member and Director, Honda Classic Foundation; Director, Broward Community College Foundation. WILTON LOONEY (4/18/19) - Trustee* - President of Genuine Parts Company, 1961-1964; Chairman of the Board, 1964-1990; Honorary Chairman of the Board, 1990 to present. Director, Rollins, Inc.; Director, RPC Energy Services, Inc. CHAMPNEY A. MCNAIR (10/30/24) - Trustee* - Director and Chairman of Investment Committee and member of Executive Committee, Cotton States Life and Health Insurance Company; Director and B-31 Chairman of Investment Committee and member of Executive Committee, Cotton States Mutual Insurance Company; Chairman, Trust Company of Georgia Advisory Council. F. WENDELL GOOCH (12/3/32) - Trustee - Retired. President, Orange County Publishing Co., Inc., 1981-1997, publisher of the Paoli News and the Paoli Republican and Editor of the Paoli Republican, 1981-1997, President, H & W Distribution, Inc., 1984-1997. Current Trustee on the Board of Trustees for the SEI Family of Funds and The Capitol Mutual Funds. Executive Vice President, Trust Department, Harris Trust and Savings Bank and Chairman of the Board of Directors of The Harris Trust Company of Arizona before January 1981. T. GORDY GERMANY (11/28/25) -Trustee - Retired President, Chairman, and CEO of Crawford & Company; held these positions, 1973-1987. Member of the Board of Directors, 1970-1990, joined company in 1948; spent entire career at Crawford, currently serves on Boards of Norrell Corporation and Mercy Health Services, the latter being the holding company of St. Joseph's Hospitals. DR. BERNARD F. SLIGER (9/30/24) - Trustee - Director, Stavros Center for Economic Education, Florida State University, 1991-present. President of Florida State University, 1976-91; previous four years EVP and Chief Academic Officer. During educational career, taught at Florida State, Michigan State, Louisiana State and Southern University. Spent 19 years as faculty member and administrator at Louisiana State University and served as Head of Economics Department, member and Chairman of the Graduate Council, Dean of Academic Affairs and Vice Chancellor. Member of Board of Directors of Federal Reserve Bank of Atlanta, 1983-1988. JESSE HALL (9/26/29) - Trustee* - Executive Vice President, SunTrust Banks, Inc., 1985-1994; Director of Crawford & Company since 1979; Member, Atlanta Estate Planning Council, 1988-1993. JONATHAN T. WALTON (3/28/30) - Trustee - Retired. Executive Vice President, NBD Bank, N.A. and NBD Bancorp, October 1956 to March 1995. Trustee, W.K. Kellogg Trust. WILLIAM H. CAMMACK (11/24/29) - Trustee* - Chairman & Director, SunTrust Equitable Securities Corporation, January, 1998-present. Chairman and CEO, Equitable Asset Management, Inc., December 1993-present. Chairman & CEO, Equitable Trust Company, June 1991-present. Chairman, Equitable Securities Corporation, July 1972 - January 1998. MARK NAGLE (10/20/59) - President and Chief Executive Officer - Vice President and Controller, Funds Accounting since 1996. Vice President of the Administrator and Distributor since 1996. Vice President of Fund Accounting - BISYS Fund Services 1995-1996. Senior Vice President - Fidelity Investments 1981-1995. TODD CIPPERMAN (2/14/66) - Vice President, Assistant Secretary - Vice President and Assistant Secretary of the Administrator and the Distributor since 1995. Associate, Dewey Ballantine (law firm), 1994-1995. Associate, Winston & Strawn (law firm), 1991-1994. B-32 LYDIA A. GAVALIS (6/5/64) - Vice President and Assistant Secretary - Vice President and Assistant Secretary of the Administrator and the Distributor since 1998. Assistant General Counsel and Director of Arbitration, Philadelphia Stock Exchange, 1989-1998. KATHY HEILIG (12/21/58) - Vice President and Assistant Secretary - Treasurer of SEI Investments Company since 1997. Assistant Controller of SEI Investments Company since 1995. Vice President of SEI Investments Company since 1991. Director of Taxes of SEI Investments Company, 1987-1991. Tax Manager - Arthur Anderson LLP prior to 1987. JOSEPH M. O'DONNELL (11/13/54) - Vice President and Assistant Secretary - Vice President and Assistant Secretary of the Administrator and the Distributor since 1998. Vice President and General Counsel, FPS Services, Inc., 1993-1997. Staff Counsel and Secretary, Provident Mutual Family of Funds, 1990-1993. SANDRA K. ORLOW (10/18/53) - Vice President, Assistant Secretary - Vice President and Assistant Secretary of the Administrator and Distributor since 1983. LYNDA J. STRIEGEL (10/30/48) - Vice President and Assistant Secretary - Vice President and Assistant Secretary of the Administrator and the Distributor since 1998. Senior Asset Management Counsel, Barnett Banks, Inc., 1997-1998. Partner, Groom and Nordberg, Chartered, 1996-1997. Associate General Counsel, Riggs Bank, N.A., 1991-1995. KEVIN P. ROBINS (4/15/61) - Vice President, Assistant Secretary - Senior Vice President & General Counsel of SEI Investments, the Administrator and the Distributor since 1994. Vice President of SEI, the Administrator and the Distributor, 1992-1994. Associate, Morgan, Lewis & Bockius LLP (law firm) prior to 1992. KATHRYN L. STANTON (11/19/58) - Vice President, Assistant Secretary - Vice President, Assistant Secretary of SEI Investments, the Administrator and Distributor since 1994. Associate, Morgan, Lewis & Bockius LLP (law firm), 1989-1994. CAROL ROONEY (5/8/64) - Controller, Chief Financial Officer - A Director of SEI Investments Mutual Funds Services since 1992. RICHARD W. GRANT (10/25/45) - Secretary - 2000 One Logan Square, Philadelphia, Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), counsel to the Trust, Administrator and Distributor, since 1989. JOHN H. GRADY, JR. (6/1/61) - Assistant Secretary - 2000 One Logan Square, Philadelphia, Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP (law firm) since 1995, counsel to the Trust, Administrator and Distributor. Associate, Morgan, Lewis & Bockius LLP, 1993-1995. Associate, Ropes & Gray (law firm), 1988-1993. - ------------------------- B-33 * Messrs. Looney, Goodrum, McNair, Hall and Cammack may be deemed to be "interested persons" of the Trust as defined in the Investment Company Act of 1940. The Trustees and Officers of the Trust own, in the aggregate, less than 1% of the outstanding shares of the Trust. For the fiscal year end May 31, 1998, the Trust paid the following amounts to Trustees and Officers of the Trust:
- ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- ESTIMATED PENSION OR ANNUAL TOTAL COMPENSATION AGGREGATE RETIREMENT BENEFITS BENEFITS FROM FUND AND FUND COMPENSATION ACCRUED AS PART OF UPON COMPLEX PAID TO NAME OF PERSON, POSITION FROM FUND FUND EXPENSES RETIREMENT TRUSTEES - ---------------------------------------------------------------------------------------------------------------------- Daniel S. Goodrum, Trustee $14,000 N/A N/A $14,000 for service on two boards Wilton Looney, Trustee $17,000 N/A N/A $17,000 for service on two boards Champney A. McNair, Trustee $13,000 N/A N/A $13,000 for service on two boards F. Wendell Gooch, Trustee $15,000 N/A N/A $15,000 for service on two boards T. Gordy Germany, $15,000 N/A N/A $15,000 for service on two Trustee boards Dr. Bernard F. Sliger, Trustee $15,000 N/A N/A $15,000 for service on two boards Jesse S. Hall, Trustee $14,000 N/A N/A $14,000 for service on two boards Jonathan T. Walton, Trustee* $3,500 N/A N/A $ 3,500 for service on two boards William H. Cammack, Trustee N/A N/A N/A $ 0 for service on two boards - ---------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------
*Messr. Walton's compensation reflects a starting date of June 19, 1998. PERFORMANCE INFORMATION From time to time a Fund may advertise its performance. Performance figures are based on historical earnings and are not intended to indicate future performance. CLASSES OF SHARES AND PERFORMANCE B-34 The performance of the Trust's Investor Shares and Flex Shares will normally be lower than for Trust Shares because Investor Shares and Flex Shares are subject to distribution, service, and certain transfer agent fees not charged to Trust Shares. Because of their differing distribution expense arrangements, the performance of Flex Shares in comparison to Investor Shares will vary depending upon the investor's investment time horizon. PERFORMANCE COMPARISONS Each Fund may periodically compare its performance to other mutual funds tracked by mutual fund rating services, to broad groups of comparable mutual funds, or to unmanaged indices. These comparisons may assume reinvestment of dividends but generally do not reflect deductions for administrative and management costs. COMPUTATION OF YIELD SEVEN-DAY YIELD The current yield of the Money Market Funds will be calculated daily based upon the seven days ending on the date of calculation (the "base period"). The yield is computed by determining the net change (exclusive of capital changes) in the value of a hypothetical pre-existing shareholder account having a balance of one share at the beginning of the period, subtracting a hypothetical charge reflecting deductions from shareholder accounts, and dividing such net change by the value of the account at the beginning of the same period to obtain the base period return and multiplying the result by (365/7). Realized and unrealized gains and losses are not included in the calculation of the yield. The effective compound yield of the Funds is determined by computing the net change (exclusive of capital changes) in the value of a hypothetical pre-existing account having a balance of one share at the beginning of the period, subtracting a hypothetical charge reflecting deductions from shareholder accounts, and dividing the difference by the value of the account at the beginning of the base period to obtain the base period return, and then compounding the base period return by adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the result, according to the 365/7 following formula: Effective Yield = [(Base Period Return + 1) ] - 1. The current and the effective yields reflect the reinvestment of net income earned daily on portfolio assets. The Tax-Exempt Money Market Fund's "tax equivalent yield" and "tax equivalent effective yield" are calculated by determining the rate of return that would have to be achieved on a fully taxable investment to produce the after-tax equivalent of the Fund's yield, assuming certain tax brackets for a Shareholder. Tax-exempt yield is calculated according to the same formula except that E equals the interest exempt from federal income tax earned during the period. This tax-exempt yield is then translated into tax-equivalent yield according to the following formula: TAX EQUIVALENT YIELD = (E) + T ------- (1-P) E = the portion of the yield which is tax-exempt P = stated income tax rate T = the portion of the yield which is taxable B-35 For the 7-day period ended May 31, 1998, the Money Market Funds' current effective and tax equivalent yields were as follows:
- --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- 7-DAY 7-DAY 7-DAY TAX EQUIVALENT TAX EQUIVALENT FUND CLASS 7-DAY YIELD EFFECTIVE YIELD YIELD EFFECTIVE YIELD - --------------------------------------------------------------------------------------------------------------------------- Prime Quality Money Market Fund Investor 4.95% 5.07% N/A N/A ---------------------------------------------------------------------------------------- Trust 5.11% 5.24% N/A N/A U.S. Government Securities Investor 4.77% 4.88% N/A N/A ---------------------------------------------------------------------------------------- Money Market Fund Trust 4.91% 5.03% N/A N/A Tax-Exempt Money Market Fund Investor 3.16% 3.21% 5.23% 5.31% ---------------------------------------------------------------------------------------- Trust 3.27% 3.32% 5.41% 5.50% - --------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------
The yields of these Funds fluctuate, and the annualization of a week's dividend is not a representation by the Trust as to what an investment in the Fund will actually yield in the future. Actual yields will depend on such variables as asset quality, average asset maturity, the type of instruments a Fund invests in, changes in interest rates on money market instruments, changes in the expenses of the Fund and other factors. THIRTY-DAY YIELD The Bond, Short-Term U.S. Treasury, Tax-Exempt Bond and Equity Funds may advertise a 30-day yield. In particular, yield will be calculated according to the following formula: 6 Yield = (2 (a-b/cd + 1) - 1) where a = dividends and interest earned during the period; b = expenses accrued for the period (net of reimbursement); c = the average daily number of shares outstanding during the period that were entitled to receive dividends; and d = the maximum offering price per share on the last day of the period. For the 30-day period ended May 31, 1998, yields on the Funds other than the Money Market Funds were as follows:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FUND CLASS OF SHARES YIELD - -------------------------------------------------------------------------------- Investment Grade Bond Fund Trust Shares 5.48% -------------------------------- Investor Shares 4.96% -------------------------------- Flex Shares 4.61% - -------------------------------------------------------------------------------- Investment Grade Tax-Exempt Bond Fund Trust Shares 3.76% -------------------------------- Investor Shares 3.24% -------------------------------- Flex Shares 2.92% - --------------------------------------------------------------------------------
B-36
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FUND CLASS OF SHARES YIELD - -------------------------------------------------------------------------------- Short-Term Bond Fund Trust Shares 5.37% -------------------------------- Investor Shares 5.06% -------------------------------- Flex Shares 4.86% - -------------------------------------------------------------------------------- Florida Tax-Exempt Bond Fund Trust Shares 3.91% -------------------------------- Investor Shares 3.57% -------------------------------- Flex Shares 3.22% - -------------------------------------------------------------------------------- Georgia Tax-Exempt Bond Fund Trust Shares 3.89% -------------------------------- Investor Shares 3.55% -------------------------------- Flex Shares 3.22% - -------------------------------------------------------------------------------- Short-Term U.S. Treasury Securities Fund Trust Shares 4.97% -------------------------------- Investor Shares 4.78% -------------------------------- Flex Shares 4.56% - -------------------------------------------------------------------------------- U.S. Government Securities Fund Trust Shares 5.64% -------------------------------- Investor Shares 4.99% -------------------------------- Flex Shares 4.73% - -------------------------------------------------------------------------------- Limited-Term Federal Mortgage Securities Fund Trust Shares 5.54% -------------------------------- Investor Shares 5.15% -------------------------------- Flex Shares 4.95% - -------------------------------------------------------------------------------- Capital Growth Fund Trust Shares .33% -------------------------------- Investor Shares ---- -------------------------------- Flex Shares ---- - -------------------------------------------------------------------------------- Sunbelt Equity Fund Trust Shares ---- -------------------------------- Investor Shares ---- -------------------------------- Flex Shares --- - -------------------------------------------------------------------------------- Value Income Stock Fund Trust Shares 1.70% -------------------------------- Investor Shares 1.32% -------------------------------- Flex Shares .64% - --------------------------------------------------------------------------------
B-37
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FUND CLASS OF SHARES YIELD - -------------------------------------------------------------------------------- Mid-Cap Equity Fund Trust Shares --- -------------------------------- Investor Shares --- -------------------------------- Flex Shares --- - -------------------------------------------------------------------------------- Balanced Fund Trust Shares 2.19% -------------------------------- Investor Shares 1.83% -------------------------------- Flex Shares 1.15% - -------------------------------------------------------------------------------- Small Cap Equity Fund Trust Shares .88% -------------------------------- Investor Shares ** -------------------------------- Flex Shares .18% - -------------------------------------------------------------------------------- Emerging Markets Equity Fund Trust Shares --- - -------------------------------------------------------------------------------- International Equity Fund Trust Shares --- -------------------------------- Investor Shares --- -------------------------------- Flex Shares --- - -------------------------------------------------------------------------------- International Equity Index Fund Trust Shares --- -------------------------------- Investor Shares --- -------------------------------- Flex Shares --- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Small Cap Growth Stock Fund Trust Shares * -------------------------------- Investor Shares ** -------------------------------- Flex Shares * - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Tax Sensitive Growth Stock Fund Trust Shares * -------------------------------- Investor Shares ** -------------------------------- Flex Shares * - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
*Not in operation during the period. **Not offered in this class. The Tax-Exempt Bond Funds' "tax equivalent yield" and "tax equivalent effective yield" are calculated by determining the rate of return that would have to be achieved on a fully taxable investment to produce the after-tax equivalent of the Fund's yield, assuming certain tax brackets for a Shareholder. Tax-exempt yield is calculated according to the same formula except that E equals the interest exempt from federal income tax earned during the period. This tax-exempt yield is then translated into tax-equivalent yield according to the following formula: B-38 TAX EQUIVALENT YIELD = (E) + T ------- (1-P) E = the portion of the yield which is tax-exempt P = stated income tax rate T = the portion of the yield which is taxable Tax equivalent yields assume the payment of federal income taxes at a rate of 39.6% and, for the Georgia Tax-Exempt Bond Fund, Georgia income taxes at a rate of 6.0%. For the 30-day period ended May 31, 1998, the tax-equivalent yields for the Trust Shares were as follows: for the Investment Grade Tax-Exempt Bond Fund - 6.23%, Georgia Tax-Exempt Bond Fund - 7.15%, and Florida Tax-Exempt Bond Fund - -6.47%. For the 30-day period ended May 31, 1998, the tax-equivalent yields for the Investor Shares of the Tax-Exempt Funds were as follows: for the Investment Grade Tax-Exempt Bond Fund - 5.36%, Georgia Tax-Exempt Bond Fund - 6.53%, and Florida Tax-Exempt Bond Fund - 5.91%. For the 30-day period ended May 31, 1998, the tax-equivalent yields for the Flex Shares of the Tax-Exempt Funds were as follows: for the Investment Grade Tax-Exempt Bond Fund - 4.83%, Georgia Tax-Exempt Bond Fund - 5.92%, and Florida Tax-Exempt Bond Fund - 5.33%. Yields are one basis upon which investors may compare the Funds with other money market funds; however, yields of other money market funds and other investment vehicles may not be comparable because of the factors set forth above and differences in the methods used in valuing portfolio instruments. CALCULATION OF TOTAL RETURN From time to time, the Bond, Short-Term U.S. Treasury, Tax-Exempt Bond, Balanced and Equity Funds may advertise total return. In particular, total return will n be calculated according to the following formula: P (1 + T) = ERV, where P = a hypothetical initial payment of $1,000; T = average annual total return; n = number of years; and ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the designated time period as of the end of such period. From time to time, the Trust may include the names of clients of the Advisors in advertisements and/or sales literature for the Trust. The SEI Funds Evaluation database tracks the total return of numerous tax-exempt pension accounts. The range of returns in these accounts determines the percentile rankings. SunTrust Bank's investment advisory affiliates, STI Capital Management, N.A. and Trusco Capital Management, have been in the top 1% of the SEI Funds Evaluation database for equity managers over the past ten years. SEI Investment's database includes research data on over 1,000 investment managers responsible for over $450 billion in assets. B-39 Based on the foregoing, the average annual total returns for the Funds from inception through May 31, 1998 and for the one-year, three year, and five-year periods ended May 31, 1998 were as follows:
- ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURN ---------------------------------------------------- FUND ONE YEAR THREE YEARS FIVE YEARS SINCE CLASS INCEPTION - ------------------------------------------------------------------------------------------------------------------------ Prime Quality Money Market Fund Trust(1) 5.22% 5.16% 4.63% 4.35% ----------------------------------------------------------------------- Investor(1) 5.04% 4.99% 4.45% 4.17% - ------------------------------------------------------------------------------------------------------------------------ U.S. Government Securities Money Market Fund Trust(1) 5.04% 5.00% 4.49% 4.21% ----------------------------------------------------------------------- Investor(1) 4.90% 4.86% 4.34% 4.06% - ------------------------------------------------------------------------------------------------------------------------ Tax-Exempt Money Market Fund Trust(1) 3.21% 3.19% 2.95% 2.81% ----------------------------------------------------------------------- Investor(1) 3.09% 3.07% 2.83% 2.70% - ------------------------------------------------------------------------------------------------------------------------ Investment Grade Bond Fund Trust(3) 10.92% 7.27% 6.63% 7.04% ----------------------------------------------------------------------- Investor-- 6.31% 5.50% 5.43% 6.05% With Sales Load(2) ----------------------------------------------------------------------- Investor-- 10.49% 6.85% 6.25% 6.73% Without Sales Load(2) ----------------------------------------------------------------------- Flex-- 7.99% * * 6.19% With Sales Load(25) ----------------------------------------------------------------------- Flex--Without 9.99% * * 6.19% Sales Load(25) - ------------------------------------------------------------------------------------------------------------------------ Investment Grade Tax-Exempt Bond Fund Trust(5) 8.57% 7.17% 7.17% 6.59% Investor-- 3.98% 5.36% 6.26% 7.16% With Sales Load(4) -----------------------------------------------------------------------
B-40
- ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURN ---------------------------------------------------- FUND ONE YEAR THREE YEARS FIVE YEARS SINCE CLASS INCEPTION - ------------------------------------------------------------------------------------------------------------------------ Investor-- 8.05.% 6.71% 7.07% 7.84% Without Sales Load(4\) ----------------------------------------------------------------------- Flex--With 5.50% * * 6.20% Sales Load(26) ----------------------------------------------------------------------- Flex--Without 7.50% * * 6.20% Sales Load(26) - ------------------------------------------------------------------------------------------------------------------------ Short-Term Bond Fund Trust(7) 7.31% 6.01% 5.51% 5.47% ----------------------------------------------------------------------- Investor-- 5.07% 5.10% 4.89% 4.75% With Sales Load(8) ----------------------------------------------------------------------- Investor-- 7.19% 5.79% 5.31% 5.17% Without Sales Load(8) ----------------------------------------------------------------------- Flex--With 4.84% * * 5.42% Sales Load(28) ----------------------------------------------------------------------- Flex-Without 6.84% * * 5.42% Sales Load(28) - ------------------------------------------------------------------------------------------------------------------------ Florida Tax-Exempt Bond Fund Trust(10) 8.77% 6.60% * 6.37% ----------------------------------------------------------------------- Investor-- 4.40% 5.03% * 5.21% With Sales Load(9) ----------------------------------------------------------------------- Investor-- 8.46% 6.39% * 6.14% Without Sales Load(9) ----------------------------------------------------------------------- Flex--With 6.04% * * 5.91% Sales Load(26) -----------------------------------------------------------------------
B-41
- ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURN ---------------------------------------------------- FUND ONE YEAR THREE YEARS FIVE YEARS SINCE CLASS INCEPTION - ------------------------------------------------------------------------------------------------------------------------ Flex--Without 8.04% * * 5.91% Sales Load(26) - ------------------------------------------------------------------------------------------------------------------------ Georgia Tax-Exempt Bond Fund Trust(9) 8.37% 6.33% * 4.84% ----------------------------------------------------------------------- Investor-- 4.19% 4.76% * 3.76% With Sales Load(11) ----------------------------------------------------------------------- Investor-- 8.26% 6.12% * 4.68% Without Sales Load(11) ----------------------------------------------------------------------- Flex--With 5.74% * * 5.34% Sales Load(31) ----------------------------------------------------------------------- Flex--Without 7.74% * * 5.34% Sales Load(31) - ------------------------------------------------------------------------------------------------------------------------ Short-Term U.S. Treasury Securities Fund Trust(7) 6.30% 5.60% 5.01% 4.89% ----------------------------------------------------------------------- Investor-- 4.97% 5.03% 4.62% 4.51% With Sales Load(6) ----------------------------------------------------------------------- Investor-- 6.04% 5.38% 4.83% 4.71% Without Sales Load(6) ----------------------------------------------------------------------- Flex--With 3.90% * * 4.96% Sales Load(27) Flex--Without 5.90% * * 4.96% Sales Load(27) - ------------------------------------------------------------------------------------------------------------------------ U.S. Government Securities Fund Trust(21) 10.76% 6.97% * 7.73% ----------------------------------------------------------------------- Investor-- 6.10% 5.24% * 6.09% With Sales Load(20) -----------------------------------------------------------------------
B-42
- ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURN ---------------------------------------------------- FUND ONE YEAR THREE YEARS FIVE YEARS SINCE CLASS INCEPTION - ------------------------------------------------------------------------------------------------------------------------ Investor-- 10.23% 6.59% * 7.12% Without Sales Load(20) ----------------------------------------------------------------------- Flex-With 7.78% * * 5.89% Sales Load(23) ----------------------------------------------------------------------- Flex--Without 9.78% * * 5.89% Sales Load(23) - ------------------------------------------------------------------------------------------------------------------------ Limited-Term Federal Mortgage Securities Fund Trust(23) 7.12% 6.13% * 6.50% ----------------------------------------------------------------------- Investor-- 4.24% 5.01% * 5.80% With Sales Load(22) ----------------------------------------------------------------------- Investor-- 6.95% 5.90% * 6.51% Without Sales Load(22) ----------------------------------------------------------------------- Flex--With 4.49% * * 5.46% Sales Load(23) ----------------------------------------------------------------------- Flex--Without 6.49% * * 5.46% Sales Load(23) - ------------------------------------------------------------------------------------------------------------------------ Capital Growth Fund Trust1(3) 29.51% 27.69% 18.19% 18.16% ----------------------------------------------------------------------- Investor-- 23.85% 26.86% 16.54% 17.17% With Sales Load(4) ----------------------------------------------------------------------- Investor-- 28.71% 25.26% 17.43% 17.92% Without Sales Load(4) ----------------------------------------------------------------------- Flex--With 26.12% * * 26.26% Sales Load(26) -----------------------------------------------------------------------
B-43
- ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURN ---------------------------------------------------- FUND ONE YEAR THREE YEARS FIVE YEARS SINCE CLASS INCEPTION - ------------------------------------------------------------------------------------------------------------------------ Flex--Without 28.12% * * 26.26% Sales Load(26) - ------------------------------------------------------------------------------------------------------------------------ Sunbelt Equity Fund Trust(19) 23.86% 21.64% * 14.45% ----------------------------------------------------------------------- Investor-- 18.62% 19.56% * 12.94% With Sales Load(18) ----------------------------------------------------------------------- Investor-- 23.25% 21.10% * 13.92% Without Sales Load(18) ----------------------------------------------------------------------- Flex--With 20.48% * * 19.79% Sales Load(29) ----------------------------------------------------------------------- Flex--Without 22.48% * * 19.79% Sales Load(29) - ------------------------------------------------------------------------------------------------------------------------ Value Income Stock Fund Trust(15) 23.10% 24.37% 20.30% 19.66% ----------------------------------------------------------------------- Investor-- 18.13% 22.34% 18.89% 18.99% With Sales Load(14) ----------------------------------------------------------------------- Investor-- 22.71% 23.90% 19.80% 19.86% Without Sales Load(14) ----------------------------------------------------------------------- Flex--With 19.76% * * 23.04% Sales Load(26) ----------------------------------------------------------------------- Flex--Without 21.76% * * 23.04% Sales Load(26) - ------------------------------------------------------------------------------------------------------------------------ Mid-Cap Equity Fund Trust(17) 21.14% 20.21% * 16.40% ----------------------------------------------------------------------- Investor-- 16.07% 18.14% * 14.79% With Sales Load(16) -----------------------------------------------------------------------
B-44
- ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURN ---------------------------------------------------- FUND ONE YEAR THREE YEARS FIVE YEARS SINCE CLASS INCEPTION - ------------------------------------------------------------------------------------------------------------------------ Investor-- 20.56% 19.66% * 15.81% Without Sales Load(16) ----------------------------------------------------------------------- Flex--With 17.80% * * 18.54% Sales Load(29) ----------------------------------------------------------------------- Flex--Without 19.80% * * 18.54% Sales Load(29) - ------------------------------------------------------------------------------------------------------------------------ Balanced Fund Trust(19) 22.15% 18.66% * 14.05% - ------------------------------------------------------------------------------------------------------------------------ Investor-- 17.13% 16.77% * 12.62% With Sales Load(18) ----------------------------------------------------------------------- Investor-- 21.72% 18.26% * 13.60% Without Sales Load(18) ----------------------------------------------------------------------- Flex--With 18.85% * * 17.29% Sales Load(30) ----------------------------------------------------------------------- Flex--Without 20.85% * * 17.29% Sales Load(30) - ------------------------------------------------------------------------------------------------------------------------ Small Cap Equity Fund Trust(12) 23.59% * * 26.83% ----------------------------------------------------------------------- Flex--With 20.29% * * 17.48% Sales Load(35) ----------------------------------------------------------------------- Flex--Without 22.29% * * 19.52% Sales Load(35) - ------------------------------------------------------------------------------------------------------------------------ Emerging Markets Equity Fund Trust(12) (15.74%) * * (6.91%) - ------------------------------------------------------------------------------------------------------------------------
B-45
- ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURN ---------------------------------------------------- FUND ONE YEAR THREE YEARS FIVE YEARS SINCE CLASS INCEPTION - ------------------------------------------------------------------------------------------------------------------------ International Equity Fund Trust(33) 21.87% * * 24.03% ----------------------------------------------------------------------- Investor-- 16.83% * * 20.39% With Sales Load(32) ----------------------------------------------------------------------- Investor-- 21.39% * * 22.33% Without Sales Load(32) ----------------------------------------------------------------------- Flex--With 18.54% * * 21.57% Sales Load(32) ----------------------------------------------------------------------- Flex--Without 20.54% * * 21.57% Sales Load(32) - ------------------------------------------------------------------------------------------------------------------------ International Equity Index Fund Trust(24) 25.82% 13.91% * 11.04% ----------------------------------------------------------------------- Investor-- 20.54% 12.03% * 9.53% With Sales Load(24) ----------------------------------------------------------------------- Investor-- 25.25% 13.47% * 10.58% Without Sales Load(24) ----------------------------------------------------------------------- Flex--Without 22.50% * * 12.82% Sales Load(34) ----------------------------------------------------------------------- Flex--With 24.50% * * 12.82% Sales Load(34) - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ Small Cap Growth Stock Fund Trust * * * * ----------------------------------------------------------------------- Flex--With * * * * Sales Load ----------------------------------------------------------------------- Flex--Without * * * * Sales Load - ------------------------------------------------------------------------------------------------------------------------ Tax Sensitive Growth Stock Fund Trust * * * * - ------------------------------------------------------------------------------------------------------------------------
B-46 - ------------------------------------------------------------------------------------------------------------------------ Flex--With * * * * Sales Load - ------------------------------------------------------------------------------------------------------------------------ Flex--Without * * * * Sales Load - ------------------------------------------------------------------------------------------------------------------------
1 Commenced operations 6/8/92 2 Commenced operations 6/11/92 3 Commenced operations 7/16/92 4 Commenced operations 6/9/92 5 Commenced operations 10/21/93 6 Commenced operations 3/18/93 7 Commenced operations 3/15/93 8 Commenced operations 3/22/93 9 Commenced operations 1/18/94 10 Commenced operations 1/25/94 11 Commenced operations 1/19/94 12 Commenced operations 1/31/97 13 Commenced operations 7/1/92 14 Commenced operations 2/17/93 15 Commenced operations 2/12/93 16 Commenced operations 2/1/94 17 Commenced operations 2/2/94 18 Commenced operations 1/4/94 19 Commenced operations 1/3/94 20 Commenced operations 6/9/94 21 Commenced operations 7/31/94 22 Commenced operations 7/17/94 23 Commenced operations 6/7/94 24 Commenced operations 6/6/94 25 Commenced operations 6/1/95 26 Commenced operations 6/2/95 27 Commenced operations 6/22/95 28 Commenced operations 6/20/95 29 Commenced operations 6/5/95 30 Commenced operations 6/14/95 31 Commenced operations 6/7/95 32 Commenced operations 1/2/96 33 Commenced operations 12/1/95 34 Commenced operations 6/8/95 35 Commenced operations 6/5/97 36 Commenced operations 6/6/97 *Fund not in operation for entire period. PURCHASING SHARES Purchases and redemptions of shares of the Funds may be made on any day the New York Stock Exchange ("NYSE") is open for business. Currently, the NYSE is closed on: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. REDEEMING SHARES A Shareholder will at all times be entitled to aggregate cash redemptions from all Funds of the Trust during any 90-day period of up to the lesser of $250,000 or 1% of the Trust's net assets. The Trust reserves the right to suspend the right of redemption and/or to postpone the date of payment upon redemption for any period on which trading on the NYSE is restricted, or during the existence of an emergency (as determined by the Securities and Exchange Commission by rule or regulation) as a result of disposal or valuation of a Fund's securities is not reasonably practicable, or for such other periods as the Securities and Exchange Commission has by order permitted. The Trust also reserves the right to suspend sales of shares of a Fund for any period during which the NYSE, an Advisor, the Administrator and/or, the Custodian are not open for business. A number of Fund shareholders are institutions with significant share holdings that may be redeemed at any time. If a substantial number or amount of redemptions should occur within a relatively short period of time, a Fund may have to sell portfolio securities it would otherwise hold and incur the additional transaction costs. The sale of portfolio securities may result in the recognition of capital gains, which will be distributed annually and generally will be taxable to shareholders as ordinary income or capital gains. Shareholders are notified annually regarding the federal tax status of distributions they receive (see "Taxes"). B-47 DETERMINATION OF NET ASSET VALUE The net asset value per share of the Money Market Funds is calculated daily by the Administrator by adding the value of securities and other assets, subtracting liabilities and dividing by the number of outstanding shares. Securities will be valued by the amortized cost method which involves valuing a security at its cost on the date of purchase and thereafter (absent unusual circumstances) assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuations in general market rates of interest on the value of the instrument. While this method provides certainty in valuation, it may result in periods during which a security's value, as determined by this method, is higher or lower than the price a Fund would receive if it sold the instrument. During periods of declining interest rates, the daily yield of a Fund may tend to be higher than a like computation made by a company with identical investments utilizing a method of valuation based upon market prices and estimates of market prices for all of its portfolio securities. Thus, if the use of amortized cost by a Fund resulted in a lower aggregate portfolio value on a particular day, a prospective investor in a Fund would be able to obtain a somewhat higher yield than would result from investment in a company utilizing solely market values, and existing investors in a Fund would experience a lower yield. The converse would apply in a period of rising interest rates. A Fund's use of amortized cost and the maintenance of a Fund's net asset value at $1.00 are permitted by regulations promulgated by Rule 2a-7 under the 1940 Act, provided that certain conditions are met. The regulations also require the Trustees to establish procedures which are reasonably designed to stabilize the net asset value per share at $1.00 for the Funds. Such procedures include the determination of the extent of deviation, if any, of the Funds current net asset value per share calculated using available market quotations from the Funds amortized cost price per share at such intervals as the Trustees deem appropriate and reasonable in light of market conditions and periodic reviews of the amount of the deviation and the methods used to calculate such deviation. In the event that such deviation exceeds 1/2 of 1%, the Trustees are required to consider promptly what action, if any, should be initiated, and, if the Trustees believe that the extent of any deviation may result in material dilution or other unfair results to Shareholders, the Trustees are required to take such corrective action as they deem appropriate to eliminate or reduce such dilution or unfair results to the extent reasonably practicable. Such actions may include the sale of portfolio instruments prior to maturity to realize capital gains or losses or to shorten average portfolio maturity; withholding dividends; redeeming shares in kind; or establishing a net asset value per share by using available market quotations. In addition, if the Funds incur a significant loss or liability, the Trustees have the authority to reduce pro rata the number of shares of the Funds in each Shareholder's account and to offset each Shareholder's pro rata portion of such loss or liability from the Shareholder's accrued but unpaid dividends or from future dividends while each other Fund must annually distribute at least 90% of its investment company taxable income. The securities of the Bond, Short-Term U.S. Treasury Securities and Equity Funds are valued by the Administrator pursuant to valuations provided by an independent pricing service. The pricing service relies primarily on prices of actual market transactions as well as trader quotations. However, the service may also use a matrix system to determine valuations of fixed income securities, which system considers such factors as security prices, yields, maturities, call features, ratings and developments relating to specific securities in arriving at valuations. The procedures of the pricing service and its valuations are reviewed by the officers of the Trust under the general supervision of the Trustees. Although the methodology and procedures are identical, the net asset value per share of Trust Shares, Flex Shares and Investor Shares of the Bond, Short-Term U.S. Treasury Securities and Equity Funds may differ because of variations in the distribution and service fees and transfer agent fees charged to Investor Shares. B-48 TAXES The following is a summary of certain Federal income tax considerations generally affecting the Funds and their shareholders that are not described in the Funds' prospectus. No attempt is made to present a detailed explanation of the Federal tax treatment of the funds or their Shareholders, and the discussion here and in the Funds' prospectus is not intended as a substitute for careful tax planning. This discussion of Federal income tax consequences is based on the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations issued thereunder, in effect on the date of this Statement of Additional Information. New legislation, as well as administrative changes or court decisions, may change the conclusions expressed herein, and may have a retroactive effect with respect to the transactions contemplated herein. FEDERAL INCOME TAX In order to qualify for treatment as a regulated investment company ("RIC") under the Internal Revenue Code of 1986, as amended ("Code"), each Fund must distribute annually to its Shareholders at least the sum of 90% of its net investment income excludable from gross income plus 90% of its investment company taxable income (generally, net investment income plus net short-term capital gain) ("Distribution Requirement") and also must meet several additional requirements. Among these requirements are the following: (i) at least 90% of a Fund's gross income each taxable year must be derived from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of stock or securities, or certain other income; (ii) at the close of each quarter of a Fund's taxable year, at least 50% of the value of its total assets must be represented by cash and cash items, U.S. Government securities, securities of other RIC's and other securities, with such other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of a Fund's assets and that does not represent more than 10% of the outstanding voting securities of such issuer; and (iii) at the close of each quarter of a Fund's taxable year, not more than 25% of the value of its assets may be invested in securities (other than U.S. Government securities or the securities of other RIC's) of any one issuer, or of two or more issuers engaged in same or similar businesses if the Fund owns at least 20% of the voting power of such issuers. In addition, each Fund will distribute by the end of any calendar year 98% of its ordinary income for that year and 98% of its capital gain net income for the one-year period ending on October 31 of that calendar year, plus certain other amounts. Each Fund intends to make sufficient distributions prior to the end of each calendar year to avoid liability for the federal excise tax applicable to regulated investment companies. If, at the close of each quarter of its taxable year, at least 50% of the value of a Fund's total assets consists of obligations the interest on which is excludable from gross income, a Fund may pay "exempt-interest dividends," as defined in Section 852(b)(5) of the Code, to its shareholders. As noted in the Prospectus, the Tax-Exempt Money Market Fund, the Investment Grade Tax-Exempt Bond Fund, and the State Tax-Exempt Bond Funds intend to pay exempt-interest dividends. Exempt-interest dividends are excludable from a Shareholder's gross income for regular Federal income tax purposes, but may nevertheless be subject to the alternative minimum tax (the "Alternative Minimum Tax") imposed by Section 55 of the Code or the environmental tax (the "Environmental Tax") imposed by Section 59A of the Code. The Alternative Minimum Tax is imposed at the rate of 26% (with a maximum rate of 28%) in the case of non-corporate taxpayers and at the rate of 20% in the case of corporate taxpayers, to the extent it exceeds the taxpayer's regular tax liability. The B-49 Environmental Tax is imposed at the rate of 0.12% and applies only to corporate taxpayers. The Alternative Minimum Tax and the Environmental Tax may be imposed in two circumstances. First, exempt-interest dividends derived from certain "private activity bonds" issued after August 7, 1986, will generally be an item of tax preference and therefore potentially subject to the Alternative Minimum Tax for both corporate and non-corporate taxpayers and the Environmental Tax for corporate taxpayers only. Second, in the case of exempt-interest dividends received by corporate Shareholders, all exempt-interest dividends, regardless of when the bonds from which they are derived were issued or whether they are derived from private activity bonds, will be included in the corporation's "adjusted current earnings," as defined in Section 56(g) of the Code, in calculating the corporation's alternative minimum taxable income for purposes of determining the Alternative Minimum Tax and the Environmental Tax. For tax years beginning after December 31, 1997, the Alternative Minimum Tax is repealed for certain corporations. Distributions of exempt-interest dividends may result in additional Federal income tax consequences to shareholders in Tax-Exempt Funds. For example, interest on indebtedness incurred by Shareholders to purchase or carry shares of a Tax-Exempt Fund will not be deductible for Federal income tax purposes to the extent that the Fund distributes exempt interest dividends during the taxable year. The deduction otherwise allowable to property and casualty insurance companies for "losses incurred" will be reduced by an amount equal to a portion of exempt-interest dividends received or accrued during any taxable year. Certain foreign corporations engaged in a trade or business in the United States will be subject to a "branch profits tax" on their "dividend equivalent amount" for the taxable year, which will include exempt-interest dividends. Certain Subchapter S corporations may also be subject to taxes on their "passive investment income," which could include exempt-interest dividends. Up to 85% of the Social Security benefits or railroad retirement benefits received by an individual during any taxable year will be included in the gross income of such individual if the individual's "modified adjusted gross income" (which includes exempt-interest dividends) plus one-half of the Social Security benefits or railroad retirement benefits received by such individual during that taxable year exceeds the base amount described in Section 86 of the Code. A Tax-Exempt Fund may not be an appropriate investment for persons (including corporations and other business entities) who are "substantial users" (or persons related to such users) of facilities financed by industrial development or private activity bonds. A "substantial user" is defined generally to include certain persons who regularly use in a trade or business a facility financed from the proceeds of industrial development bonds or private activity bonds. Such entities or persons should consult their tax advisors before purchasing shares of a Tax-Exempt Fund. Issuers of bonds purchased by a Tax-Exempt Fund (or the beneficiary of such bonds) may have made certain representations or covenants in connection with the issuance of such bonds to satisfy certain requirements of the Code that must be satisfied subsequent to the issuance of such bonds. Investors should be aware that exempt-interest dividends derived from such bonds may become subject to Federal income taxation retroactively to the date of issuance of the bonds to which such dividends are attributable thereof if such representations are determined to have been inaccurate or if the issuer of such bonds (or the beneficiary of such bonds) fails to comply with such covenants. Any gain or loss recognized on a sale or redemption of shares of a Fund by a Shareholder who is not a dealer in securities will generally be treated as long-term capital gain or loss if the shares have been held for more than eighteen months, mid-term if the shares have been held for over one year but not for over eighteen months, and short-term if for a year or less. If shares held for six months or less are sold or redeemed for a loss, two special rules apply: First, if shares on which a net capital gain distribution has been received are subsequently sold or redeemed, and such shares have been held for six months or less, any loss recognized will be treated as long-term B-50 capital loss to the extent of the long-term capital gain distributions. Second, any loss recognized by a Shareholder upon the sale or redemption of shares of a Tax-Exempt Fund held for six months or less will be disallowed to the extent of any exempt-interest dividends received by the Shareholder with respect to such shares. The Funds will make annual reports to Shareholders of the Federal income tax status of all distributions. FOREIGN TAXES Dividends and interests received by a Fund may be subject to income, withholding or other taxes imposed by foreign countries and U.S. possessions that would reduce the yield on the Fund's stock or securities. Tax conventions between certain countries and the United States may reduce or eliminate these taxes. Foreign countries generally do not impose taxes on capital gains with respect to investments by foreign investors. If any of the International Equity Index, International Equity, and Emerging Markets Equity Funds meets the Distribution Requirement, and if more than 50% of the value of such Fund's total assets at the close of its taxable year consists of stock or securities of foreign corporations, such Fund will be eligible to, and will, file an election with the Internal Revenue Service that will enable Shareholders, in effect, to receive the benefit of the foreign tax credit with respect to any foreign and U.S. possessions income taxes paid by the Fund. Pursuant to the election, each Fund will treat those taxes as dividends paid to its Shareholders. Each Shareholder will be required to include a proportionate share of those taxes in gross income as income received from a foreign source and must treat the amount so included as if the Shareholder had paid the foreign tax directly. The Shareholder may then either deduct the taxes deemed paid by him or her in computing his or her taxable income or, alternatively, use the foregoing information in calculating the foreign tax credit against the Shareholders' Federal income tax. In no event shall a Shareholder be allowed a foreign tax credit with respect to shares in a Fund if such shares are held by the Shareholder for 15 days or less during the 30-day period beginning on the date which is 15 days before the date on which such shares become ex-dividend with respect to such dividend. If any of the three above-mentioned Funds make the election, such Fund will report annually to its Shareholders the respective amounts per share of the Fund's income from sources within, and taxes paid to, foreign countries and U.S. possessions. The International Equity Index, International Equity, and Emerging Markets Equity Funds' transactions in foreign currencies and forward foreign currency contracts will be subject to special provisions of the Code that, among other things, may affect the character of gains and losses realized by Funds (I.E., may effect whether gains or losses are ordinary or capital), accelerate recognition of income to the fund and defer Fund losses. These rules could therefore affect the character, amount and timing of distributions to Shareholders. These provisions also may require the Funds to mark-to-market certain types of the positions in its portfolio (I.E., treat them as if they were closed out) which may cause the Funds to recognize income without receiving cash with which to make distributions in amounts necessary to satisfy the 90% and 98% distribution requirements for avoiding income and excise taxes. Each Fund will monitor its transactions, will make the appropriate tax elections, and will make the appropriate entries in the books and records when it acquires any foreign currency or forward foreign currency contract in order to mitigate the effect of these rules and prevent disqualification of the Fund as a RIC and minimize the imposition of income and excise taxes. FUND TRANSACTIONS The Trust has no obligation to deal with any dealer or group of dealers in the execution of transactions in portfolio securities. Subject to policies established by the Trustees, an Advisor is responsible for placing the orders to execute transactions for a Fund. In placing orders, it is the policy of the Trust to seek to obtain the best net results B-51 taking into account such factors as price (including the applicable dealer spread), the size, type and difficulty of the transaction involved, the firm's general execution and operational facilities, and the firm's risk in positioning the securities involved. While an Advisor generally seeks reasonably competitive spreads or commissions, the Trust will not necessarily be paying the lowest spread or commission available. The money market securities in which the Funds invest are traded primarily in the over-the-counter market. Bonds and debentures are usually traded over-the-counter, but may be traded on an exchange. Where possible, an Advisor will deal directly with the dealers who make a market in the securities involved except in those circumstances where better prices and execution are available elsewhere. Such dealers usually are acting as principal for their own account. On occasion, securities may be purchased directly from the issuer. Money market securities are generally traded on a net basis and do not normally involve either brokerage commissions or transfer taxes. The cost of executing portfolio securities transactions of the Trust will primarily consist of dealer spreads and underwriting commissions. TRADING PRACTICES AND BROKERAGE The Trust selects brokers or dealers to execute transactions for the purchase or sale of portfolio securities on the basis of its judgment of their professional capability to provide the service. The primary consideration is to have brokers or dealers provide transactions at best price and execution for the Trust. Best price and execution includes many factors, including the price paid or received for a security, the commission charged, the promptness and reliability of execution, the confidentiality and placement accorded the order and other factors affecting the overall benefit obtained by the account on the transaction. The Trust's determination of what are reasonably competitive rates is based upon the professional knowledge of its trading department as to rates paid and charged for similar transactions throughout the securities industry. In some instances, the Trust pays a minimal share transaction cost when the transaction presents no difficulty. Some trades are made on a net basis where the Trust either buys securities directly from the dealer or sells them to the dealer. In these instances, there is no direct commission charged but there is a spread (the difference between the buy and sell price) which is the equivalent of a commission. The Trust may allocate out of all commission business generated by all of the funds and accounts under management by an Advisor, brokerage business to brokers or dealers who provide brokerage and research services. These research services include advice, either directly or through publications or writings, as to the value of securities, the advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities; furnishing of analyses and reports concerning issuers, securities or industries; providing information on economic factors and trends, assisting in determining portfolio strategy, providing computer software used in security analyses, and providing portfolio performance evaluation and technical market analyses. Such services are used by an Advisor in connection with its investment decision-making process with respect to one or more funds and accounts managed by it, and may not be used exclusively with respect to the fund or account generating the brokerage. As provided in the Securities Exchange Act of 1934 (the "1934 Act") higher commissions may be paid to broker-dealers who provide brokerage and research services than to broker-dealers who do not provide such services if such higher commissions are deemed reasonable in relation to the value of the brokerage and research services provided. Although transactions are directed to broker-dealers who provide such brokerage and research services, the Trust believes that the commissions paid to such broker-dealers are not, in general, higher than commissions that would be paid to broker-dealers not providing such services and that such commissions are reasonable in relation to the value of the brokerage and research services provided. In addition, portfolio transactions which B-52 generate commissions or their equivalent are directed to broker-dealers who provide daily portfolio pricing services to the Trust. Subject to best price and execution, commissions used for pricing may or may not be generated by the funds receiving the pricing service. An Advisor may place a combined order for two or more accounts or funds engaged in the purchase or sale of the same security if, in its judgment, joint execution is in the best interest of each participant and will result in best price and execution. Transactions involving commingled orders are allocated in a manner deemed equitable to each account or fund. It is believed that the ability of the accounts to participate in volume transactions will generally be beneficial to the accounts and funds. Although it is recognized that, in some cases, the joint execution of orders could adversely affect the price or volume of the security that a particular account or Fund may obtain, it is the opinion of each Advisor and the Trust's Board of Trustees that the advantages of combined orders outweigh the possible disadvantages of separate transactions. Consistent with the Conduct Rules of the National Association of Securities Dealers, Inc., and subject to seeking best price and execution, the Funds, at the request of the Distributor, give consideration to sales of shares of the Trust as a factor in the selection of brokers and dealers to execute Trust portfolio transactions. It is expected that the Trust may execute brokerage or other agency transactions through the Distributor or an affiliate of an Advisor, both of which are registered broker-dealers, for a commission in conformity with the 1940 Act, the 1934 Act and rules promulgated by the SEC. Under these provisions, the Distributor or an affiliate of an Advisor is permitted to receive and retain compensation for effecting portfolio transactions for the Trust on an exchange if a written contract is in effect between the Distributor and the Trust expressly permitting the Distributor or an affiliate of an Advisor to receive and retain such compensation. These rules further require that commissions paid to the Distributor by the Trust for exchange transactions not exceed "usual and customary" brokerage commissions. The rules define "usual and customary" commissions to include amounts which are "reasonable and fair compared to the commission, fee or other renumeration received or to be received by other brokers in connection with comparable transactions involving similar securities being purchased or sold on a securities exchange during a comparable period of time." In addition, the Trust may direct commission business to one or more designated broker-dealers in connection with such broker/dealer's provision of services to the Trust or payment of certain Trust expenses (E.G., custody, pricing and professional fees). The Trustees, including those who are not "interested persons" of the Trust, have adopted procedures for evaluating the reasonableness of commissions paid to the Distributor, and will review these procedures periodically. For the fiscal year ended May 31, 1998, the Funds paid the following brokerage commissions with respect to portfolio transactions: B-53
- ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL $ AMOUNT OF TOTAL $ AMOUNT OF % OF TOTAL BROKERAGE % OF TOTAL BROKERED BROKERAGE BROKERAGE COMMISSIONS PAID TO TRANSACTIONS EFFECTED COMMISSIONS PAID COMMISSIONS PAID TO AFFILIATED BROKERS IN FYE THROUGH AFFILIATED IN FYE 5/31/98 AFFILIATES IN FYE 5/31/98(2) BROKERS FYE 5/31/98(3) 5/31/98(1) FUND - ---------------------------------------------------------------------------------------------------------------------------------- Prime Quality Money $ 165,811 $ 165,811 100% 100% Market Fund U.S. Government $ 151,183 $ 151,183 100% 100% Securities Money Market Fund Tax-Exempt Money Market $ 0 $ 0 0% 0% Fund Investment Grade Bond $ 14,956 $ 14,956 100% 100% Fund Investment Grade Tax- $ 5,295 $ 5,295 100% 100% Exempt Bond Fund Capital Growth Fund $ 5,416,600 $ 77,348 1.43% 27.4% Value Income Stock Fund $ 5,107,117 $ 68,315 1.34% 32.8% Short-Term Bond Fund $ 0 $ 0 0% 0% Short-Term U.S. Treasury $ 0 $ 0 0% 0% Securities Fund Sunbelt Equity Fund $ 783,859 $ 2,997 0.38% 55.6% Balanced Fund $ 378,975 $ 7,126 1.88% 50.1% Mid-Cap Equity Fund $ 1,029,108 $ 11,115 1.08% 46.6% Florida Tax-Exempt Bond $ 0 $ 0 0% 0% Fund Georgia Tax-Exempt Bond $ 423 $ 423 100% 100% Fund U.S. Government $ 0 $ 0 0% 0% Securities Fund Limited-Term Federal $ 1,295 $ 1,295 100% 100% Mortgage Securities Fund - ----------------------------------------------------------------------------------------------------------------------------------
B-54
- ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL $ AMOUNT OF TOTAL $ AMOUNT OF % OF TOTAL BROKERAGE % OF TOTAL BROKERED BROKERAGE BROKERAGE COMMISSIONS PAID TO TRANSACTIONS EFFECTED COMMISSIONS PAID COMMISSIONS PAID TO AFFILIATED BROKERS IN FYE THROUGH AFFILIATED IN FYE 5/31/98 AFFILIATES IN FYE 5/31/98(2) BROKERS FYE 5/31/98(3) 5/31/98(1) FUND - ---------------------------------------------------------------------------------------------------------------------------------- Small Cap Equity Fund $ 967,876 $ 5,851 0.60% 50% Emerging Markets Equity $ 252,185 $ 0 0% 0% Fund International Equity $ 21,888 $ 0 0% 0% Index Fund International Equity Fund $ 3,098,062 $ 0 0% 0% Small Cap Growth Stock * * * * Fund Tax Sensitive Growth * * * * Stock Fund - ----------------------------------------------------------------------------------------------------------------------------------
1. These amounts refer to brokerage commissions paid to, or brokered transactions effected through, SEI Investments Distribution Co., the Trust's prinicpal underwriter. For the fiscal years ended May 31, 1997 and 1996, the Funds paid the following brokerage commissions with respect to portfolio transactions:
- ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- TOTAL $ AMOUNT OF BROKERAGE TOTAL $ AMOUNT OF BROKERED COMMISSIONS PAID COMMISSIONS PAID TO AFFILIATES ------------------------------------------------------------------------ 1997 1996 1997 1996 FUND - ----------------------------------------------------------------------------------------------------------------- Prime Quality Money Market Fund $ 122,053 $ 0 $ 122,053 $ 0 U.S. Government Securities Money $ 141,850 $ 0 $ 141,850 $ 0 Market Fund Tax-Exempt Money Market Fund $ 0 $ 0 $ 0 $ 0 Investment Grade Bond Fund $ 17,502 $ 0 $ 17,502 $ 0
B-55
- ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- TOTAL $ AMOUNT OF BROKERAGE TOTAL $ AMOUNT OF BROKERED COMMISSIONS PAID COMMISSIONS PAID TO AFFILIATES ------------------------------------------------------------------------ 1997 1996 1997 1996 FUND - ----------------------------------------------------------------------------------------------------------------- Investment Grade Tax-Exempt Bond Fund $ 3,552 $ 0 $ 3,552 $ 0 Short-Term Bond Fund $ 0 $ 0 $ 0 $ 0 Short-Term U.S. Treasury Securities $ 0 $ 0 $ 0 $ 0 Fund Florida Tax-Exempt Bond Fund $ 169 $ 0 $ 169 $ 200 Georgia Tax-Exempt Bond Fund $ 201 $ 0 $ 201 $ 135 U.S. Government Securities Fund $ 0 $ 0 $ 0 $ 0 Limited-Term Federal Mortgage $ 2,053 $ 0 $ 2,053 $ 73 Securities Fund Capital Growth Fund $ 3,228,364 $ 3,339,393 $ 3,228,364 $ 34,827 Sunbelt Equity Fund $ 903,669 $ 904,698 $ 903,669 $ 5,202 Value Income Stock Fund $ 4,600,079 $ 4,325,977 $ 4,600,079 $ 37,379 Mid-Cap Equity Fund $ 1,090,559 $ 191,298 $ 1,090,559 $ 18,224 Balanced Fund $ 195,918 $ 169,222 $ 195,918 $ 4,280 Small Cap Equity Fund $ 229,856 * $ 229,856 * Emerging Markets Equity Fund $ 144,635 * $ 0 * International Equity Index Fund $ 94,672 $ 1,532,834 $ 0 $ 71 International Equity Fund $ 2,875,911 $ 129,411 $ 0 $ 0 Small Cap Growth Stock Fund * * * * Tax Sensitive Growth Stock Fund * * * * - ----------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------
*Not in operation during the period. For the fiscal years ended May 31, 1998 and 1997, the portfolio turnover rate for each of the non-money market Funds was as follows:
- ------------------------------------------------------------------------ - ------------------------------------------------------------------------ TURNOVER RATE --------------------- FUND 1998 1997 - ------------------------------------------------------------------------ Investment Grade Bond Fund 109% 298% Investment Grade Tax-Exempt Bond Fund 378% 489%
B-56
- ------------------------------------------------------------------------ - ------------------------------------------------------------------------ TURNOVER RATE --------------------- FUND 1998 1997 - ------------------------------------------------------------------------ Short-Term U.S. Treasury Securities Fund 39% 93% Short-Term Bond Fund 87% 118% U.S. Government Securities Fund 14% 21% Limited-Term Federal Mortgage Securities Fund 163% 133% Florida Tax-Exempt Bond Fund 69% 135% Georgia Tax-Exempt Bond Fund 7% 15% Capital Growth Fund 194% 141% Value Income Stock Fund 99% 105% Mid-Cap Equity Fund 129% 152% Small-Cap Equity Fund 55% 27% Balanced Fund 154% 197% Sunbelt Equity Fund 70% 72% Emerging Markets Equity 74% 24% International Equity Fund 108% 139% International Equity Index Fund 1% 2% Small Cap Growth Stock Fund * * Tax Sensitive Growth Stock Fund * * - ------------------------------------------------------------------------ - ------------------------------------------------------------------------
*Not in operation during the period. DESCRIPTION OF SHARES The Declaration of Trust authorizes the issuance of an unlimited number of shares and classes of shares of the Funds each of which represents an equal proportionate interest in that Fund with each other share. Shares are entitled upon liquidation to a PRO RATA share in the net assets of the Funds. Shareholders have no preemptive rights. The Declaration of Trust provides that the Trustees of the Trust may create additional series of shares or classes of series. All consideration received by the Trust for shares of any additional series and all assets in which such consideration is invested would belong to that series and would be subject to the liabilities related thereto. Share certificates representing shares will not be issued. B-57 SHAREHOLDER LIABILITY The Trust is an entity of the type commonly known as a "Massachusetts business trust." Under Massachusetts law, shareholders of such a trust could, under certain circumstances, be held personally liable as partners for the obligations of the trust. Even if, however, the Trust were held to be a partnership, the possibility of the Shareholders' incurring financial loss for that reason appears remote because the Trust's Declaration of Trust contains an express disclaimer of Shareholder liability for obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by or on behalf of the Trust or the Trustees, and because the Declaration of Trust provides for indemnification out of the Trust property for any Shareholder held personally liable for the obligations of the Trust. LIMITATION OF TRUSTEES' LIABILITY The Declaration of Trust provides that a Trustee shall be liable only for his own willful defaults and, if reasonable care has been exercised in the selection of officers, agents, employees or investment advisors, shall not be liable for any neglect or wrongdoing of any such person. The Declaration of Trust also provides that the Trust will indemnify its Trustees and officers against liabilities and expenses incurred in connection with actual or threatened litigation in which they may be involved because of their offices with the Trust unless it is determined in the manner provided in the Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the Trust. However, nothing in the Declaration of Trust shall protect or indemnify a Trustee against any liability for his willful misfeasance, bad faith, gross negligence or reckless disregard of his duties. YEAR 2000 The Trust depends on the smooth functioning of computer systems in almost every aspect of its business. Like other mutual funds, businesses and individuals around the world, the Trust could be adversely affected if the computer systems used by its service providers do not properly process dates on and after January 1, 2000 and distinguish between the year 2000 and the year 1900. The Trust has asked its service providers whether they expect to have their computer systems adjusted for the year 2000 transition, and received assurances from each from each that its system is expected to accommodate the year 2000 without material adverse consequences to the Trust. The Trust and its shareholders may experience losses if these assurances prove to be incorrect or as a result of year 2000 computer difficulties experienced by issuers of portfolio securities or third parties, such as custodians, banks, broker-dealers or others with which the Trust does business. 5% AND 25% SHAREHOLDERS As of July 14, 1998, the following persons were the only persons who were record owners (or to the knowledge of the Trust, beneficial owners) of 5% and 25% or more of the shares of the Funds. Persons who owned of record or beneficially more than 25% of a Fund's outstanding shares may be deemed to control the Fund within the meaning of the Act. The Trust believes that most of the shares of the Trust Class of the Funds were held for the record owner's fiduciary, agency or custodial customers. TRUST SHARES B-58
NAME AND NUMBER OF SHARES % OF CLASS FUND -------- ---------------- ---------- ---- ADDRESS ------- Prime Quality Money Market Fund SunTrust Bank, Atlanta 1,771,602,838.6700 95.70 P.O. Box 105504 Atlanta, GA 30348 US Government Securities Money SunTrust Bank, Atlanta 422,353,070.5500 98.15 Market Fund P.O. Box 105504 Atlanta, GA 30348 Tax Exempt Money Market Fund SunTrust Bank, Atlanta 545,665,981,0300 100.00 P.O. Box 105504 Atlanta, GA 30348 Investment Grade Bond Fund Trustman 48,241,619,6730 65.80 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 16,573,843.1970 22.61 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 4,822,641.7760 6.58 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Investment Grade Tax Exempt Bond Trustman 7,960,908.5930 61.59 Fund Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 3,199,304.7600 24.75 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870
B-59
NAME AND NUMBER OF SHARES % OF CLASS FUND -------- ---------------- ---------- ---- ADDRESS ------- Trustman 1,765,397.9590 13.66 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Capital Growth Fund Trustman 57,503,738.9520 63.00 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 19,503,941.5190 21.37 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Value Income Stock Fund Trustman 72,277,511.3130 60.14 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 28,391,563.0480 23.62 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Short-Term U.S. Treasury Securities Trustman 2,129,919.1430 44.62 Fund Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 1,834,564.6530 38.43 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870
B-60
NAME AND NUMBER OF SHARES % OF CLASS FUND -------- ---------------- ---------- ---- ADDRESS ------- Trustman 684,962.2520 14.35 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Short-Term Bond Fund Trustman 5,747,258.8000 46.25 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 5,639,917.0680 43.21 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Sunbelt Equity Fund Trustman 16,392,594.6100 59.45 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 6,526,198.6690 23.67 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 1,433,567.4920 5.20 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870
B-61
NAME AND NUMBER OF SHARES % OF CLASS FUND -------- ---------------- ---------- ---- ADDRESS ------- Mid-Cap Equity Fund Trustman 12,589,416.6140 53.52 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 8,827,011.0380 37.52 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Balanced Fund Trustman 9,513,571.4340 63.33 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Florida Tax-Exempt Bond Fund Trustman 6,516,097.0450 70.74 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 1,677,456.4180 18.21 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 1,018,316.3380 11.05 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Georgia Tax-Exempt Bond Fund Trustman 3,242,799.6550 46.21 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870
B-62
NAME AND NUMBER OF SHARES % OF CLASS FUND -------- ---------------- ---------- ---- ADDRESS ------- Trustman 2,727,478.5660 38.87 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 1,046,579.0340 14.92 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 International Equity Index Fund Trustman 3,268.694.8160 79.05 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 325,899.2180 7.88 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870
B-63
NAME AND NUMBER OF SHARES % OF CLASS FUND -------- ---------------- ---------- ---- ADDRESS ------- International Equity Fund Trustman 25,150,125.1900 59.26 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 13,976,121.7680 33.28 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 2,422,779.7960 5.71 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 U.S. Government Securities Fund Trustman 1,687,909.2120 48.64 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 933,284.3680 26.89 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 817,640.7420 23.56 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Limited Term Federal Mortgage Trustman 8,567,666.2610 62.45 Securities Fund Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870
B-64
NAME AND NUMBER OF SHARES % OF CLASS FUND -------- ---------------- ---------- ---- ADDRESS ------- Trustman 4,303,123.9380 31.36 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Emerging Markets Equity Fund Trustman 3,271,650.7040 84.77 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 496,336.6320 12.86 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Small Cap Equity Fund Trustman 17,708,443.010 58.94 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 9,468,242.5490 32.16 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 INVESTOR SHARES - --------------- NAME AND NUMBER OF SHARES % OF CLASS FUND -------- ---------------- ---------- ---- ADDRESS ------- Prime Quality Money Market Fund BHC Securities Inc 411,944,765.8000 84.25 Attn: Cash Sweeps Dept. 2005 Market Street One Commerce Square, 11th Floor Philadelphia, PA 19103-7042
B-65
NAME AND NUMBER OF SHARES % OF CLASS FUND -------- ---------------- ---------- ---- ADDRESS ------- U.S. Government Securities Money BHC Securities Inc 28,381,956.9800 48.49 Market Fund Attn: Cash Sweeps Dept. 2005 Market Street One Commerce Square, 11th Floor Philadelphia, PA 19103-7042 Akerman, Senterfitt & Eidson 5,194,830.9900 8.87 Attorney Account P.O. Box 231 Orlando, FL 32802-0231 Tax Exempt Money Market Fund BHC Securities Inc 116,228,508.4600 69.32 Attn: Cash Sweeps Dept. 2005 Market Street One Commerce Square, 11th Floor Philadelphia, PA 19103-7042 STCM 28,600,00.000 17.06 Omnibus Account P.O. Box 4418, Ctr.3910 Atlanta, GA 30302-4418 Investment Grade Bond Fund BHC Securities Inc. 1,678,711.9560 54.61 Trade House Account Attn: Mutual Funds Dept One Commerce Square, 2005 Market Street Philadelphia, PA 19103-7042
B-66
NAME AND NUMBER OF SHARES % OF CLASS FUND -------- ---------------- ---------- ---- ADDRESS ------- Investment Grade Tax-Exempt Bond BHC Securities Inc. 733,560.8630 31.01 Fund Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042 Capital Growth Fund BHC Securities Inc. 6,981,000.2450 42.64 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042 Value Income Stock Fund BHC Securities Inc. 8,431,033.5060 56.79 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042 Short-Term U.S. Treasury BHC Securities Inc. 114,364.5720 40.50 Securities Fund Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042
B-67
NAME AND NUMBER OF SHARES % OF CLASS FUND -------- ---------------- ---------- ---- ADDRESS ------- Clarence A. Rittenhouse & 64,742.5960 22.92 Margaret S. Rittenhouse JT WROS 12993 Lampadaire Drive Creve Coeur, MO 63141-7361 International Investment 50,179.3010 17.77 Conference Inc. Attn: Sandy Lawrence 6310 Sunset Drive Miami, FL 33143-4823 Short-Term Bond Fund BHC Securities Inc. 132,052.2330 70.04 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042 Bartow Memorial Hospital 12,854.2940 6.82 Foundation Inc. 1239 East Main Street Bartow, FL 33830-5005 Sunbelt Equity Fund BHC Securities Inc. 1,123,893.6480 55.50 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042
B-68
NAME AND NUMBER OF SHARES % OF CLASS FUND -------- ---------------- ---------- ---- ADDRESS ------- Mid-Cap Equity Fund BHC Securities Inc. 1,231,298.3630 69.56 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042 Balanced Fund BHC Securities Inc. 428,666.5920 62.38 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042 Florida Tax-Exempt Bond Fund BHC Securities Inc. 99,276.5640 30.93 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042 Dexter Hawks & 33,415.0370 10.41 Joanne Hawks JT WROS 26 Sea Lane - Cornfield Point Old Saybrook, CT 06745-1923 Mildred Meinhart Rast 31,390.8780 9.78 821 Lake Port Boulevard Apt. #A404 Leesburg, FL 34748-7698
B-69
NAME AND NUMBER OF SHARES % OF CLASS FUND -------- ---------------- ---------- ---- ADDRESS ------- Georgia Tax-Exempt Bond Fund BHC Securities Inc. 195,517.1970 55.94 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042 Patrick J. Doran & 30,776.5460 8.80 Norma R. Doran JTTEN 2024 Fisher Trail NE Atlanta, GA 30345-3429 International Equity Index Fund BHC Securities Inc. 337,637.2930 70.20 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042 Community First National Bank 35,953.1240 7.48 RPO Tyler 401(k) RSP Attn: Kathy Lindstrom Main At Broadway Fargo, ND 58103-1906 International Equity Fund BHC Securities Inc. 925,110.9480 77.11 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042
B-70
NAME AND NUMBER OF SHARES % OF CLASS FUND -------- ---------------- ---------- ---- ADDRESS ------- U.S. Government Securities Fund BHC Securities, Inc. 288,086.2340 95.44 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042 Limited-Term Federal Mortgage BHC Securities Inc. 227,837.2670 86.86 Securities Fund Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042 FLEX SHARES - ----------- NAME AND NUMBER OF SHARES % OF CLASS FUND -------- ---------------- ---------- ---- ADDRESS ------- Short-Term U.S. Treasury BHC Securities Inc. 16,187,4670 11.07 Securities Fund FAO 21558256 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042
B-71
NAME AND NUMBER OF SHARES % OF CLASS FUND -------- ---------------- ---------- ---- ADDRESS ------- BHC Securities Inc. 11,385.1660 7.78 FAO 20216122 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042 BHC Securities Inc. 7,778.0200 5.32 FAO 21180400 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042 BHC Securities Inc. 7,531.7030 5.15 FAO 20834830 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042 Short-Term Bond Fund BHC Securities Inc. 23,074.0820 13.08 FAO 21549889 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042
B-72
NAME AND NUMBER OF SHARES % OF CLASS FUND -------- ---------------- ---------- ---- ADDRESS ------- BHC Securities Inc. 9,646.1260 5.47 FAO 21180400 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042 Florida Tax-Exempt Bond Fund BHC Securities, Inc. 150,076.6860 16.35 FAO 20439207 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042 BHC Securities Inc. 50,204.2460 5.47 FAO 20951046 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042 Georgia Tax-Exempt Bond Fund BHC Securities Inc. 70,480.8470 8.16 FAO 21141197 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042
B-73
NAME AND NUMBER OF SHARES % OF CLASS FUND -------- ---------------- ---------- ---- ADDRESS ------- International Equity Index Fund BHC Securities Inc. 28,461.6380 25.08 FAO 20519082 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042 BHC Securities, Inc. 5,833.0970 5.14 FAO 21119083 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042 U.S. Government Securities Fund BHC Securities, Inc. 23,978.8070 5.82 FAO 21180443 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042 Limited-Term Federal Mortgage BHC Securities Inc. 11,214.5540 7.45 Securities Fund FAO 21838525 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042
B-74 EXPERTS The financial statements as of May 31, 1998 have been audited by Arthur Anderen, LLP, Independent Public Accountants, as indicated in their report dated July 24, 1998 with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report. B-75 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders and Board of Trustees STI Classic Funds: We have audited the accompnaying statements of net assets of the Value Income Stock, Mid-Cap Equity, Small Cap Equity, Capital Growth, Balanced, Emerging Markets Equity, International Equity Index, International Equity, Sunbelt Equity, Investment Grade Tax-Exempt Bond, Florida Tax-Exempt Bond, Georgia Tax-Exempt Bond, Investment Grade Bond, Short-Term Bond, Short-Term U.S. Treasury Securities, Limited-Term Federal Mortgage Securities, and U.S. Government Securities Funds of STI Classic Funds (the "Trust") as of May 31, 1998, and the related statemnets of operations, changes in net assets, and financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on thes financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards requires that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlighs are free of material misstatement. An audit inclludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 1998, by correspondence with th ecustodian and the application of alternative auditing procedures with respect to unsettled securities transactions. An audity also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Value Income Stock, Mid-Cap Equity, Small Cap Equity, Capital Growth, Balanced, Emerging Markets Equity, International Equity Index, International Equity, Sunbelt Equity, Investment Grade Tax-Exempt Bond, Florida Tax-Exempt Bond, Georgia Tax-Exempt Bond, Investment Grade Bond, Short-Term Bond, Short-Term U.S. Treasury Securities, Limited-Term Federal Mortgage Securities, and U.S. Government Securities Funds of STI Classic Funds as of May 31, 1998, the results of their operations, changes in their net assets, and financial highlights for the periods presented, in conformity wioth generally accepted accounting principles. ARTHUR ANDERSON LLP Philadelphia, PA July 24, 1998 37 STATEMENT OF NET ASSETS - ----------------------------------------------------------- - ----------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1998
VALUE INCOME STOCK FUND - ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- COMMON STOCKS (92.3%) BASIC MATERIALS (12.4%) Allegheny Teledyne 1,064,900 $ 24,759 B.F. Goodrich 305,400 15,652 Consolidated Papers 573,400 16,593 Eastman Chemical 309,800 20,757 Engelhard 1,110,600 23,114 Hercules 473,300 20,855 Morton International 387,900 11,807 Nalco Chemical 196,500 7,369 PPG Industries 218,700 15,938 Reynolds Metals 517,100 29,992 Sonoco Products 555,830 19,419 Union Camp 263,200 14,394 Weyerhaeuser 355,900 18,084 Witco Chemical 277,800 10,539 Worthington Industries 776,800 13,691 ----------- 262,963 ----------- CAPITAL GOODS (12.0%) AMP 830,000 31,540 Cooper Industries 246,300 15,856 Crown Cork & Seal 652,400 33,843 Federal Signal 737,600 16,504 General Signal 359,800 14,797 Harris 440,000 21,202 Johnson Controls 283,200 16,850 National Service Industries 189,700 9,675 Pall 1,367,500 27,094 Tecumseh Products, Cl A 308,300 15,376 Tenneco 686,900 28,592 Thomas & Betts 423,300 22,620 ----------- 253,949 ----------- COMMUNICATION SERVICES (5.4%) Alltel 790,300 31,167 Ameritech 967,300 41,050 Frontier 347,500 10,577 GTE 553,900 32,299 ----------- 115,093 ----------- CONSUMER CYCLICALS (8.7%) American Greetings, Cl A 442,300 $ 21,009 Genuine Parts 607,600 20,620 H & R Block 517,100 22,752 ITT Industries 562,300 20,735 J.C. Penney 312,600 22,449 May Department Stores 500,000 32,156 TRW 535,200 28,667 Wallace Computer Services 585,500 15,662 ----------- 184,050 ----------- CONSUMER STAPLES (16.4%) American Stores 1,395,200 34,793 Anheuser Busch 693,700 31,867 Bestfoods 412,800 23,297 ConAgra 1,701,700 49,775 Food Lion, Cl A 984,100 9,533 General Mills 474,600 32,391 Hormel Foods 348,600 11,722 International Flavors & Fragrances 697,700 33,490 Kimberly Clark 996,800 49,404 McCormick 470,900 15,775 R.R. Donnelley & Sons 325,300 14,638 Rubbermaid 527,300 17,203 Seagram 511,300 22,465 ----------- 346,353 ----------- ENERGY (9.9%) Atlantic Richfield 419,900 33,120 Kerr-McGee 402,900 25,483 Mobil 533,100 41,582 Murphy Oil 443,000 22,288 Texaco 776,000 44,814 Unocal 1,209,800 43,099 ----------- 210,386 -----------
38 - ----------------------------------------------------------- - -----------------------------------------------------------
- ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- FINANCIALS (13.7%) American Financial Group 393,600 $ 17,786 American General 309,400 20,768 AmSouth Bancorp 401,175 15,420 BankBoston 153,800 16,207 Chase Manhattan Bank 117,600 15,986 Cigna 603,900 41,367 Crestar Financial 284,900 16,364 Hibernia, Cl A 813,200 17,077 Jefferson-Pilot 278,100 15,921 Magna Group 173,100 9,618 Safeco 682,300 31,727 TIG Holdings 429,600 10,633 Transamerica 180,600 20,769 Union Planters 250,700 14,666 Wells Fargo 51,700 18,690 Willis Corroon PLC, ADR 577,000 7,465 ----------- 290,464 ----------- HEALTH CARE (6.1%) Baxter International 612,600 35,033 C.R. Bard 687,500 23,848 Mallinckrodt 660,000 20,336 Pharmacia Upjohn ADR 1,110,200 49,057 ----------- 128,274 ----------- TECHNOLOGY (0.9%) EG&G 582,700 18,355 ----------- UTILITIES (6.8%) Cinergy 553,300 17,879 Consolidated Natural Gas 570,300 32,258 GPU 562,200 21,645 Pacificorp 664,500 15,325 Questar 315,100 12,781 Scana 679,500 19,578 Sonat 623,100 24,418 ----------- 143,884 ----------- - ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- Total Common Stocks (Cost $1,754,836) $ 1,953,771 ----------- REPURCHASE AGREEMENTS (8.1%) Deutsche Bank 5.58%, dated 05/29/98, matures 06/01/98, repurchase price $77,181,210 (collateralized by FHLMC obligation: total market value $78,688,244) (H) $77,145 77,145 Salomon Brothers 5.58%, dated 05/29/98, matures 06/01/98, repurchase price $93,672,579 (collateralized by various FHLMC and FNMA obligations: total market value $102,625,423) (H) 93,629 93,629 ----------- Total Repurchase Agreements (Cost $170,774) 170,774 ----------- Total Investments (100.4%) (Cost $1,925,610) 2,124,545 ----------- OTHER ASSETS AND LIABILITIES, NET (-0.4%) (8,006) -----------
39 STATEMENT OF NET ASSETS - ----------------------------------------------------------- - ----------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1998
VALUE INCOME STOCK FUND--CONCLUDED - ----------------------------------------------------------- VALUE (000) - ----------------------------------------------------------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 124,116,815 outstanding shares of beneficial interest $1,362,503 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 15,185,947 outstanding shares of beneficial interest 173,234 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 13,126,024 outstanding shares of beneficial interest 174,097 Undistributed net investment income 6,050 Accumulated net realized gain on investments 201,720 Unrealized appreciation on investments 198,935 ---------- Total Net Assets (100.0%) $2,116,539 ---------- ---------- - ----------------------------------------------------------- VALUE - ----------------------------------------------------------- Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 13.90 ---------- ---------- Net Asset Value and Redemption Price Per Share -- Investor Shares $ 13.87 ---------- ---------- Maximum Offering Price Per Share -- Investor Class ($13.87 / 96.25%) $ 14.41 ---------- ---------- Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 13.75 ---------- ----------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95. 40 - ----------------------------------------------------------- - -----------------------------------------------------------
MID-CAP EQUITY FUND - ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- COMMON STOCKS (97.8%) CAPITAL GOODS (11.9%) Allied Waste Industries* 515,700 $ 13,666 Danka Business Systems ADR 172,400 2,909 Herman Miller 209,100 5,789 Hubbell, Cl B 93,100 4,382 U.S. Filter* 494,400 15,048 Watsco 126,600 3,719 --------- 45,513 --------- COMMUNICATION SERVICES (1.0%) LCI International* 100,400 3,759 --------- CONSUMER CYCLICALS (23.3%) Barnes & Noble* 119,100 4,035 BJ's Wholesale Club* 167,400 6,612 Borders Group* 170,100 5,273 Ethan Allen Interiors 108,700 5,469 Family Dollar Stores 330,800 5,479 Harley-Davidson 292,500 10,457 International Speedway* 120,800 3,684 Just for Feet* 104,800 2,299 Men's Wearhouse* 234,900 10,013 Norrell 186,700 4,212 Office Depot* 82,000 2,419 Radiant Systems* 160,700 2,642 Ralph Lauren* 240,600 7,338 Saks Holdings* 214,300 5,049 Samsonite* 169,400 4,870 Staff Leasing* 125,400 3,574 West Marine* 289,400 5,553 --------- 88,978 --------- CONSUMER STAPLES (13.3%) Avis Rent A Car* 283,300 6,870 Cracker Barrel Old Country Stores 218,300 7,040 Dial 233,400 5,791 Hannaford Brothers 94,300 4,167 Interstate Bakeries 318,700 10,278 Papa John's International* 189,300 7,880 US Foodservice* 126,600 4,194 Wendy's International 189,200 4,671 --------- 50,891 --------- ENERGY (8.5%) Anadarko Petroleum 46,100 3,043 EEX* 628,200 6,203 National-Oilwell Inc* 58,100 2,030 Newpark Resources* 316,800 5,762 Santa Fe International 112,200 3,913 Valero Energy 166,300 5,426 Western Atlas* 69,600 6,025 --------- 32,402 --------- FINANCIALS (8.5%) Colonial Bancgroup 158,200 5,122 Dime Bancorp 197,800 5,773 First Security 277,162 6,305 First Virginia Banks 73,200 3,825 Hibernia, Cl A 225,700 4,740 North Fork Bancorporation 234,300 5,638 Western Bancorp 21,500 924 --------- 32,327 --------- HEALTH CARE (12.3%) Acuson Corp* 358,300 6,852 Allergan 46,700 1,961 Biogen* 82,800 3,643 DePuy* 126,500 3,779 Dura Pharmaceuticals* 236,000 6,151 Jones Pharmaceuticals 208,500 6,411 Mylan Laboratories 211,200 6,336 Quorum Health Group* 65,100 1,957 Watson Pharmaceuticals* 229,800 10,054 --------- 47,144 ---------
41 STATEMENT OF NET ASSETS - ------------------------------------------------------------ - ------------------------------------------------------------ STI CLASSIC FUNDS MAY 31, 1998
MID-CAP EQUITY FUND--CONCLUDED - ------------------------------------------------------------ SHARES/FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------ TECHNOLOGY (15.3%) ADC Telecommunications* 290,900 $ 8,182 Fiserv* 135,200 7,973 Flextronics International* 223,200 8,844 Intuit* 82,900 3,928 Networks Associates* 165,240 10,121 PMT Services* 248,200 4,840 Sawtek* 351,100 9,008 Teradyne* 183,300 5,636 --------- 58,532 --------- TRANSPORTATION (3.0%) CNF Transportation 164,600 6,759 Sanmina* 59,400 4,626 --------- 11,385 --------- UTILITIES (0.7%) Southwest Gas 117,000 2,559 --------- Total Common Stocks (Cost $333,621) 373,490 --------- REPURCHASE AGREEMENT (3.9%) Merrill Lynch 5.53%, dated 05/29/98, matures 06/01/98, repurchase price $14,779,462 (collateralized by GNMA obligation: total market value $15,068,947) (H) $14,773 14,773 --------- Total Repurchase Agreement (Cost $14,773) 14,773 --------- Total Investments (101.7%) (Cost $348,394) 388,263 --------- OTHER ASSETS AND LIABILITIES, NET (-1.7%) (6,466) --------- - ----------------------------------------------------------- VALUE (000) - ----------------------------------------------------------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 24,497,672 outstanding shares of beneficial interest $ 273,201 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 1,823,608 outstanding shares of beneficial interest 20,703 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 1,418,645 outstanding shares of beneficial interest 18,063 Accumulated net operating loss (1) Accumulated net realized gain on investments 29,962 Net unrealized appreciation on investments 39,869 --------- Total Net Assets 100.0% $ 381,797 --------- --------- Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 13.79 --------- --------- Net Asset Value and Redemption Price Per Share -- Investor Shares $ 13.67 --------- --------- Maximum Offering Price Per Share -- Investor Class ($13.67 / 96.25%) $ 14.20 --------- --------- Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 13.42 --------- ---------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FORDESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95. 42 - ----------------------------------------------------------- - -----------------------------------------------------------
SMALL CAP EQUITY FUND - ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- COMMON STOCKS (93.2%) BASIC MATERIALS (15.5%) Ameron 78,500 $ 4,720 Carpenter Technology 159,900 8,475 Columbus Mckinnon 94,400 2,749 Commonwealth Industries 299,000 4,373 General Chemical Group 184,400 4,702 H. B. Fuller 105,700 6,619 Jannock Limited 242,900 3,340 Lilly Industries, Cl A 327,500 6,386 Madeco ADR 241,800 3,083 Quimica y Minera Chile ADR 193,200 6,653 Texas Industries 190,400 11,305 Wausau-Mosinee Paper 205,000 4,382 --------- 66,787 --------- CAPITAL GOODS (13.4%) A.M. Castle 189,700 4,268 American Woodmark 132,000 3,663 Belden 104,600 4,151 DT Industries 112,800 3,268 Furon 204,700 3,262 General Binding 15,100 515 Hardinge 64,300 2,540 Kaman 262,400 4,822 LSI Industries 133,300 2,749 Regal Beloit 409,500 13,360 Rock Tenn, Cl A 158,000 2,321 Toro 88,800 3,102 Valmont Industries 232,400 4,648 Watts Industries, Cl A 214,900 5,010 --------- 57,679 --------- CONSUMER CYCLICALS (23.1%) Brown Group 400,500 7,184 Bush Industries 291,700 7,839 Guilford Mills 296,950 8,018 Harman International 272,800 11,611 K2 505,500 10,110 Kimball International* 352,200 8,673 Libbey 126,700 4,989 Norrell 562,700 12,696 Ritchie Bros. Auctioneers* 136,900 3,713 Smith (A.O.) 93,600 4,727 Sotheby's Holdings, Cl A 422,800 9,724 Springs Industries, Cl A 81,900 4,597 Sturm Ruger 304,400 5,669 --------- 99,550 --------- CONSUMER STAPLES (11.3%) Angelica 205,900 4,633 Banta 273,900 8,679 Bowne & Company 122,800 5,257 Chemed 77,500 2,853 Ingles Markets, Cl A 237,000 2,963 Nash Finch 213,900 3,610 Standard Register 260,100 9,380 Universal Foods 388,600 9,254 York Group 117,800 2,113 --------- 48,742 --------- ENERGY (3.6%) Chesapeake Energy 1,086,800 4,687 Giant Industries 424,500 7,986 Quaker State 173,300 2,935 --------- 15,608 --------- FINANCIALS (8.4%) Administradora de Fondos de Pensiones Provida ADR 176,000 2,959 Annuity & Life Re Holdings* 164,700 3,757 ARM Financial Group 125,000 2,555 Banco Latinamericano de Exportaciones 115,100 3,856 Klamath First Bancorp 111,100 2,201 National Bancorp of Alaska 14,800 472 Seacoast Banking of Florida 51,300 2,001
43 STATEMENT OF NET ASSETS - ----------------------------------------------------------- - ----------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1998
SMALL CAP EQUITY FUND--CONCLUDED - ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- FINANCIALS--CONTINUED Student Loan 62,200 $ 3,001 Westcorp 392,300 4,757 Westerfed Financial 166,300 4,074 Willis Corroon PLC, ADR 495,800 6,414 --------- 36,047 --------- HEALTH CARE (7.0%) Block Drug, Cl A 73,400 3,211 Invacare 187,000 4,932 London International Group ADR 279,400 4,890 Medeva PLC, ADR 591,900 6,696 Vital Signs 293,300 5,096 West Company 187,800 5,540 --------- 30,365 --------- TECHNOLOGY (4.2%) Dallas Semiconductor 159,400 5,370 Fluke 183,500 5,895 Innovex 292,800 5,435 Methode Electronics, Cl A 115,900 1,478 --------- 18,178 --------- TRANSPORTATION (4.8%) Knightsbridge Tankers Limited* 150,700 4,351 Pittston Burlington 334,500 5,875 Sea Containers 238,500 9,644 Western Star Truck Holdings 53,600 965 --------- 20,835 --------- UTILITIES (1.9%) Northwest Natural Gas 106,850 2,938 Nui 114,800 2,827 TNP Enterprises 81,500 2,654 --------- 8,419 --------- Total Common Stocks (Cost $377,626) 402,210 --------- - ----------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- PREFERRED STOCKS (0.9%) BASIC MATERIALS (0.9%) Coeur D'Alene Mines, CV to 0.8260 Share, Callable 03/15/99 @ 21.622 299,800 $ 3,916 --------- Total Preferred Stocks (Cost $4,811) 3,916 --------- REPURCHASE AGREEMENT (6.8%) Greenwich 5.57%, dated 05/29/98, matures 06/01/98, repurchase price $29,225,441 (collateralized by FNMA obligations: total market value $29,801,117) (H) $29,212 29,212 --------- Total Repurchase Agreement (Cost $29,212) 29,212 --------- Total Investments (100.9%) (Cost $411,649) 435,338 --------- OTHER ASSETS AND LIABILITIES, NET (-0.9%) (3,884) ---------
44 - ----------------------------------------------------------- - -----------------------------------------------------------
- ----------------------------------------------------------- VALUE (000) - ----------------------------------------------------------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 30,355,957 outstanding shares of beneficial interest $348,236 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 3,172,170 outstanding shares of beneficial interest 39,827 Undistributed net investment income 669 Accumulated net realized gain on investments 19,033 Unrealized appreciation on investments 23,689 --------- Total Net Assets 100.0% $ 431,454 --------- --------- - ----------------------------------------------------------- VALUE - ----------------------------------------------------------- Net Asset Value, Offering and Redemption Price Per Share-- Trust Shares $ 12.88 --------- --------- Net Asset Value, Offering and Redemption Price Per Share-- Flex Shares (1) $ 12.80 --------- ---------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95. 45 STATEMENT OF NET ASSETS - ----------------------------------------------------------- - ----------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1998
CAPITAL GROWTH FUND - ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- COMMON STOCKS (84.4%) BASIC MATERIALS (3.1%) Air Products & Chemicals 195,000 $ 16,965 ConAgra 499,200 14,602 Ecolab 138,900 4,289 Morton International 197,800 6,021 Praxair 350,000 17,259 --------- 59,136 --------- CAPITAL GOODS (14.9%) Allied Signal 623,000 26,633 Allied Waste Industries* 156,300 4,142 Avery Dennison 74,100 3,839 Boeing 186,500 8,882 Culligan Water Technologies* 186,200 10,392 Dover 105,100 3,941 Emerson Electric 108,000 6,561 General Electric 645,700 53,835 Honeywell 275,800 23,150 Hubbell, Cl B 21,400 1,007 Molten Metal Technology* 43,500 10 Newell 343,500 16,574 Parker Hannifin 100,300 4,119 Textron 29,200 2,166 Thermo Electron* 265,600 9,329 Tyco International 476,180 26,368 U.S. Filter* 36,400 1,108 United Technologies 415,400 39,048 USA Waste Services* 549,145 25,913 W.W. Grainger 171,500 18,104 --------- 285,121 --------- COMMUNICATION SERVICES (2.6%) Ameritech 139,400 5,916 BellSouth 50,800 3,277 Century Telephone Enterprises 71,000 3,146 Ericsson Telephone ADR 277,500 7,735 MCI Communications 351,700 18,805 Northern Telecom 39,300 2,515 Southern New England Telecommunications 10,800 695 Worldcom* 148,700 6,766 --------- 48,855 --------- CONSUMER CYCLICALS (13.8%) Abercrombie & Fitch, Cl A 266,984 11,280 Acnielsen* 1 -- Bed Bath & Beyond* 47,300 2,374 Boron Lepore & Associates* 30,600 903 Carnival 452,700 30,670 Consolidated Stores* 242,400 9,257 Costco* 411,100 23,792 Federated Department Stores* 279,900 14,502 Gannett 77,100 5,084 Home Depot 6,348 499 Intimate Brands 174,400 5,003 Lear* 255,400 13,632 Limited 72,500 2,411 Lowe's Companies 278,600 22,062 Manpower 175,600 7,540 Masco 509,000 28,631 Mattel 350,500 13,275 McGraw-Hill 263,800 20,626 Office Depot* 458,900 13,538 Omnicom Group 12,000 562 Republic Industries* 77,300 1,904 Sherwin Williams 188,963 6,283 Staples* 228,750 5,747 Starwood Lodging Trust REIT 113,234 5,343 Tandy 347,300 15,368 Viking Office Products* 82,200 2,350 Wal-Mart Stores 24,100 1,330 --------- 263,966 ---------
46 - ----------------------------------------------------------- - -----------------------------------------------------------
- ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- CONSUMER STAPLES (10.5%) Avon Products 203,600 $ 16,657 Campbell Soup 34,600 1,886 Cendant* 600,623 13,026 Clorox 110,000 9,185 Colgate-Palmolive 84,400 7,343 CVS 413,600 29,030 Flowers Industries 54,800 1,130 Fred Meyer* 107,900 4,640 Gillette 46,600 5,458 International Home Foods* 4,900 133 PepsiCo 232,100 9,473 Philip Morris 531,550 19,867 Ralston Purina 219,400 24,422 Rite Aid 195,800 7,012 Safeway* 529,200 19,283 Sara Lee 218,700 12,876 Unilever ADR 135,850 10,724 US Foodservice* 251,950 8,346 --------- 200,491 --------- ENERGY (4.3%) British Petroleum ADR 166,228 14,732 Chevron 81,800 6,534 EVI Weatherford Inc* 87,875 4,443 Halliburton 393,000 18,618 Mobil 105,800 8,252 Schlumberger 94,600 7,385 Texaco 241,900 13,970 Union Pacific Resources Group 257,959 5,224 Unocal 86,100 3,067 --------- 82,225 --------- FINANCIALS (13.8%) American International Group 181,975 22,531 AmSouth Bancorp 4,800 184 Associates First Capital 142,000 10,623 Banc One 93,610 5,160 Bank of New York 57,400 3,509 Bank United, Cl A 63,100 3,155 BankAmerica 94,700 7,831 BankBoston 75,500 7,956 Beneficial 55,900 7,491 Chase Manhattan Bank 28,100 3,820 Citicorp 28,000 4,175 CMAC Investment 53,500 3,237 Conseco 117,800 5,492 Crestar Financial 20,700 1,189 Cullen/Frost Bankers 79,400 4,302 FHLMC 448,800 20,420 First American of Tennessee 26,000 1,206 First Chicago NBD 57,200 5,001 First Commerce 159,100 12,261 First Commercial 14,000 969 First Security 24,200 551 First Tennessee National 102,600 3,258 Fleet Financial Group 179,588 14,726 FNMA 39,500 2,365 Golden State Bancorp* 14,700 563 H.F. Ahmanson 78,600 5,993 Household International 68,700 9,296 Mellon Bank 314,800 21,229 MGIC Investment 201,200 12,059 National City 30,840 2,089 PNC Bank 187,900 10,851 Regions Financial 72,800 2,994 State Street 9,400 648 Summit Bancorp 16,700 837 Sunamerica 136,000 6,613 Torchmark 326,600 14,003 Travelers 265,894 16,220 U.S. Bancorp 118,100 4,621 Washington Mutual 61,580 4,349 --------- 263,777 ---------
47 STATEMENT OF NET ASSETS - ----------------------------------------------------------- - ----------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1998
CAPITAL GROWTH FUND--CONTINUED - ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- HEALTH CARE (8.7%) Abbott Laboratories 212,800 $ 15,787 American Home Products 438,600 21,190 Baxter International 98,100 5,610 Boston Scientific* 24,400 1,555 Bristol-Myers Squibb 338,500 36,389 Eli Lilly 177,300 10,893 Healthsouth* 493,619 14,006 Johnson & Johnson 126,500 8,736 Merck 192,482 22,532 Tenet Healthcare* 402,000 14,070 U.S. Surgical 31,700 1,260 Warner Lambert 233,100 14,875 ---------- 166,903 ---------- TECHNOLOGY (9.7%) 3Com* 48,500 1,231 Analog Devices* 57,100 1,410 Automatic Data Processing 174,400 11,096 Ceridian* 355,800 19,213 Cisco Systems* 361,950 27,372 Compaq Computer 143,400 3,917 EMC* 204,700 8,482 IBM 212,100 24,895 Intel 209,500 14,966 Lucent Technologies 123,864 8,787 Microsoft* 339,900 28,828 Networks Associates* 125,300 7,675 Sun Microsystems* 91,500 3,666 Texas Instruments 66,400 3,411 Xerox 189,000 19,420 ---------- 184,369 ---------- TRANSPORTATION (3.0%) AMR* 29,000 4,464 Burlington Northern Santa Fe 251,700 25,044 Continental Airlines, Cl B* 59,300 3,354 Delta Air Lines 152,300 17,514 Trans World Air* 94,400 6,950 ---------- 57,326 ---------- Total Common Stocks (Cost $1,282,946) $1,612,169 ---------- PREFERRED STOCKS (2.5%) CAPITAL GOODS (0.2%) Ingersoll-Rand, CV to 0.4282 Share 160,000 3,900 ---------- CONSUMER STAPLES (0.2%) Suiza Capital Trust, CV to 0.6390 Share, Callable 04/01/01 @ 51.719 (B)* 60,000 2,910 ---------- ENERGY (0.9%) Belco Oil & Gas, CV to 1.1292 Shares, Callable 03/10/01 @ 25* 71,000 1,376 EVI , CV to 0.6250 Share, Callable 11/04/00 @ 51.75 (B) 164,400 7,645 Unocal, CV to 1.1748 Shares, Callable 09/03/00 @ 50 154,000 8,335 ---------- 17,356 ---------- FINANCE (0.3%) Conseco Financial Trust, CV to 0.9363 share* 65,000 3,343 United Financial, CV to 1.6530 Shares, Callable 07/01/98 @ 45.188 48,500 1,764 ---------- 5,107 ---------- TECHNOLOGY (0.9%) Microsoft, CV to 1 Share 187,500 17,508 ---------- TRANSPORTATION (0.2%) Trans World Air, CV to 2.4668 Shares, Callable 03/15/99 @ 50* 58,000 2,124 Trans World Air, CV to 6.3291 Shares, Callable 12/15/00 @ 53.238 (B) 23,000 1,693 ---------- 3,817 ----------
48 - ----------------------------------------------------------- - -----------------------------------------------------------
- ----------------------------------------------------------- FACE AMOUNT (000)/SHARES VALUE (000) - ----------------------------------------------------------- Total Preferred Stocks (Cost $46,619) $ 50,598 ---------- CONVERTIBLE BONDS (1.8%) Coeur D'alene, CV to 57.3066 Shares 7.250%, 10/31/05 $ 2,000 1,705 Continental Airlines, CV to 33.1181 Shares, Callable 04/15/99 @ 104.73 6.750%, 04/15/06 1,350 2,599 Home Depot, CV to 21.6998 Shares, Callable 10/02/99 @ 100.81 3.250%, 10/01/01 10,000 17,325 Molten Metal Technology, CV to 25.8065 Shares, Callable 05/01/99 @ 102.75 (B) 5.500%, 05/01/06 9,500 629 Network Associates, CV to 5.6920 Shares, Callable 02/13/03 @ 49.452 (A) (B) 0.000%, 02/13/18 10,000 4,350 USA Waste Services, CV to 33.0797 Shares, Callable 06/01/99 @ 101.8 (B) 4.500%, 06/01/01 3,000 4,740 USA Waste Services, CV to 35.3243 Shares, Callable 03/15/99 @ 102.5 5.000%, 03/01/06 1,350 2,292 ---------- Total Convertible Bonds (Cost $28,522) 33,640 ---------- REGULATED INVESTMENT COMPANIES (0.6%) CVS, TRACES* 70,000 4,944 Dollar General, STRYPES* 174,800 6,773 ---------- Total Regulated Investment Companies (Cost $11,829) 11,717 ---------- - ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- REPURCHASE AGREEMENTS (11.2%) Deutsche Bank 5.59%, dated 05/29/98, matures 06/01/98, repurchase price $17,064,601 (collateralized by FHLMC obligation: total market value $17,397,784) (H) $ 17,057 $ 17,057 Greenwich 5.59%, dated 05/29/98, matures 06/01/98, repurchase price $31,543,226 (collateralized by FHLMC and FNMA obligations: total market value $32,161,612) (H) 31,529 31,529 Salomon Brothers 5.59%, dated 05/29/98, matures 06/01/98, repurchase price $166,139,955 (collateralized by various FHLMC and FNMA obligations: total market value $169,833,329) (H) 166,063 166,063 ---------- Total Repurchase Agreements (Cost $214,649) 214,649 ---------- Total Investments (100.7%) (Cost $1,584,565) 1,922,773 ---------- OTHER ASSETS AND LIABILITIES, NET (-0.7%) (12,472) ----------
49 STATEMENT OF NET ASSETS - ----------------------------------------------------------- - ----------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1998
CAPITAL GROWTH FUND--CONCLUDED - ----------------------------------------------------------- VALUE (000) - ----------------------------------------------------------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 93,020,666 outstanding shares of beneficial interest $1,112,047 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 16,497,457 outstanding shares of beneficial interest 194,911 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 6,577,743 outstanding shares of beneficial interest 98,697 Undistributed net investment income 3,728 Accumulated net realized gain on investments 162,710 Net unrealized appreciation on investments 338,208 ---------- Total Net Assets (100.0%) $1,910,301 ---------- ---------- - ----------------------------------------------------------- VALUE - ----------------------------------------------------------- Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 16.48 ---------- ---------- Net Asset Value and Redemption Price Per Share -- Investor Shares $ 16.43 ---------- ---------- Maximum Offering Price Per Share -- Investor Class ($16.43 / 96.25%) $ 17.07 ---------- ---------- Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 16.22 ---------- ----------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95. 50 - ----------------------------------------------------------- - -----------------------------------------------------------
BALANCED FUND - ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- COMMON STOCKS (57.6%) BASIC MATERIALS (1.7%) Air Products & Chemicals 15,700 $ 1,366 Ecolab 11,300 349 Morton International 15,900 484 Praxair 29,000 1,430 Viking Office Products* 6,700 192 ---------- 3,821 ---------- CAPITAL GOODS (9.7%) Allied Signal 50,200 2,146 Allied Waste Industries* 16,600 440 Avery Dennison 6,000 311 Boeing 15,000 714 Culligan Water Technologies* 15,000 837 Dover 5,900 221 Emerson Electric 8,800 535 General Electric 52,400 4,369 Honeywell 22,300 1,872 Hubbell, Cl B 1,700 80 Molten Metal Technology* 19,100 5 Parker Hannifin 8,100 333 Textron 2,200 163 Thermo Electron* 21,400 752 Tyco International 38,598 2,137 U.S. Filter* 2,900 88 United Technologies 33,500 3,149 USA Waste Services* 43,805 2,067 W.W. Grainger 13,900 1,467 ---------- 21,686 ---------- COMMUNICATION SERVICES (1.6%) Ameritech 10,900 463 BellSouth 3,800 245 Century Telephone Enterprises 5,600 248 Ericsson Telephone ADR 22,400 624 MCI Communications 23,100 1,235 Northern Telecom 3,300 211 Southern New England Telecommunications 1,500 97 Worldcom* 11,900 541 ---------- 3,664 ---------- CONSUMER CYCLICALS (10.7%) Abercrombie & Fitch, Cl A* 21,526 909 Bed Bath & Beyond* 3,800 191 Boron Lepore & Associates* 2,500 74 Carnival 36,600 2,480 ConAgra 40,400 1,182 Consolidated Stores* 19,400 741 Costco* 33,200 1,921 CVS 33,300 2,337 Federated Department Stores* 22,600 1,171 Gannett 6,200 409 Home Depot 600 47 Intimate Brands 13,400 384 Lear* 20,000 1,067 Limited 5,700 190 Lowe's Companies 22,400 1,774 Masco 41,100 2,312 Mattel 28,150 1,066 McGraw-Hill 21,300 1,665 Office Depot* 36,000 1,062 Omnicom Group 900 42 Republic Industries* 8,200 202 Sherwin Williams 15,300 509 Staples* 18,500 465 Starwood Lodging Trust REIT 9,155 432 Tandy 27,900 1,235 Wal-Mart Stores 2,600 143 ---------- 24,010 ---------- CONSUMER STAPLES (6.5%) Avon Products 16,100 1,317 Cendant* 48,358 1,049 Clorox 8,900 743
51 STATEMENT OF NET ASSETS - ----------------------------------------------------------- - ----------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1998
BALANCED FUND--CONTINUED - ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- CONSUMER STAPLES--CONTINUED Colgate-Palmolive 7,400 $ 644 Flowers Industries 5,400 111 Fred Meyer* 8,500 365 Gillette 3,700 433 International Home Foods* 400 11 Newell 27,700 1,337 PepsiCo 18,800 767 Philip Morris 42,800 1,600 Ralston Purina 17,700 1,970 Rite Aid 15,800 566 Safeway* 42,400 1,545 Sara Lee 17,700 1,042 Unilever ADR 6,700 529 US Foodservice* 19,580 649 ---------- 14,678 ---------- ENERGY (3.2%) British Petroleum ADR 13,407 1,188 Chevron 6,600 527 EVI Weatherford Inc* 13,445 680 Halliburton 31,600 1,497 Mobil 8,500 663 Schlumberger 7,600 593 Texaco 23,300 1,346 Union Pacific Resources Group 20,722 420 Unocal 6,900 246 ---------- 7,160 ---------- FINANCIALS (10.1%) American International Group 14,650 1,814 AmSouth Bancorp 400 15 Associates First Capital 11,400 853 Banc One 7,392 407 Bank of New York 4,500 275 Bank United, Cl A 10,300 515 BankAmerica 8,300 686 BankBoston 5,800 611 Beneficial 4,500 603 Chase Manhattan Bank 2,600 353 Citicorp 2,800 418 CMAC Investment 5,000 302 Conseco 9,600 448 Crestar Financial 1,600 92 Cullen/Frost Bankers 6,200 336 FHLMC 35,900 1,633 First American of Tennessee 1,900 88 First Chicago NBD 4,700 411 First Commerce 12,700 979 First Security 2,000 46 First Tennessee National 14,400 457 Fleet Financial Group 14,499 1,189 FNMA 5,800 347 H.F. Ahmanson 6,300 480 Household International 6,300 852 Mellon Bank 25,400 1,713 MGIC Investment 16,300 977 National City 2,160 146 PNC Bank 16,400 947 Regions Financial 5,900 243 State Street 800 55 Summit Bancorp 1,400 70 Sunamerica 10,900 530 Torchmark 26,400 1,132 Travelers 21,349 1,302 U.S. Bancorp 9,600 376 Washington Mutual 5,310 375 ---------- 22,076 ---------- HEALTH CARE (5.9%) Abbott Laboratories 16,200 1,202 American Home Products 34,300 1,657 Baxter International 7,900 452 Boston Scientific* 2,000 127 Bristol-Myers Squibb 27,300 2,935
52 - ----------------------------------------------------------- - -----------------------------------------------------------
- ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- HEALTH CARE--CONTINUED Eli Lilly 14,300 $ 879 Healthsouth* 40,028 1,136 Johnson & Johnson 10,200 704 Merck 15,600 1,826 Tenet Healthcare* 32,500 1,137 U.S. Surgical 2,600 103 Warner Lambert 18,600 1,187 ---------- 13,345 ---------- TECHNOLOGY (6.4%) 3Com* 3,200 81 Analog Devices* 4,600 114 Automatic Data Processing 13,800 878 Ceridian* 28,600 1,544 Cisco Systems* 29,400 2,223 Compaq Computer 11,600 317 EMC* 16,200 671 IBM 17,100 2,007 Intel 15,100 1,079 Lucent Technologies 9,808 696 Microsoft* 23,400 1,985 Networks Associates* 10,200 625 Sun Microsystems* 7,900 316 Texas Instruments 5,400 277 Xerox 15,100 1,552 ---------- 14,365 ---------- TRANSPORTATION (2.0%) AMR* 2,300 354 Burlington Northern Santa Fe 20,000 1,990 Continental Airlines, Cl B* 4,800 271 Delta Air Lines 12,300 1,415 Trans World Air* 5,800 427 ---------- 4,457 ---------- Total Common Stocks (Cost $105,720) 129,262 ---------- - ----------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- PREFERRED STOCKS (1.0%) CAPITAL GOODS (0.2%) Ingersoll-Rand, CV to 0.4282 Share* 15,000 $ 366 ---------- ENERGY (0.1%) EVI , CV to 0.6250 Share, Callable 11/04/00 @ 51.75 (B)* 5,600 260 ---------- FINANCE (0.2%) Conseco Financial Trust, CV to 0.9363 Share* 10,000 514 ---------- TECHNOLOGY (0.5%) Microsoft, CV to 1 Share 12,500 1,167 ---------- Total Preferred Stocks (Cost $2,144) 2,307 ---------- CORPORATE OBLIGATIONS (18.5%) FINANCE (13.3%) Aristar 6.750%, 05/15/99 $ 1,500 1,510 AT&T Capital, MTN 6.410%, 08/13/99 2,250 2,250 Countrywide Home Loan, Ser F, MTN 6.840%, 10/22/04 400 412 6.510%, 02/11/05 2,300 2,309 Ford Motor Credit 7.000%, 09/25/01 2,250 2,315 6.500%, 02/28/02 2,100 2,129 General Motors Acceptance 7.125%, 05/01/01 1,900 1,952 General Motors Acceptance, MTN 7.050%, 04/23/02 1,000 1,030 Great Western Financial 8.600%, 02/01/02 800 858 Homeside Lending, MTN 6.875%, 05/15/00 3,400 3,443
53 STATEMENT OF NET ASSETS - ----------------------------------------------------------- - ----------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1998
BALANCED FUND--CONCLUDED - ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- FINANCE--CONTINUED International Lease Finance, Ser J, MTN 5.957%, 01/15/02 $ 700 $ 696 Merrill Lynch, Ser B, MTN 6.060%, 10/15/01 4,000 3,990 Morgan Stanley, Ser C, MTN, Callable 3/9/2001 @ 100 6.090%, 03/09/11 1,500 1,500 Salomon 7.300%, 05/15/02 1,750 1,816 Salomon Smith Barney 6.250%, 01/15/05 1,750 1,730 SunAmerica 6.200%, 10/31/99 2,000 2,005 ---------- 29,945 ---------- INDUSTRIAL (5.2%) American Home Products 7.700%, 02/15/00 1,000 1,030 7.900%, 02/15/05 1,850 2,017 Bausch & Lomb 6.750%, 12/15/04 1,000 1,019 Ikon Capital, MTN 6.730%, 06/15/01 1,000 1,014 Lockheed Martin 6.550%, 05/15/99 2,000 2,010 Philip Morris 7.250%, 09/15/01 2,100 2,155 7.500%, 04/01/04 1,000 1,051 Praxair 6.900%, 11/01/06 1,250 1,302 ---------- 11,598 ---------- Total Corporate Obligations (Cost $41,274) 41,543 ---------- - ----------------------------------------------------------- FACE AMOUNT (000)/SHARES VALUE (000) - ----------------------------------------------------------- CONVERTIBLE BONDS (1.0%) Marriott International, CV to 8.7600 Shares, Callable 03/25/99 @ 60.371 (A) (D) 0.000%, 03/25/11 $1,000 $ 676 Staples, CV to 45.4545 Shares, Callable 10/01/98 @ 101.8 (B) 4.500%, 10/01/00 500 862 CONVERTIBLE BONDS--CONTINUED USA Waste Services, CV to 35.3243 Shares, Callable 03/15/99 @ 102.5 5.000%, 03/01/06 355 603 ---------- Total Convertible Bonds (Cost $1,541) 2,141 ---------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (2.4%) FHLMC 8.000%, 06/01/02 327 333 7.500%, 09/01/03 863 879 FNMA 7.000%, 10/01/03 4,029 4,086 ---------- Total U.S. Agency Mortgage-Backed Obligations (Cost $5,267) 5,298 ---------- U.S. TREASURY OBLIGATIONS (13.4%) U.S. Treasury Bonds 7.500%, 11/15/16 5,300 6,259 8.125%, 08/15/19 9,200 11,657 6.000%, 02/15/26 4,650 4,725 U.S. Treasury Notes 6.375%, 04/30/99 500 504 5.875%, 11/30/01 2,300 2,321 6.625%, 03/31/02 1,200 1,242 5.875%, 11/15/05 3,400 3,448 ---------- Total U.S. Treasury Obligations (Cost $28,253) 30,156 ----------
54 - ----------------------------------------------------------- - -----------------------------------------------------------
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- BANK NOTE (0.7%) Capital One 6.530%, 11/26/99 $ 1,450 $ 1,452 ---------- Total Bank Note (Cost $1,450) 1,452 ---------- REGULATED INVESTMENT COMPANIES (0.2%) Dollar General, STRYPES* 14,100 546 ---------- Total Regulated Investment Companies (Cost $556) $ 546 ---------- REPURCHASE AGREEMENT (5.2%) Merrill Lynch 5.53%, dated 05/29/98, matures 06/01/98, repurchase price $11,721,271 (collateralized by various GNMA obligations: total market value $11,954,302) (H) 11,716 11,716 ---------- Total Repurchase Agreement (Cost $11,716) 11,716 ---------- Total Investments (100.0%) (Cost $197,921) 224,421 ---------- OTHER ASSETS AND LIABILITIES, NET (0.0%) (18) ---------- - ----------------------------------------------------------- VALUE (000) - ----------------------------------------------------------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 14,399,980 outstanding shares of beneficial interest $152,733 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 632,425 outstanding shares of beneficial interest 6,807 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 2,121,418 outstanding shares of beneficial interest 26,099 Undistributed net investment income 784 Accumulated net realized gain on investments 11,480 Net unrealized appreciation on investments 26,500 -------- Total Net Assets 100.0% $224,403 -------- -------- Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 13.09 -------- -------- Net Asset Value and Redemption Price Per Share -- Investor Shares $ 13.14 -------- -------- Maximum Offering Price Per Share -- Investor Class ($13.14 / 96.25%) $ 13.65 -------- -------- Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 13.02 -------- --------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95. 55 STATEMENT OF NET ASSETS - ----------------------------------------------------------- - ----------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1998
EMERGING MARKETS EQUITY FUND - ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- FOREIGN COMMON STOCKS (87.0%) ARGENTINA (4.2%) Capex, Cl A 33,700 $ 133 Massalin Particulares, Cl B 38,800 194 Metrogas ADR 32,204 290 Quilmes Industrial 22,000 212 Transportadora de Gas del Sur ADR 33,000 353 YPF ADR, Cl D 8,650 269 --------- 1,451 --------- BRAZIL (6.7%) Makro Atacadista GDR 15,800 197 Makro Atacadista GDR (B) 11,700 109 Petrobras ADR 13,500 264 Souza Cruz 63,500 439 Telebras ADR 6,330 675 Telesp Celular* 1,690,000 98 Telec De Sao Paulo* 1,690,000 257 Unibanco 9,100 285 --------- 2,324 --------- CHILE (2.9%) Administradora de Fondos de Pensiones Provida ADR 29,500 496 Banco De A. Edwards 17,000 236 Quimica Y Minera Chile ADR 8,300 286 --------- 1,018 --------- COLOMBIA (1.4%) Banco Ganadero ADR 15,600 291 Bancolombia 87,924 201 --------- 492 --------- CZECH REPUBLIC (1.2%) Spt Telecom* 3,300 424 --------- ECUADOR (0.4%) LA Cemento Nacional GDR 800 128 --------- GREECE (5.4%) Greek Telecom 26,085 $ 766 Hellas Can Packaging 25,500 437 Papastratos Cigarettes 25,400 653 --------- 1,856 --------- HONG KONG (4.8%) China Hong Kong Photo 790,000 112 Guangdong Kelon Electric Holding 188,000 180 HSBC Holdings 14,744 358 National Mutual Asia 866,000 609 Seoul Horizon Trust 17,000 82 Techtronic Industries 1,350,000 314 --------- 1,655 --------- HUNGARY (0.4%) Egis 3,925 144 --------- INDIA (3.6%) Hindalco GDR 2,700 37 Hindalco Industries GDR 10,500 158 Mahanagar Telephone Nigam GDR* 26,500 348 Videsh Sanchar Nigam GDR 60,000 712 --------- 1,255 --------- INDONESIA (1.4%) Budi Acid Jaya, F 231,250 21 Citra Marga Nusaphala, F 944,000 31 Dankos Laboratories, F 665,000 28 Indonesian Satellite, F 96,000 128 Modern Photo Film, F 356,000 32 PT Jaya Real Property, F 754,000 23 PT Timbang Timah 350,000 218 --------- 481 ---------
56 - ----------------------------------------------------------- - -----------------------------------------------------------
- ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- ISRAEL (6.5%) Bank Leumi Le-Israel 145,000 $ 293 Blue Square Stores* 42,300 524 ECI Telecommunications 25,000 803 Israel Chemicals 274,000 348 Nice Systems ADR* 8,000 292 --------- 2,260 --------- MALAYSIA (4.9%) Aluminium of Malaysia 231,000 42 Berjaya Sports Toto 150,000 314 IOI Corp 325,000 219 Petronas Dagangan 170,000 177 RJ Reynolds 305,000 477 Technology Resources Industries 635,000 461 --------- 1,690 --------- MEXICO (12.6%) Grupo Carso 78,000 402 Grupo Continental 167,750 567 Grupo Financiero Banorte, Cl B 216,935 292 Grupo Radio Centro ADR 16,000 206 Herdez, Cl B 518,000 276 Kimberly Clark, Cl A 100,000 418 Grupo Industrial Maseca ADR 17,000 146 Nacional de Drogas, Cl L 622,000 424 Panamerican Beverage, Cl A 9,000 304 San Luis Cpo 97,000 422 Telefonos de Mexico ADR 19,000 901 --------- 4,358 --------- PANAMA (0.3%) Banco Latinamericano de Exportaciones 2,800 94 --------- PERU (3.1%) CPT Telefoncia del Peru 34,000 735 Credicorp 14,630 232 Telefonica del Peru, Cl B 50,500 108 --------- 1,075 --------- PHILIPPINES (3.7%) Bacnotan Consolidated 155,940 $ 239 Benpres Holdings (B)* 72,440 268 First Philippene Holdings 209,250 156 Music* 1,000,000 247 Philippine Long Distance 14,000 360 --------- 1,270 --------- POLAND (1.2%) Bank Handlowy 25,000 430 --------- PORTUGAL (8.7%) Banco Totta & Acores 35,000 1,296 Cimentos de Portugal 15,720 602 Electricidade de Portugal 12,500 661 Portugal Telecom ADR 8,200 433 --------- 2,992 --------- SINGAPORE (1.9%) Amtek Engineering 246,000 119 Elec & Eltek International 56,400 254 Oversea Chinese Bank 73,000 290 --------- 663 --------- SOUTH AFRICA (8.7%) Amalgated Banks of South Africa 56,235 442 Barlow 26,600 218 Kersaf Investments 68,600 386 Liberty Life Association of Africa 14,400 400 Rembrandt Group 48,800 402 Richemont 26,500 373 South African Breweries 13,600 384 Suncrush 147,535 395 --------- 3,000 --------- SOUTH KOREA (1.4%) Dae Duck Electronics 3,800 186 SK Telecom 968 293 --------- 479 ---------
57 STATEMENT OF NET ASSETS - ----------------------------------------------------------- - ----------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1998
EMERGING MARKETS EQUITY FUND--CONCLUDED - ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- THAILAND (1.5%) Advanced Info Service, F 27,000 $ 147 Delta Electronics, F 37,500 283 KR Precision, F 46,500 91 --------- 521 --------- Total Foreign Common Stocks (Cost $34,886) 30,060 --------- FOREIGN PREFERRED STOCKS (6.9%) Banco Itau SA 1,070,000 637 Brahma 600,000 350 Cemig 15,603,450 516 Fertilizantes Fosfatados 43,000,000 170 Globex Utilidades 30,800 260 Lojas Renner 5,500,000 189 Petrol Brasileiros 1,300,000 251 --------- Total Foreign Preferred Stocks (Cost $2,879) 2,373 --------- TIME DEPOSIT (6.7%) Cayman Time Deposit 5.125%, 06/01/98 2,300,000 2,300 --------- Total Time Deposit (Cost $2,300) 2,300 --------- Total Investments (100.5%) (Cost $40,066) 34,733 --------- OTHER ASSETS AND LIABILITIES, NET (-0.5%) (179) --------- - ----------------------------------------------------------- VALUE (000) - ----------------------------------------------------------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 3,896,622 outstanding shares of beneficial interest $ 41,007 Undistributed net investment income 298 Accumulated net realized loss on investments and foreign currency transactions (1,418) Net unrealized depreciation on investments (5,333) --------- Total Net Assets (100.0%) $ 34,554 --------- --------- Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 8.87 --------- ---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95. 58 - ----------------------------------------------------------- - -----------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND - ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- FOREIGN COMMON STOCKS (94.1%) AUSTRALIA (2.2%) Amcor 13,361 $ 62 Broken Hill Proprietary 20,656 177 Coles Myer 30,235 136 CSR 27,994 82 Lend Lease 4,481 96 Mount Isa Mines Holdings 42,910 22 National Australia Bank 13,886 192 Newscorp 33,881 209 Pacific Dunlop 28,455 51 Rio Tinto 5,542 67 Western Mining 20,202 63 Westpac Banking 36,880 243 --------- 1,400 --------- AUSTRIA (1.9%) Bank of Austria 2,658 239 Creditanstalt Bankverein 2,035 242 Ea - Generali 343 117 Oest El Wirtsch, Cl A 2,245 264 OMV 1,715 248 Wienerberger Baustoff 401 99 --------- 1,209 --------- BELGIUM (2.3%) Bekaert 30 24 Delhaize Freres 1,000 69 Electrabel 1,000 250 Fortis 700 200 Generale Banque 370 271 Groupe Bruxelles Lambert 450 99 Kredietbank 290 203 Petrofina 440 181 Royale Belge 175 68 Solvay, Cl A 1,250 92 Union Minere 680 46 --------- 1,503 --------- DENMARK (1.6%) Carlsberg, Cl B 1,427 $ 99 D/S 1912, Cl B 25 228 D/S Svendborg, Cl B 10 131 Danisco 1,810 113 Novo Nordisk, Cl B 1,370 216 Ratin, Cl B 251 49 Sophus Berendsen, Cl B 251 10 Tele Danmark, Cl B 1,908 179 --------- 1,025 --------- FINLAND (1.2%) Merita 19,200 121 Nokia Oyj, Cl A 2,000 132 Nokia, Cl K 4,600 301 Outokumpu Oy Akt, Cl A 3,100 44 Rauma 303 6 UPM - Kymmene 6,600 191 --------- 795 --------- FRANCE (14.6%) Accor 847 232 Air Liquide 1,886 372 Alcatel Alsthom 2,238 479 Axa 4,748 540 Banque National Paris, Cl A 3,350 286 Bouygues 950 172 Carrefour 603 368 Cie Bancaire 710 130 Cie de Saint Gobain 2,265 447 Cie Generale des Eaux 2,045 411 Compagnie de Suez 15 -- Elf Aquitaine 3,282 456 Elf Sanofi 2,573 301 Eridania Beghin - Say 983 215 Generale Des Eaux Warrants* 2,045 4 Groupe Danone 1,552 418 Havas 1,300 102 L'Oreal 1,084 538
59 STATEMENT OF NET ASSETS - ----------------------------------------------------------- - ----------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1998
INTERNATIONAL EQUITY INDEX FUND--CONTINUED - ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- FRANCE--CONTINUED Lafarge Coppee 2,218 $ 225 Legrand 670 185 Louis Vuitton - Moet Hennessy 1,502 315 Lyonnaise des Eaux Dumez 2,480 423 Michelin, Cl B 2,844 176 Paribas 958 98 Pernod - Ricard 2,179 162 Peugeot 1,201 235 Pinault - Printemps Redoute 400 329 Promodes 333 162 Rhone - Poulenc, Cl A 6,900 383 Schneider 3,877 328 Societe Generale 1,830 362 Total Compaigne, Cl B 4,470 555 Unibail 400 55 --------- 9,464 --------- GERMANY (18.2%) Aachener & Munchener Bete 810 93 Allianz 4,380 1,384 BASF 14,200 658 Bayer 11,410 545 Bayerische Hypotheken und Wechselbank 5,750 362 Bayerische Vereinsbank 2,360 198 Biersdorf 2,640 161 Daimler - Benz 9,230 930 Degussa 2,490 159 Deutsche Bank 8,120 699 Dresdner Bank Frankfurt 4,600 259 Heidelberger Zement 2,024 203 Hochtief 260 12 Karstadt 525 274 Linde 291 215 Lufthansa 11,380 284 Man Muenchen 31 12 Mannesmann 703 688 Metro AG 7,351 468 Muenchener Rueckvers 1,110 504 Preussag 11 4 RWE 6,340 337 SAP 1,400 723 Schering 1,810 212 Siemens 11,790 761 Thyssen 1,001 261 Veba 10,910 717 Viag 533 299 Volkswagen 461 374 --------- 11,796 --------- HONG KONG (0.5%) Cathay Pacific Airways 9,000 6 Cheung Kong Holdings 13,000 70 CLP Holdings 7,500 32 Hang Seng Bank 7,600 57 Hong Kong Telecommunications 27,200 49 Hutchison Whampoa 12,800 67 Sun Hung Kai Properties 6,600 32 Swire Pacific 9,000 33 --------- 346 --------- ITALY (13.1%) Assicurazioni Generali 42,670 1,371 Banca Commerciale Italiana 33,500 198 Benetton Group 9,825 214 Credito Italiano 23,000 128 Edison 28,500 272 ENI 76,000 537 Fiat 131,900 590 Fiat Non-Convertible 46,200 122 Istituto Bancario san Paolo di Torino 29,591 463 Istituto Nazionale 181,919 566 Italgas 5,000 23 Mediobanca 26,450 356 Montedison 134,680 186 Olivetti 91,200 134 Parmalat Finanziaria 87,800 183 Pirelli 90,000 297
60 - ----------------------------------------------------------- - -----------------------------------------------------------
- ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- ITALY--CONTINUED RAS 6,635 $ 105 Sirti 19,500 121 Telecom Italia 127,222 961 Telecom Italia Mobile 195,802 1,157 Telecom Italia Mobile di Risp 101,664 369 Telecom Italia Rinascente 26,627 144 --------- 8,497 --------- JAPAN (15.5%) Ajinomoto 15,000 126 Asahi Bank 20,000 75 Asahi Chemical Industries 15,000 52 Asahi Glass 12,000 65 Bank of Tokyo - Mitsubushi 24,000 247 Bank of Yokohama 11,000 27 Bridgestone 9,000 205 Chiba Bank 12,000 43 Chiyoda 5,000 6 Citizen Watch 11,000 84 Cosmo Oil 12,000 20 Dai Nippon Printing 12,000 198 Daiei 11,000 31 Daiwa Kosho Lease 5,000 20 Daiwa Securities 18,000 69 Ebara 8,000 72 Fanuc 900 33 Fuji Bank 24,000 118 Fuji Photo Film 5,000 169 Fujitsu 18,000 207 Furukawa Electric 15,000 48 Hankyu 2,000 8 Hitachi 32,000 211 Honda Motor 5,000 170 Industrial Bank of Japan 20,000 123 Ito Ham Foods 1,000 4 Ito Yokado 4,000 199 Itochu 31,000 70 Japan Air Lines* 16,000 41 Japan Energy 11,000 11 Joyo Bank 14,300 51 Jusco 3,000 52 Kansai Electric Power 9,800 156 Kao 7,000 105 Kawasaki Steel 19,000 30 Kinki Nippon Railway 26,000 125 Kirin Brewery 15,000 140 Komatsu 13,000 54 Kubota 23,000 56 Kyocera 3,000 146 Marui 4,000 61 Matsushita Electric 18,000 282 Mitsubishi 21,000 127 Mitsubishi Chemical 16,000 29 Mitsubishi Electric 23,000 54 Mitsubishi Estate 5,000 44 Mitsubishi Heavy Industries 43,000 150 Mitsubishi Materials 35,000 68 Mitsubishi Trust & Banking 13,000 115 Mitsui 17,000 87 Mitsui Trust & Banking 13,000 31 Mitsukoshi 7,000 18 Murata Manufacturing 1,000 29 NEC 15,000 153 New Oji Paper 9,000 38 Nichido Fire & Marine Insurance 15,000 78 Nippon Express 5,000 27 Nippon Oil 16,000 50 Nippon Paper Industries 1,000 4 Nippon Sharyo 5,000 12 Nippon Steel 39,000 66 Nippon Yusen 27,000 93 Nippondenso 7,000 119 Nissan Motor 32,000 97 NKK 24,000 20 Nomura Securities 19,000 207 Obayashi 13,000 48
61 STATEMENT OF NET ASSETS - ----------------------------------------------------------- - ----------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1998
INTERNATIONAL EQUITY INDEX FUND--CONTINUED - ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- JAPAN--CONTINUED Odakyu Electric Railway 24,000 $ 78 Olympus Optical 8,000 75 Osaka Gas 44,000 95 Sakura Bank 25,000 74 Sankyo 7,000 169 Sanyo Electric 4,000 11 Sega Enterprises 1,600 30 Sekisui Chemical 7,000 35 Sekisui House 7,000 52 Sharp 10,000 75 Shimizu 3,000 8 Shin - Etsu Chemical 7,000 130 Shizuoka Bank 9,000 97 Skylark 3,000 28 Sony 3,500 296 Sumitomo Bank 28,000 262 Sumitomo Chemical 20,000 54 Sumitomo Metal 26,000 40 Taisei 35,000 68 Takeda Chemical 15,000 388 Tobu Railway 15,000 43 Tohoku Electric Power 5,300 72 Tokai Bank 20,000 111 Tokio Marine & Fire Insurance 34,000 322 Tokyo Electric Power 15,900 304 Tokyo Gas 26,000 54 Tokyu 10,000 33 Toppan Printing 11,000 120 Toray 24,000 120 Tostem 3,000 38 Toto 7,700 51 Toyo Seikan Kaisha 3,300 39 Toyoda Automatic Loom 4,000 70 Toyota Motor 31,000 768 Yamaichi Securities 15,000 -- Yamanouchi Pharmaceutical 1,000 22 Yasuda Trust & Banking 5,000 6 --------- 10,012 --------- NETHERLANDS (3.2%) ABN Amro Holding 7,740 187 Akzo Nobel 470 98 ING Groep 4,704 323 Koninklijke 2,986 167 Koninklijke Nederlanden Papierfabriek 960 28 Philips Electronics 1,836 174 Royal Dutch Petroleum 11,520 656 Unilever 3,760 299 Wolters Kluwer 772 108 --------- 2,040 --------- NORWAY (0.9%) Bergesen, Cl A 2,650 53 Hafslund Nycomed, Cl B 2,200 10 Kvaerner 1,400 53 Norsk Hydro 6,525 296 Nycomed Asa, Cl B 2,300 52 Uni Storebrand* 9,987 93 --------- 557 --------- SPAIN (5.2%) Argentaria Bancaria de Espana 2,316 197 Autopistas CESA 6,347 102 Banco Bilbao Vizcaya 11,213 563 Banco Central Hispano 5,430 178 Banco de Santander 5,119 258 Dragados Construccion 2,565 80 Endesa 15,892 381 Fomento de Construcciones Contratas 1,392 70 Gas Natural 2,512 172 Iberdola 13,406 221 Mapfre 2,036 79 Repsol 6,279 349 Telefonica de Espana 15,076 674 Union Electrica Fenosa 4,929 61 --------- 3,385 ---------
62 - ----------------------------------------------------------- - -----------------------------------------------------------
- ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- SWEDEN (2.1%) ABB AB, Cl A 6,300 $ 102 Asticus* 675 8 Astra AB, Cl A 13,266 267 Diligentia 1,350 12 Electrolux, Cl B 800 80 Ericsson, Cl B 14,000 399 Granges 550 10 Skandinaviska Enskilda Banken 7,700 128 Skanska, Cl B 1,800 85 Stora Kopparbergs Bergslags, Cl A 2,500 41 Svenska Cellulosa, Cl B 4,000 110 Swedish Match 4,500 16 Volvo, Cl B 3,950 126 --------- 1,384 --------- SWITZERLAND (2.2%) Nestle 172 368 Novartis 184 311 Roche Holdings, Genusshein 23 237 Roche Holdlings, Bearer 7 116 Schweizerische Bankgesellschaft 120 202 Swiss Bank 575 208 --------- 1,442 --------- UNITED KINGDOM (9.4%) Abbey National 8,291 148 Barclays Bank 14,416 385 Bass 8,451 155 Bass, Cl B* 9,466 13 BAT Industries 22,460 202 BG 18,333 95 BG, Cl B* 20,778 10 Blue Circle Industries 12,797 82 British Petroleum 41,753 613 British Telecommunications 20,475 214 BTR 35,692 118 BTR, Cl B* 43,929 27 Cable & Wireless 22,390 253 Centrica* 20,778 33 Diageo 35,812 405 Diageo, Cl B* 5,637 47 Energy Group 9,677 133 General Electric 21,236 174 Glaxo Wellcome 19,999 538 Great Universal Stores 7,352 104 Hanson 12,096 71 HSBC Holdings 7,895 206 Imperial Chemical 11,454 217 Marks & Spencer 40,514 361 National Power 9,177 85 Reuters Group 11,375 130 RMC Group 2,799 53 RTZ 13,785 172 Sainsbury, J. 11,344 90 Smithkline Beecham 40,668 440 Unilever 24,920 274 Vodafone Group 22,646 249 --------- 6,097 --------- Total Foreign Common Stocks (Cost $43,189) 60,952 --------- FOREIGN PREFERRED STOCKS (1.5%) GERMANY (1.3%) RWE 3,730 151 SAP 980 544 Volkswagen 247 149 --------- 844 --------- ITALY (0.2%) Fiat 47,080 126 --------- Total Foreign Preferred Stocks (Cost $365) 970 ---------
63 STATEMENT OF NET ASSETS - ----------------------------------------------------------- - ----------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1998
INTERNATIONAL EQUITY INDEX FUND--CONCLUDED - ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- CASH EQUIVALENT (0.0%) Highmark Diversified Money Market Fund $10,411 $ 10 --------- Total Cash Equivalent (Cost $10) 10 --------- Total Investments (95.6%) (Cost $43,564) 61,932 --------- OTHER ASSETS AND LIABILITIES, NET (4.4%) 2,878 --------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 4,222,238 outstanding shares of beneficial interest 37,231 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 540,956 outstanding shares of beneficial interest 5,453 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 111,603 outstanding shares of beneficial interest 1,243 Undistributed net investment income 259 Accumulated net realized gain on investments and foreign currency transactions 2,261 Net unrealized appreciation on investments 18,368 Net unrealized depreciation foreign currency and translation of other assets and liabilities in foreign currency investments (5) --------- Total Net Assets (100.0%) $ 64,810 --------- --------- - ----------------------------------------------------------- VALUE - ----------------------------------------------------------- Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 13.31 --------- --------- Net Asset Value, Offering Price and Redemption Price Per Share -- Investor Shares $ 13.20 --------- --------- Maximum Offering Price Per Share -- Investor Shares ($13.20 / 96.25%) $ 13.71 --------- --------- Net Asset Value, Offering Price and Redemption Price Per Share -- Flex Shares (1) $ 13.17 --------- ---------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95. 64 - ----------------------------------------------------------- - -----------------------------------------------------------
INTERNATIONAL EQUITY FUND - ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- FOREIGN COMMON STOCKS (92.5%) ARGENTINA (0.3%) YPF ADR, Cl D 69,850 $ 2,170 --------- AUSTRALIA (2.5%) Australia & New Zealand Bank Group 1,206,840 8,556 QBE Insurance 2,037,904 8,345 --------- 16,901 --------- CANADA (0.5%) Suncor 97,527 3,448 --------- FINLAND (0.8%) Sampo Insurance, Cl A 116,000 5,391 --------- FRANCE (10.9%) Accor 24,300 6,665 AXA 124,000 14,114 Credit Local De France 82,630 11,228 Elf Aquitaine 100,300 13,931 Groupe Danone 24,500 6,597 Moulinex* 105,580 2,991 Suez Lyonnaise des Eaux 52,000 8,874 Technip 60,500 8,676 --------- 73,076 --------- GERMANY (9.1%) Allianz 30,830 9,745 Bayer 133,600 6,387 Bayerische Motoren Werke 5,800 6,137 Bayerische Motoren Werke - New* 1,160 1,222 Buderus 12,440 6,135 Commerzbank 128,000 5,187 Hoechst 166,000 8,280 Man 6,000 2,387 Preussag 22,040 8,041 Veba 105,000 6,897 --------- 60,418 ---------- GREECE (1.7%) Greek Telecom 390,243 11,463 --------- HONG KONG (1.5%) Hutchison Whampoa 1,315,000 6,873 National Mutual Asia 4,286,000 3,015 Sung Hung Kai Properties 5,312 26 --------- 9,914 --------- INDONESIA (0.0%) Modern Photo Film, F 1,440,000 128 --------- ISRAEL (1.3%) ECI Telecommunications 94,500 3,036 Teva Pharmaceuticals ADR 133,200 5,461 --------- 8,497 --------- ITALY (7.3%) Banca Popolare di Milano 970,000 8,724 ENI 1,318,000 9,314 Istituto Banc San Paolo 531,700 8,387 Montedison 3,175,000 4,386 Saipem 854,000 4,967 Telecom Italia 1,692,630 12,784 --------- 48,562 --------- JAPAN (8.9%) Canon 368,000 8,767 Eisai 408,000 5,414 Fuji Photo Film 182,000 6,162 Honda Motor 216,000 7,360 Sankyo 252,000 6,076 Sony 99,400 8,396 Takefuji 62,000 3,070 TDK 85,000 6,676 Terumo 491,000 7,426 --------- 59,347 ---------
65 STATEMENT OF NET ASSETS - ----------------------------------------------------------- - ----------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1998
INTERNATIONAL EQUITY FUND--CONCLUDED - ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- NETHERLANDS (7.0%) Akzo Nobel 38,200 $ 7,980 ING Groep 321,000 22,039 Koninklijke PTT Nederland 91,300 5,102 New Holland 169,300 4,021 Philips Electronics 81,900 7,781 --------- 46,923 --------- NEW ZEALAND (0.7%) Fletcher Challenge Building Division 2,653,748 4,360 --------- PANAMA (0.8%) Banco Latinamericano de Exportaciones 150,400 5,038 --------- NORWAY (2.3%) Petroleum Geo Services ADR* 127,000 8,319 Sparebanken Nor 232,000 6,928 --------- 15,247 --------- PERU (0.8%) CPT Telefoncia del Peru 164,100 3,549 Credicorp 127,213 2,020 --------- 5,569 --------- PHILIPPINES (0.3%) Benpres Holdings GDR, (B) 590,984 2,185 --------- PORTUGAL (1.8%) Banco Espirito Santo 144,480 5,087 Bco Espirito Santo Rights 15,049 150 Portugal Telecom ADR 130,000 6,857 --------- 12,094 --------- SINGAPORE (0.6%) Overseas Chinese Bank 1,083,000 4,304 --------- SPAIN (3.4%) Repsol 166,000 9,226 Telefonica de Espana 296,727 13,260 --------- 22,486 --------- SWEDEN (1.1%) Volvo, Cl B 230,000 7,352 --------- SWITZERLAND (9.1%) Asea Brown Boveri Group 4,565 7,733 Credit Suisse Group 22,000 4,840 Nestle 7,500 16,061 Novartis, Registered 9,815 16,613 Swiss Bank 42,300 15,273 --------- 60,520 --------- UNITED KINGDOM (19.8%) Allied Domecq 408,800 4,021 Bank of Ireland 788,148 14,808 Bass 580,982 10,669 British Aerospace 1,308,000 11,594 British Petroleum 708,579 10,399 Diageo 718,200 8,119 General Electric 1,072,000 8,785 Ladbroke Group 1,170,000 6,608 Laporte 497,900 6,957 Lucasvarity 2,175,776 9,590 National Westminster Bank 160,000 2,923 Next 1,068,000 9,658 Siebe 500,000 12,529 SmithKline Beecham 600,758 6,507 Storehouse 1,953,695 8,898 --------- 132,065 --------- Total Foreign Common Stocks (Cost $504,598) 617,458 ---------
66 - ----------------------------------------------------------- - -----------------------------------------------------------
- ----------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- FOREIGN PREFERRED STOCKS (2.2%) Gea 18,500 $ 7,154 Man 25,200 7,542 --------- Total Foreign Preferred Stocks (Cost $11,834) 14,696 --------- TIME DEPOSIT (4.8%) Cayman Time Deposit 5.125%, 06/01/98 $32,000 32,000 --------- Total Time Deposit (Cost $32,000) 32,000 --------- Total Investments (99.5%) (Cost $548,433) 664,154 --------- OTHER ASSETS AND LIABILITIES, NET (0.5%) 3,423 --------- - ----------------------------------------------------------- VALUE (000) - ----------------------------------------------------------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 41,926,884 outstanding shares of beneficial interest $481,962 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 1,164,900 outstanding shares of beneficial interest 14,451 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 1,441,816 outstanding shares of beneficial interest 19,112 Undistributed net investment income 2,660 Accumulated net realized gain on investments and foreign currency transactions 33,758 Net unrealized appreciation on investments 115,721 Net unrealized depreciation foreign currency and translation of other assets and liabilities in foreign currency investments (87) --------- Total Net Assets (100.0%) $667,577 --------- --------- Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 15.00 --------- --------- Net Asset Value, Offering Price and Redemption Price Per Share -- Investor Shares $ 14.92 --------- --------- Maximum Offering Price Per Share -- Investor Shares ($14.92 / 96.25%) $ 15.50 --------- --------- Net Asset Value, Offering Price and Redemption Price Per Share -- Flex Shares (1) $ 14.68 --------- ---------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95. 67 STATEMENT OF NET ASSETS - ----------------------------------------------------------- - ----------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1998
SUNBELT EQUITY FUND - ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- COMMON STOCKS (91.7%) CAPITAL GOODS (12.3%) American Buildings* 144,152 $ 4,937 American Homestar* 228,868 4,863 Artesyn Technologies* 234,751 3,851 Aviall* 119,542 1,748 Blount International 182,723 5,151 Centex 67,601 2,417 Citation* 90,069 1,723 Kellstrom Industries* 169,004 4,700 Kuhlman 111,238 4,700 Maverick Tube* 214,288 3,241 Miller Industries* 407,070 2,900 Owens & Minor Holding 109,719 1,289 Palm Harbor Homes* 154,596 6,445 Roper Industries 75,829 2,517 Tristar Aerospace* 98,529 1,595 UNIFAB International* 161,289 3,085 Watsco 99,449 2,921 --------- 58,083 --------- COMMUNICATION SERVICES (3.1%) Cellstar* 124,905 3,759 Premiere Technologies* 166,678 3,979 Superior TeleCom* 64,999 2,576 World Access* 134,017 4,205 --------- 14,519 --------- CONSUMER CYCLICALS (14.6%) AHL Services* 70,928 2,296 Apple South 199,235 2,615 Barnett* 228,919 4,149 Books-A-Million* 346,060 1,774 Central Parking 98,229 4,402 Claire's Stores 107,515 2,023 Family Dollar Stores 345,140 5,716 Friedman's, Cl A* 51,506 1,017 Knight-Ridder 84,503 4,822 Lowe's Companies 71,826 5,688 O'Charleys* 141,141 2,937 Pier 1 Imports 84,502 2,033 Play By Play Toys & Novelties* 91,743 1,514 Policy Management Systems* 50,480 4,165 Promus Hotel* 68,911 2,980 Renters Choice* 92,136 2,453 Staffmark* 208,981 7,680 Stein Mart* 349,868 5,510 Suburban Lodges of America* 230,460 3,702 Tractor Supply* 52,876 1,276 --------- 68,752 --------- CONSUMER STAPLES (3.7%) Educational Medical* 147,418 1,483 Food Lion, Cl A 390,782 3,786 Outback Steakhouse* 117,264 4,324 Richfood Holdings 128,298 3,135 Sonic* 221,818 4,589 --------- 17,317 --------- ENERGY (17.4%) Anadarko Petroleum 108,562 7,165 BJ Services* 204,507 6,685 Camco International 112,559 7,851 Core Laboratories N.V.* 224,583 5,937 Diamond Offshore Drilling 103,035 4,926 Ensco International 153,291 3,880 Global Industries* 523,164 11,150 Global Marine* 135,164 3,016 J. Ray McDermott S.A.* 103,606 4,183 Nuevo Energy* 172,828 5,617 Oceaneering International* 95,593 2,055 St. Mary Land & Exploration 74,358 2,026 Stone Energy* 265,790 9,419 Transocean Offshore 84,359 4,160 World Fuel Services 229,589 4,047 --------- 82,117 ---------
68 - ----------------------------------------------------------- - -----------------------------------------------------------
- ----------------------------------------------------------- SHARES VALUE (000) - ----------------------------------------------------------- FINANCIALS (17.7%) AmSouth Bancorp 86,166 $ 3,312 Bank United, Cl A 56,281 2,814 Capital One Financial 29,408 2,935 CCB Financial 49,101 5,377 Compass Bancshares 126,011 5,982 Crestar Financial 89,697 5,152 Cullen/Frost Bankers 21,011 1,139 Equity Inns REIT 206,362 2,954 Fairfield Communities* 619,987 12,671 Hibernia, Cl A 194,050 4,075 Nova* 170,195 5,606 PMT Services* 412,872 8,051 Profit Recovery Group International* 159,389 3,905 Regions Financial 132,479 5,448 Texas Regional Bancshares, Cl A 61,382 1,964 Triad Guaranty* 217,159 7,166 Union Planters 57,356 3,355 Winston Hotels REIT 108,493 1,302 --------- 83,208 --------- HEALTH CARE (3.3%) Pharmerica* 203,637 2,482 PSS World Medical Inc* 138,327 1,729 Quorum Health Group* 217,034 6,525 Serologicals* 164,406 4,850 --------- 15,586 --------- TECHNOLOGY (14.4%) Acxiom* 225,828 4,884 Benchmark Electronics* 250,023 5,047 Billing Information Concepts* 126,854 2,949 CHS Electronics* 247,862 4,926 Cybex Computer Products* 134,506 3,094 Datastream Systems* 119,543 2,540 Harbinger* 273,798 6,374 HBO 119,541 6,900 Input/Output* 299,044 6,579 - ----------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- TECHNOLOGY--CONTINUED National Data 83,857 $ 3,145 Nichols Research* 232,020 5,568 SCB Computer Technology* 823,338 9,880 Sterling Commerce* 146,782 5,825 --------- 67,711 --------- TRANSPORTATION (5.2%) Comair 111,571 2,971 Covenant Transportation Incorporated, Cl A* 205,932 3,372 Hunt J B Transportation Services 398,433 11,928 Southwest Airlines 108,029 2,883 USA Truck* 210,914 3,164 --------- 24,318 --------- Total Common Stocks (Cost $305,611) 431,611 --------- CONVERTIBLE BONDS (6.3%) Career Horizons, CV to 88.1057 Shares, Callable 11/01/98 @ 104 7.000%, 11/01/02 $1,904 5,543 Diamond Offshore, CV to 24.6910 Shares, Callable 02/22/01 @ 102.08 3.750%, 02/15/07 3,286 4,223 Pier 1 Imports, CV to 81.1030 Shares, Callable 10/01/99 @ 103 5.750%, 10/01/03 2,388 4,842 Pride International, CV to 81.6330 Shares, Callable 03/01/99 @ 103.125 6.250%, 02/15/06 4,806 8,987 Sci Systems, CV to 41.0172 Shares, Callable 05/01/99 @ 103.5 5.000%, 05/01/06 3,917 5,831 --------- Total Convertible Bonds (Cost $27,463) 29,426 ---------
69 STATEMENT OF NET ASSETS - ----------------------------------------------------------- - ----------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1998
SUNBELT EQUITY FUND--CONCLUDED - ----------------------------------------------------------- SHARES/FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- REGULATED INVESTMENT COMPANIES (1.0%) Dollar General, STRYPES* 126,752 $ 4,912 --------- Total Regulated Investment Companies (Cost $4,999) 4,912 --------- REPURCHASE AGREEMENT (1.9%) Swiss Bank 5.51%, dated 05/29/98, matures 06/01/98, repurchase price $9,182,045 (collateralized by U.S. Treasury Note and US Treasury Bond: total market value $9,368,147) (H) $9,178 9,178 --------- Total Repurchase Agreement (Cost $9,178) 9,178 --------- Total Investments (100.9%) (Cost $347,251) 475,127 --------- OTHER ASSETS AND LIABILITIES, NET (-0.9%) (4,276) --------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 28,568,437 outstanding shares of beneficial interest 291,256 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 2,089,279 outstanding shares of beneficial interest 20,090 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 552,859 outstanding shares of beneficial interest 7,265 Undistributed net investment income 40 Accumulated net realized gain on investments 24,324 Net unrealized appreciation on investments 127,876 --------- Total Net Assets (100.0%) $ 470,851 --------- --------- - ----------------------------------------------------------- VALUE - ----------------------------------------------------------- Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 15.12 --------- --------- Net Asset Value and Redemption Price Per Share -- Investor Shares $ 14.77 --------- --------- Maximum Offering Price Per Share -- Investor Class ($14.77 / 96.25%) $ 15.35 --------- --------- Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 14.60 --------- ---------
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95. 70 - ----------------------------------------------------------- - -----------------------------------------------------------
INVESTMENT GRADE TAX-EXEMPT BOND FUND - ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- MUNICIPAL BONDS (104.9%) ALABAMA (2.0%) State Docks Department, Docks Facility, RB (MBIA) 5.250%, 10/01/99 $1,500 $ 1,525 5.250%, 10/01/00 1,000 1,025 5.250%, 10/01/01 1,000 1,033 --------- 3,583 --------- ARIZONA (2.5%) Maricopa County, University School District No. 80 (Chandler), GO, Partially Prerefunded 07/01/01 @ 101 (FGIC) (F) 6.400%, 07/01/10 3,050 3,265 Scottsdale, GO 5.500%, 07/01/14 1,250 1,344 --------- 4,609 --------- CALIFORNIA (3.6%) Metropolitan Water District, Southern California Waterworks, RB, Callable 01/01/08 @ 101 5.500%, 07/01/10 2,785 3,007 Orange County, Loma Ridge Data Center Project, COP, Prefunded 06/01/19 @ 100 (AMBAC) (F) 6.000%, 06/01/21 2,075 2,292 San Bernardino, J.T. Powers Financing Authority, Central City Merged Project, Ser A, Tax Allocation (AMBAC) 5.750%, 07/01/18 1,230 1,351 --------- 6,650 --------- DISTRICT OF COLUMBIA (1.1%) District of Columbia, American College Obstetricians, RB, Callable 08/15/01 @ 102 (AMBAC) 6.500%, 08/15/18 1,930 2,088 --------- FLORIDA (12.9%) Orange County, State Health Facilities Authority, Orlando Regional Healthcare, RB (MBIA) 6.250%, 10/01/13 $1,000 $ 1,158 State, Board of Education, Capital Outlay, Ser C, GO, Callable 06/01/03 @ 101 5.700%, 06/01/11 4,000 4,245 State, Finance Department, Environmental Protection, Preservation 2000, Ser A, RB (FSA) 5.500%, 07/01/09 7,500 8,176 State, Finance Department, Ser A, RB, Prerefunded 07/01/02 @ 100 (MBIA) (G) 6.250%, 07/01/13 2,500 2,724 Tampa, Allegany Health, RB, Prerefunded 12/01/99 @ 102 (FGIC) (F) 7.375%, 12/01/23 3,500 3,746 Tampa, Occupational License Tax, Ser A, RB (FGIC) (C) 3.900%, 10/01/18 3,600 3,600 --------- 23,649 --------- GEORGIA (4.8%) Clayton County, Water Authority, RB 5.000%, 05/01/13 1,050 1,070 5.100%, 05/01/15 2,365 2,413 5.100%, 05/01/16 1,615 1,638 Fulton County, Development Authority, Special Facilities Revenue, Delta Airlines Project, RB, AMT, Callable 05/01/08 @ 101 5.300%, 05/01/13 1,000 997 State, GO 7.250%, 07/01/99 1,305 1,354
71 STATEMENT OF NET ASSETS - ----------------------------------------------------------- - ----------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1998
INVESTMENT GRADE TAX-EXEMPT BOND FUND--CONTINUED - ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- GEORGIA--CONTINUED State, Municipal Electric Authority, Ser B, RB (FGIC) 6.250%, 01/01/12 $1,150 $ 1,319 --------- 8,791 --------- ILLINOIS (11.6%) State, Financial Authority, Provena Health, Ser A, RB (MBIA) 5.500%, 05/15/06 3,260 3,458 State, Financial Authority, Provena Health, Ser A, RB, Callable 05/15/08 @ 101 (MBIA) 5.500%, 05/15/11 2,500 2,624 State, GO, Prerefunded 06/01/01 @ 102 6.600%, 06/01/12 2,350 2,562 State, Health Facilities Authority, Rockford Health System, RB (AMBAC) 5.500%, 08/15/05 525 557 State, Health Facilities Authority, Trinity Medical Center Project, RB, Callable 07/01/02 @ 102 (FSA) 7.000%, 07/01/12 5,000 5,561 State, Regional Transportation Authority, RB (FGIC) 6.000%, 06/01/15 2,000 2,249 State, Regional Transportation Authority, Ser A, RB, Callable 06/01/02 @ 102 (AMBAC) 6.500%, 06/01/15 3,830 4,169 --------- 21,180 --------- MARYLAND (2.2%) Baltimore, Metropolitan District, GO, Callable 07/01/02 @ 102 5.900%, 07/01/04 1,000 1,081 Baltimore, Water Project, Ser A, RB, Callable 07/01/06 @ 101 (FGIC) 5.800%, 07/01/15 $2,800 $ 3,005 --------- 4,086 --------- MASSACHUSETTS (2.6%) Boston, City Hospital Project, RB, Prerefunded 08/15/98 @ 100 (FHA) (F) 7.650%, 02/15/10 1,265 1,385 State, Water Reserves Authority, Ser C, RB (FGIC-TCRS) 5.250%, 12/01/15 3,250 3,390 --------- 4,775 --------- MINNESOTA (0.6%) Minneapolis, Special School District No 001, Ser A, COP, Callable 02/01/06 @ 100 (MBIA) 5.700%, 02/01/09 1,000 1,073 --------- MISSOURI (1.6%) St. Louis, Water Utility Improvements, RB, Callable 07/01/04 @ 102 (FGIC) 5.950%, 07/01/06 1,170 1,287 State, Health & Educational Facilities Authority, Health Care Projects, Ser B, ETM, RB, Callable 06/01/00 @ 102 (MBIA) (F) 7.000%, 06/01/05 1,500 1,664 --------- 2,951 --------- NEBRASKA (1.2%) Omaha, Public Power & Electric Authority, Ser A, RB, Prerefunded 02/01/02 @ 101.5 (F) 6.500%, 02/01/17 2,000 2,189 ---------
72 - ----------------------------------------------------------- - -----------------------------------------------------------
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- NEW JERSEY (0.9%) State, Health Care Facilities Financing Authority, Cathedral Health Services, RB (MBIA) (FHA) 5.500%, 02/01/11 $1,605 $ 1,708 --------- NEW YORK (14.1%) New York, Ser F, GO 5.250%, 08/01/04 2,000 2,084 New York, Ser F, GO (FGIC-TCRS) 5.250%, 08/01/05 3,110 3,277 New York, Ser G, GO (FGIC-TCRS) 5.000%, 08/01/05 4,000 4,154 New York, Ser H, GO, Callable 08/01/08 @ 100 5.500%, 08/01/13 3,000 3,105 Oneida-Herkimer, Solid Waste Management Authority, RB (FSA) 5.500%, 04/01/14 1,285 1,369 State, Dormitory Authority, RB, Callable 07/01/14 @ 100 (FSA) 5.750%, 07/01/18 1,800 1,984 State, Dormitory Authority, Ser A, RB (AMBAC) 6.000%, 07/01/10 1,550 1,751 5.750%, 07/01/13 1,000 1,103 State, Dormitory Authority, Ser A, RB (FGIC-TCRS) 5.750%, 07/01/07 1,000 1,093 State, Dormitory Authority, Ser A, RB (MBIA) 5.750%, 07/01/08 2,000 2,199 5.750%, 07/01/13 1,300 1,434 State, Urban Development, Sr. Lien, RB, Callable 07/01/06 @ 102 5.500%, 07/01/16 2,250 2,344 --------- 25,897 --------- NORTH CAROLINA (0.6%) Onslow County, GO, Callable 03/01/05 @ 101.5 (MBIA) 5.600%, 03/01/08 $1,000 $ 1,079 --------- OHIO (3.3%) Cleveland, City School District, Ser A, GO, Callable 12/01/02 @ 102 (FGIC) 5.875%, 12/01/11 1,650 1,774 Hamilton County, Hamilton County Football Project, Ser B, RB, Callable 06/01/08 @ 101 (MBIA) 5.375%, 12/01/11 4,000 4,223 --------- 5,997 --------- PENNSYLVANIA (6.0%) Allegheny County, Hospital Development Authority, Ohio Valley General, RB, Callable 04/01/03 @ 100 (MBIA) 5.875%, 04/01/11 1,500 1,584 Allegheny County, Pittsburgh International Airport, Ser A, RB (MBIA) 5.750%, 01/01/11 2,500 2,703 5.750%, 01/01/13 4,000 4,330 Berks County, GO, Callable 11/15/02 @ 100 (FGIC) 5.750%, 11/15/12 2,255 2,371 --------- 10,988 --------- PUERTO RICO (0.7%) Commonwealth, Electric Power Authority, Ser T, RB, Prerefunded 07/01/04 @ 102 (F) 6.375%, 07/01/24 1,200 1,358 ---------
73 STATEMENT OF NET ASSETS - ----------------------------------------------------------- - ----------------------------------------------------------- STI CLASSIC FUNDS MAY 31, 1998
INVESTMENT GRADE TAX-EXEMPT BOND FUND--CONCLUDED - ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- SOUTH DAKOTA (1.8%) State, Health & Educational Facility Authority, St. Lukes Midland Regional Medical, RB, Callable 07/01/01 @ 102 (MBIA) 6.625%, 07/01/11 $3,000 $ 3,241 --------- TENNESSEE (3.5%) Metropolitan Nashville Airport, Ser C, RB, Callable 07/01/01 @ 102 (FGIC) 6.600%, 07/01/15 3,900 4,223 Shelby County, GO, Prerefunded 12/01/00 @ 102 (G) 6.250%, 12/01/09 2,000 2,146 --------- 6,369 --------- TEXAS (7.4%) Amarillo, Health Facilities Corporation, Baptist Saint Anthonys Hospital, RB (FSA) 5.500%, 01/01/11 1,000 1,063 5.500%, 01/01/13 1,000 1,061 North Central, Health Facility Development, Health Resources System, Ser B, RB, Callable 02/15/08 @ 102 (MBIA) 5.750%, 02/15/13 2,120 2,283 Richardson, GO, Callable 02/15/08 @ 100 5.500%, 02/15/09 3,615 3,885 State, Water Development Board, Revolving Fund, Senior Lien, RB, Callable 07/15/02 @ 102 6.000%, 07/15/03 2,000 2,169 Travis County, GO, Callable 03/01/08 @ 100 5.000%, 03/01/09 2,055 2,130 University of Texas, Ser B, RB 6.300%, 08/15/99 $1,000 $ 1,030 --------- 13,621 --------- UTAH (3.8%) State, Intermountain Power Agency, Power Supply, Ser A, RB (AMBAC) 6.500%, 07/01/11 1,500 1,762 State, Intermountain Power Agency, Power Supply, Ser E, RB (FSA) 6.250%, 07/01/08 3,000 3,419 6.250%, 07/01/09 1,545 1,769 --------- 6,950 --------- WASHINGTON (11.8%) King County, Ser C, GO, Callable 06/01/03 @ 100 4.600%, 06/01/04 5,000 5,087 State, Health Care Facilities, Swedish Health Systems, RB, Callable 11/15/08 @ 101 (AMBAC) 5.500%, 11/15/12 2,000 2,103 State, Health Care Facilities, Virginia Mason Medical Center Project, Ser B, RB (MBIA) 4.000%, 02/15/27 8,500 8,500 State, Ser B, GO, Callable 05/01/04 @ 100 5.750%, 05/01/14 5,600 5,871 --------- 21,561 ---------
74 ================================================================================
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- WEST VIRGINIA (1.2%) West Virginia University, University Projects, Ser A, RB (MBIA) 5.500%, 04/01/13 $1,000 $ 1,072 5.500%, 04/01/14 1,000 1,069 --------- 2,141 --------- WISCONSIN (3.1%) State, Health & Elderly Facility, Childrens Hospital of Wisconsin, RB (AMBAC) 5.500%, 02/15/11 1,300 1,378 5.625%, 02/15/13 2,690 2,884 5.625%, 02/15/14 1,250 1,337 --------- 5,599 --------- Total Municipal Bonds (Cost $189,435) 192,133 --------- CASH EQUIVALENTS (6.9%) AIM Management Institutional Tax-Free Portfolio (C) 6,992 6,992 SEI Tax-Exempt Trust Institutional Tax-Free Portfolio (C) 5,656 5,656 --------- Total Cash Equivalents (Cost $12,648) 12,648 --------- Total Investments (111.8%) (Cost $202,083) 204,781 --------- OTHER ASSETS AND LIABILITIES (-11.8%) Securities Purchased Payable (28,219) Other Assets and Liabilities, Net 6,602 --------- Total Other Assets and Liabilities (21,617) --------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 12,864,803 outstanding shares of beneficial interest $ 142,338 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 2,467,705 outstanding shares of beneficial interest 26,273 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 736,855 outstanding shares of beneficial interest 8,349 Undistributed net investment income 4 Accumulated net realized gain on investments 3,502 Net unrealized appreciation on investments 2,698 --------- Total Net Assets (100.0%) $ 183,164 ========= Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 11.40 ========= Net Asset Value and Redemption Price Per Share -- Investor Shares $ 11.41 ========= Maximum Offering Price Per Share -- Investor Class ($11.41 / 96.25%) $ 11.85 ========= Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 11.40 =========
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95. 75 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 FLORIDA TAX-EXEMPT BOND FUND
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- MUNICIPAL BONDS (98.5%) FLORIDA (91.1%) Bay County, School District Sales Tax, RB (FSA) 4.500%, 06/01/06 $1,900 $ 1,923 Brevard County, School Board, Ser A, COP (AMBAC) 5.400%, 07/01/12 1,500 1,607 Brevard County, State Health Facilities Authority, Holmes Medical Center Project, RB, Callable 10/01/03 @ 102 (MBIA) 5.700%, 10/01/08 3,000 3,233 Brevard County, State Health Facilities Authority, Wuesthoff Memorial Hospital Project, RB (MBIA) 6.250%, 04/01/06 930 1,046 Broward County, Port Facilities, Ser B, RB, AMT, Callable @ 101 09/01/08 (MBIA) 5.000%, 09/01/18 2,000 1,953 Broward County, School District, COP, Callable 07/01/07 @ 101 (AMBAC) 5.100%, 07/01/09 1,465 1,535 Cape Canaveral, Hospital District, RB, Callable 01/01/2008 @ 101 5.250%, 01/01/18 1,000 978 Citrus County, Pollution Control, Florida Power, RB Callable 08/01/02 @ 102 6.350%, 02/01/22 335 363 Dade County, Ser CC, GO (AMBAC) 7.125%, 10/01/11 1,810 2,249 Dade County, Aviation Revenue, RB, AMT, Callable 10/01/02 @ 102 (MBIA) 6.600%, 10/01/22 $ 825 $ 902 Dade County, Aviation Revenue, Ser A, RB, Callable 10/01/05 @ 102 (AMBAC) 6.000%, 10/01/09 500 554 Dade County, School Board, Ser B, COP (AMBAC) 5.750%, 08/01/03 600 645 Dade County, School District, GO, Prerefunded 07/01/99 @ 102 (F) 7.375%, 07/01/08 250 264 Dade County, Seaport, RB (MBIA) 6.200%, 10/01/08 750 856 6.500%, 10/01/09 1,000 1,175 6.200%, 10/01/10 1,000 1,152 Dade County, State Educational Facilities Authority, University of Miami, RB Callable 04/01/06 @ 102 (MBIA) 5.750%, 04/01/20 2,000 2,115 Dade County, State Educational Facilities Authority, University of Miami, Ser A, RB (MBIA) 6.000%, 04/01/08 755 843 Dade County, Water & Sewer System, RB (FGIC) 6.250%, 10/01/09 750 865 Deerfield Beach, Water & Sewer Revenue, RB (FGIC) 6.125%, 10/01/06 250 282 Gainesville, Utility Systems, Ser A, RB 5.750%, 10/01/04 1,300 1,415 5.750%, 10/01/09 500 557
76 ================================================================================
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- Gulf Breeze, Local Government Lien, Ser B, RB, Mandatory Tender 12/01/08 (FGIC) 5.650%, 12/01/15 $ 460 $ 502 Gulf Breeze, Local Government Lien, Ser B, RB, Mandatory Tender 12/01/09 (FGIC) 5.750%, 12/01/15 410 448 Hillsborough County, Capital Improvement Program, ETM, RB (FGIC) (F) 5.900%, 08/01/04 300 328 Hillsborough County, Capital Improvement Program, County Center Project, Ser B, RB, Callable 07/01/06 @ 102 (MBIA) 5.000%, 07/01/08 1,000 1,030 Hillsborough County, School Board Revenue, COP, Callable 07/01/06 @ 100 (MBIA) 5.875%, 07/01/08 1,000 1,106 Hillsborough County, University Community Hospital, RB (MBIA) 6.500%, 08/15/19 145 173 Indian Trace Community, Water Management Split Benefit, Ser A-1, RB, Callable 05/01/05 @ 102 (MBIA) 5.500%, 05/01/07 455 493 Jacksonville, Excise Tax, Ser B, RB, AMT, Callable 10/01/03 @ 100 (FGIC) 5.200%, 10/01/04 1,500 1,558 Jacksonville, River City Renaissance Project, RB (FGIC) 6.000%, 10/01/04 3,430 3,780 Jacksonville, State Health Facilities Authority, Charity Obligation Group, Ser A, RB, Callable 08/15/07 @ 101 (MBIA) 5.250%, 08/15/15 $2,000 $ 2,044 Jacksonville, Water & Sewer Revenue, RB, Callable 10/01/06 @ 102, Prerefunded 09/30/08 @ 101 (MBIA) (G) 5.000%, 10/01/20 610 643 Lakeland, Electric & Water Revenue, RB 6.650%, 10/01/98 100 101 Lakeland, Electric & Water Revenue, RB (FGIC) 6.500%, 10/01/05 1,000 1,140 6.000%, 10/01/07 1,000 1,125 Manatee County, Community Redevelopment Administration, Center Project, RB, Callable 04/01/00 @ 102 (MBIA) 7.000%, 04/01/08 1,000 1,070 Martin County, State Health Facilities Authority, Martin Memorial Medical Center, Ser B, RB, Callable 11/15/07 @ 102 (MBIA) 5.150%, 11/15/11 1,070 1,110 Miami-Dade County, Special Obligation, RB, Callable 04/01/08 @ 86.6 (MBIA) (A) 0.000%, 10/01/11 1,635 852 North Broward, Hospital District Revenue, ETM, RB (MBIA) (G) 5.950%, 01/01/01 1,000 1,047 Orange County, Public Facilities Revenue, Ser A, RB, Callable 10/01/04 @ 102 (AMBAC) 5.650%, 10/01/07 200 217
77 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 FLORIDA TAX-EXEMPT BOND FUND--CONTINUED
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- Orange County, State Health Facilities Authority, Orlando Regional Healthcare, RB (MBIA) 6.250%, 10/01/13 $1,000 $ 1,158 Orange County, State Housing Finance Authority, Single Family Mortgage, Ser B, RB, Callable 09/01/07 @ 102 5.800%, 09/01/17 760 791 Orange County, Tourist Development, Ser B, RB, Prerefunded 10/01/02 @ 100 (AMBAC) 6.000%, 10/01/21 250 269 Orlando, Community Water & Electric Revenue, Ser D, RB 6.750%, 10/01/17 2,885 3,526 Osceola County, COP (AMBAC) 6.250%, 06/01/01 1,760 1,873 6.250%, 06/01/04 2,105 2,337 6.250%, 06/01/05 2,240 2,508 Palm Beach, Solid Waste Authority, Ser A, RB (AMBAC) 6.000%, 10/01/09 2,525 2,856 Palm Beach, State Health Facilities Authority, JFK Medical Center Project, RB, Prerefunded 12/01/03 @ 102 (FSA) (F) 5.750%, 12/01/14 165 180 Palm Beach County, Apartment System, RB, Callable 10/01/01 @ 102 (MBIA) 7.625%, 10/01/04 1,410 1,588 Pinellas County, Morton Plant Health Systems Project, RB, Callable 11/15/03 @ 102 (MBIA) 5.500%, 11/15/08 1,500 1,599 Pinellas County, State Housing Finance Authority, Single Family Mortgage, Ser C, RB, Callable 03/01/07 @ 102 5.050%, 09/01/07 $ 215 $ 220 5.100%, 09/01/08 230 235 Plant City, Utility System Revenue, RB (MBIA) 6.000%, 10/01/15 400 453 Reedy Creek, Utility Revenue, Ser 1991-1, RB, Prerefunded 10/01/01 @ 101 (MBIA) (F) 6.250%, 10/01/11 405 437 South Broward, Hospital District, RB, Callable 05/01/03 @ 102 (AMBAC) 7.500%, 05/01/08 1,920 2,221 State, Board of Education, Ser B, GO, Callable 06/01/01 @ 101 6.000%, 06/01/22 500 528 State, Board of Education, Ser C, GO, Prerefunded 06/01/97 @ 102 (ETM) (F) 7.100%, 06/01/07 190 193 State, Board of Education, Capital Outlay, Ser B, GO (F) 6.000%, 06/01/02 1,000 1,065 State, Board of Education, Capital Outlay, Ser B, GO, Callable 06/01/02 @ 101 5.900%, 06/01/12 450 476 6.000%, 06/01/15 170 180 State, Board of Education, Capital Outlay, Ser C, GO, Callable 06/01/03 @ 101 5.700%, 06/01/11 2,305 2,446
78 ================================================================================
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- State, Department of Transportation, Right of Way, GO 6.000%, 07/01/06 $1,000 $ 1,115 State, Department of Transportation, Turnpike Authority, Ser A, RB (AMBAC) 5.500%, 07/01/03 1,000 1,064 State, Department of Transportation, Turnpike Authority, Ser A, RB, Callable 07/01/08 @ 101 (FGIC) 5.000%, 07/01/23 2,500 2,458 State, Finance Department, Department of Natural Resources, Preservation 2000, Ser A, RB, Prerefunded 07/01/01 @ 102 (AMBAC) (F) 6.750%, 07/01/06 80 88 State, Finance Department, Environmental Protection, Preservation 2000, Ser A, RB (FSA) 5.500%, 07/01/08 1,000 1,088 5.500%, 07/01/09 3,000 3,271 State, Finance Department, Environmental Protection, Preservation 2000, Ser B, RB (AMBAC) 6.000%, 07/01/09 3,000 3,395 State, Keys, Aqueduct Authority Revenue, RB, Prerefunded 09/01/01 @ 101 (AMBAC) 6.750%, 09/01/21 170 186 State, Municipal Power Agency, Saint Lucie Project, ETM, RB, Callable 12/08/97 @ 100 (F) 5.000%, 10/01/17 500 502 Sunrise, Utility System, RB, Callable 10/01/2018 @ 100 (AMBAC) 5.200%, 10/01/22 $2,000 $ 2,045 5.000%, 10/01/28 1,500 1,495 Tallahassee, Utility System, Ser B, RB, Prerefunded 10/01/99 @ 102 (F) 6.900%, 10/01/14 240 254 Tampa, RB, Callable 10/1/01 @ 102 (AMBAC) 7.050%, 10/01/07 1,000 1,107 Tampa, Health System, Catholic Health, Ser A-1, RB (MBIA) 5.250%, 11/15/04 1,000 1,054 Tampa, Health System, Catholic Health, Ser A-1, RB, Callable 11/15/08 @ 102 (MBIA) 5.250%, 11/15/11 2,300 2,396 Tampa, Health System, Catholic Health, Ser A-2, RB, Callable 11/15/08 @ 102 (AMBAC) 5.250%, 11/15/10 2,030 2,096 --------- 96,032 --------- PUERTO RICO (7.4%) Commonwealth, GO (MBIA) 5.750%, 07/01/12 2,000 2,215 5.650%, 07/01/15 1,000 1,091 Commonwealth, Highway & Transportation Authority, Ser Z, RB (MBIA) 6.250%, 07/01/14 2,000 2,320 Electric Power Authority, RB (MBIA) 6.125%, 07/01/09 1,000 1,143 Electric Power Authority, Ser S, RB 5.500%, 07/01/00 200 206
79 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 FLORIDA TAX-EXEMPT BOND FUND--CONCLUDED
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- Public Buildings Authority Revenue, Guaranteed Government Facilities, Ser A, RB (AMBAC) 6.250%, 07/01/14 $ 750 $ 870 --------- 7,845 --------- Total Municipal Bonds (Cost $100,743) 103,877 --------- CASH EQUIVALENTS (3.3%) AIM Management Institutional Tax-Free Portfolio (C) 2,706 2,706 SEI Tax-Exempt Trust Institutional Tax-Free Portfolio (C) 794 794 --------- Total Cash Equivalents (Cost $3,500) 3,500 --------- Total Investments (101.8%) (Cost $104,243) 107,377 --------- OTHER ASSETS AND LIABILITIES, NET (-1.8%) (1,897) --------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 8,764,559 outstanding shares of beneficial interest $ 90,819 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 315,231 outstanding shares of beneficial interest 3,119 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 760,024 outstanding shares of beneficial interest 7,944 Undistributed net investment income 1 Accumulated net realized gain on investments 463 Net unrealized appreciation on investments 3,134 --------- Total Net Assets (100.0%) $ 105,480 ========= Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 10.72 ========= Net Asset Value and Redemption Price Per Share -- Investor Shares $ 10.72 ========= Maximum Offering Price Per Share -- Investor Class ($10.72 / 96.25%) $ 11.14 ========= Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 10.74 =========
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95. 80 ================================================================================ GEORGIA TAX-EXEMPT BOND FUND
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- MUNICIPAL BONDS (94.3%) GEORGIA (94.3%) Albany-Dougherty County, State Hospital Authority, Ser B, Anticipation Certificate, Prerefunded 09/01/00 @ 102 (AMBAC) (F) 7.500%, 09/01/20 $ 255 $ 279 Alpharetta, GO 5.000%, 05/01/07 1,650 1,726 Athens, Water & Sewer Revenue, ETM, RB (F) 5.700%, 07/01/00 165 171 Atlanta, Airport Facility, RB (AMBAC) 6.000%, 01/01/03 1,000 1,075 6.000%, 01/01/04 500 544 6.500%, 01/01/06 1,000 1,135 Metro Atlanta, Rapid Tranit Authority, Ser N, RB 6.000%, 07/01/07 1,000 1,119 Augusta, Water & Sewer Revenue, RB, Prerefunded 05/01/02 @ 102 (F) 6.200%, 05/01/03 130 142 Bibb County, GO 7.000%, 01/01/04 985 1,118 Burke County, Development Authority, Pollution Control, Oglethorpe Power, Ser A, RB, VRDN (FGIC) (C) (D) 3.900%, 01/01/16 2,500 2,500 Cartersville, Water & Sewer Revenue, RB, Callable 07/01/08 @102 (FSA) 5.000%, 07/01/12 1,255 1,269 Clayton County, Water & Sewer Authority, RB (MBIA) 5.000%, 05/01/11 750 769 Clayton County, Water Authority, RB, Callable 05/01/06 @ 102 (AMBAC) 5.350%, 05/01/09 $1,500 $ 1,599 Cobb County, GO 5.000%, 02/01/03 1,025 1,063 Cobb County, Recreational Facilities Improvements, GO, Callable 01/01/07 @ 101 5.125%, 01/01/15 850 863 Cobb County, Water & Sewer Authority, RB, Callable 07/01/04 @ 102 5.125%, 07/01/05 345 363 Cobb County & Marietta, Coliseum & Exhibit Hall Authority, RB (MBIA) 5.500%, 10/01/12 940 1,016 Cobb County & Marietta, Water Authority, RB 5.100%, 11/01/04 1,000 1,051 Columbus, Georgia Water & Sewer, RB, Callable 11/01/07 @ 102 (FGIC) 5.625%, 05/01/13 1,055 1,131 Dalton, Utilities Revenue RB (MBIA) 6.000%, 01/01/08 2,000 2,240 Dalton-Whitfield County, Hospital Authority, RB, Prerefunded 07/01/00 @ 102 (F) 7.000%, 07/01/03 355 383 DeKalb County, Development Authority, Emory University Project, Ser A, RB 5.375%, 11/01/05 1,650 1,764 DeKalb County, Development Authority, Emory University Project, Ser A, RB, Callable 11/01/05 @ 101 5.200%, 11/01/08 500 528
81 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 GEORGIA TAX-EXEMPT BOND FUND--CONTINUED
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- DeKalb County, School District, Ser A, GO 6.250%, 07/01/11 $1,500 $ 1,735 Douglas County, School District, GO (MBIA) 5.650%, 01/01/09 805 868 Douglasville - Douglas County, Water & Sewer Authority, RB (AMBAC) 5.625%, 06/01/15 350 380 East Point, Building Authority, RB, Callable 02/01/06 @ 102 (AMBAC) 4.800%, 02/01/07 535 549 Fayette County, School District, GO 6.250%, 03/01/07 450 510 Fayette County, Water Authority, ETM, RB (MBIA) (F) 8.550%, 10/01/01 300 341 Forsyth County, School District, GO 6.500%, 07/01/06 1,000 1,144 Forsyth County, School District, GO (MBIA) 5.350%, 07/01/10 780 822 Fulco, Hospital Authority, Catholic Health East, Ser A, RB, Anticipation Certificate, Callable 11/15/2008 @ 102 (MBIA) 5.250%, 11/15/12 1,000 1,037 Fulton County, Hospital Authority, Northside Hospital Project, Ser B, RB, Prerefunded 10/01/02 @ 102 (MBIA) (F) 6.600%, 10/01/11 2,000 2,228 Gwinnett County, Recreation Authority, RB 5.800%, 02/01/06 785 860 5.875%, 02/01/07 1,390 1,538 Gwinnett County, School District, GO 6.400%, 02/01/06 $ 500 $ 567 Gwinnett County, School District, Ser B, GO 6.400%, 02/01/07 1,000 1,144 Gwinnett County, Water & Sewer Authority, RB, Callable 08/01/07 @ 102 5.250%, 08/01/18 780 790 Gwinnett County, Water & Sewer Authority, RB, Callable 08/01/08 @ 102 5.000%, 08/01/12 500 511 5.000%, 08/01/13 800 814 Hall County, School District, Ser B, GO 6.300%, 12/01/05 675 760 Henry County, GO 6.300%, 08/01/08 300 344 Henry County, Henry Medical Center Project, Callable 07/01/07 @ 102 (AMBAC) 5.500%, 07/01/08 2,460 2,664 Henry County, School District, Ser A, GO 6.150%, 08/01/06 150 168 6.450%, 08/01/11 500 586 Henry County, School District, Ser B, GO (MBIA) 5.500%, 08/01/01 350 366 Henry County, Water & Sewer Authority, RB (AMBAC) 6.150%, 02/01/20 1,750 2,024 Medical Center Hospital Authority, Columbus Regional Healthcare System, Callable 08/01/05 @ 102, RB (MBIA) 6.000%, 08/01/06 1,000 1,110
82 ================================================================================
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- Meriwether County, School District, GO (FSA) 7.000%, 02/01/06 $ 740 $ 866 5.500%, 02/01/16 1,000 1,041 Milledgeville, Water & Sewer Revenue, RB (FSA) 6.000%, 12/01/16 1,000 1,130 6.000%, 12/01/21 1,000 1,142 Paulding County, School District, Ser A, GO 6.625%, 02/01/07 1,000 1,156 6.625%, 02/01/08 500 585 Private Colleges & Universities Facilities Authority, Emory University Project, Ser A, RB, Callable 11/01/07 @ 100 5.000%, 11/01/10 1,000 1,034 Private Colleges & Universities Facilities Authority, Emory University Project, Ser C, RB, Callable 10/01/02 @ 102 5.900%, 10/01/04 305 331 Private Colleges & Universities Facilities Authority, Mercer University Project, RB (MBIA) 6.400%, 11/01/11 500 587 Private Colleges & Universities Facilities Authority, Spelman College Project, RB (FGIC) 6.000%, 06/01/09 475 523 Putnam County, School District, GO, Callable 2/01/08 @ 102 4.500%, 02/01/12 930 901 Richmond County, Water & Sewer Revenue, Ser A, RB, Callable 10/01/06 @ 102 (FGIC) 5.125%, 10/01/17 1,000 1,002 Rockdale County, School District, RB, Prerefunded 01/01/99 @ 102 (F) 6.400%, 01/01/05 $ 150 $ 155 Savannah, Water & Sewer Revenue, ETM, RB (F) 6.450%, 12/01/04 1,000 1,127 Smyrna, Development Authority, RB 5.600%, 02/01/20 735 792 State GO, Ser C 6.500%, 04/01/08 1,000 1,166 6.250%, 08/01/08 1,360 1,564 State Housing & Financial Authority, Single Family Mortgage, Ser B, Sub-ser B-1, Callable 06/01/05 @ 102, RB 5.550%, 12/01/07 550 579 State Housing & Financial Authority, Single Family Mortgage, Ser B, Sub-ser B-1, Callable 06/01/06 @ 102, RB (FHA) 5.550%, 12/01/10 325 337 5.600%, 12/01/11 450 467 State Housing & Financial Authority, Single Family Mortgage, Ser C, Sub-ser C-1, Callable 12/01/07 @ 101.5, RB 5.550%, 12/01/16 500 517 State Municipal Electric Authority, ETM, RB, Callable 01/12/98 @ 101 (F) 8.000%, 01/01/15 465 616 State, Tollway Authority, Georgia 400 Project, RB 5.000%, 07/01/09 1,280 1,338 Upper Oconee Basin, Water Authority, RB, Callable 07/01/08 @ 102 (FGIC) 5.000%, 07/01/12 500 507
83 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 GEORGIA TAX-EXEMPT BOND FUND--CONCLUDED
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- Vidalia, Water & Sewer Revenue, ETM, RB (F) 6.000%, 07/01/07 $ 605 $ 679 Walker County, School District, GO 5.000%, 02/01/03 1,000 1,036 Walker, Dade, and Catoosa Counties, Hutchinson Medical, Ser A, RB, Callable 10/01/07 @ 102 (FSA) 5.500%, 10/01/08 1,370 1,474 --------- 70,360 --------- Total Municipal Bonds (Cost $68,096) 70,360 --------- CASH EQUIVALENT (4.2%) AIM Management Institutional Tax-Free Portfolio (C) 3,106 3,106 --------- Total Cash Equivalent (Cost $3,106) 3,106 --------- Total Investments (98.5%) (Cost $71,202) 73,466 --------- OTHER ASSETS AND LIABILITIES, NET (1.5%) 1,136 --------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 6,165,879 outstanding shares of beneficial interest $ 60,321 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 392,414 outstanding shares of beneficial interest 3,836 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 816,778 outstanding shares of beneficial interest 8,050 Undistributed net investment income 1 Accumulated net realized gain on investments 130 Net unrealized appreciation on investments 2,264 --------- Total Net Assets (100.0%) $ 74,602 ========= Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 10.11 ========= Net Asset Value and Redemption Price Per Share -- Investor Shares $ 10.13 ========= Maximum Offering Price Per Share -- Investor Class ($10.13 / 96.25%) $ 10.52 ========= Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 10.12 =========
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95. 84 INVESTMENT GRADE BOND FUND
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- U.S. TREASURY OBLIGATIONS (31.7%) U.S. Treasury Bonds 7.500%, 11/15/16 $60,000 $ 70,855 8.125%, 08/15/19 87,950 111,438 6.000%, 02/15/26 47,875 48,651 U.S. Treasury Notes 5.875%, 11/30/01 5,000 5,045 6.625%, 03/31/02 12,000 12,418 5.875%, 11/15/05 17,500 17,747 --------- Total U.S. Treasury Obligations (Cost $245,576) 266,154 --------- CORPORATE OBLIGATIONS (55.1%) FINANCE (39.0%) Aristar 6.750%, 05/15/99 23,000 23,151 AT&T Capital, MTN 6.410%, 08/13/99 26,000 26,005 Countrywide Home Loan, MTN 6.840%, 10/22/04 5,000 5,144 6.510%, 02/11/05 23,300 23,387 Ford Motor Credit 7.000%, 09/25/01 24,100 24,793 6.500%, 02/28/02 23,500 23,823 General Motors Acceptance 7.125%, 05/01/01 23,500 24,146 General Motors Acceptance, MTN 7.050%, 04/23/02 10,300 10,609 Great Western Financial 8.600%, 02/01/02 9,800 10,510 Homeside Lending, MTN 6.875%, 05/15/00 29,200 29,565 International Lease Finance, MTN 5.957%, 01/15/02 7,150 7,105 Merrill Lynch, MTN 6.060%, 10/15/01 41,500 41,396 Morgan Stanley, MTN, Callable 03/09/01 @ 100 6.090%, 03/09/11 12,000 12,000 FINANCE--CONTINUED Salomon 7.300%, 05/15/02 $20,000 $ 20,750 Salomon Smith Barney 6.250%, 01/15/05 20,000 19,775 SunAmerica 6.200%, 10/31/99 25,000 25,058 --------- 327,217 --------- INDUSTRIAL (16.1%) American Home Products 7.700%, 02/15/00 11,750 12,103 7.900%, 02/15/05 21,300 23,217 Bausch & Lomb 6.750%, 12/15/04 11,800 12,021 Ikon Capital, MTN 6.730%, 06/15/01 13,000 13,179 Lockheed Martin 6.550%, 05/15/99 16,000 16,080 Philip Morris 7.250%, 09/15/01 24,500 25,143 7.500%, 04/01/04 14,500 15,243 Praxair 6.900%, 11/01/06 17,725 18,456 --------- 135,442 --------- Total Corporate Obligations (Cost $459,288) 462,659 --------- U.S. GOVERNMENT AGENCY OBLIGATIONS (7.2%) FHLMC 8.000%, 06/01/02 4,586 4,669 7.500%, 09/01/03 12,948 13,179 FNMA 7.000%, 10/01/03 41,842 42,431 --------- Total U.S. Government Agency Obligations (Cost $59,936) 60,279 ---------
85 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 INVESTMENT GRADE BOND FUND--CONCLUDED
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- BANK NOTE (1.7%) Capital One 6.530%, 11/26/99 $14,500 $ 14,518 --------- Total Bank Note (Cost $14,500) 14,518 --------- REPURCHASE AGREEMENTS (3.6%) Deutsche Bank 5.50%, dated 05/29/98, matures 06/01/98, repurchase price $21,876,757 (collateralized by U.S. Treasury Note: total market value $22,304,576) (H) 21,867 21,867 Swiss Bank 5.52%, dated 05/29/98, matures 06/01/98, repurchase price $8,448,982 (collateralized by U.S. Treasury Note and U.S. Treasury Bond: total market value $8,622,434) (H) 8,445 8,445 --------- Total Repurchase Agreements (Cost $30,312) 30,312 --------- Total Investments (99.3%) (Cost $809,612) 833,922 --------- OTHER ASSETS AND LIABILITIES, NET (0.7%) 5,946 --------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 74,493,579 outstanding shares of beneficial interest $ 771,578 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 3,124,013 outstanding shares of beneficial interest 32,828 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 1,230,012 outstanding shares of beneficial interest 12,857 Overdistributed net investment income (188) Accumulated net realized loss on investments (1,517) Net unrealized appreciation on investments 24,310 --------- Total Net Assets (100.0%) $ 839,868 ========= Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 10.65 ========= Net Asset Value and Redemption Price Per Share -- Investor Shares $ 10.65 ========= Maximum Offering Price Per Share -- Investor Class ($10.65 / 96.25%) $ 11.06 ========= Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 10.66 =========
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95. 86 SHORT-TERM BOND FUND
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- U.S. TREASURY OBLIGATIONS (29.1%) U.S. Treasury Notes 4.750%, 10/31/98 $9,000 $ 8,975 5.500%, 02/28/99 4,750 4,751 5.875%, 07/31/99 5,000 5,017 5.625%, 10/31/99 3,000 3,003 7.500%, 11/15/01 6,500 6,885 5.750%, 08/15/03 1,000 1,008 U.S. Treasury STRIPS 0.000%, 08/15/03 1,250 939 0.000%, 11/15/04 8,000 5,594 --------- Total U.S. Treasury Obligations (Cost $35,982) 36,172 --------- CORPORATE OBLIGATIONS (48.9%) FINANCE (21.2%) American Express 6.750%, 06/23/04 3,000 3,097 American General 5.900%, 01/15/03 2,000 1,977 6.250%, 03/15/03 1,100 1,101 Associates of North America, MTN 5.980%, 12/19/00 1,250 1,248 7.080%, 04/15/03 1,500 1,554 Bankers Trust New York 6.625%, 07/30/99 2,250 2,264 Beneficial, MTN 6.490%, 09/27/00 1,000 1,009 Chrysler Financial 9.500%, 12/15/99 1,000 1,051 Dean Witter Discover, MTN 6.000%, 02/08/01 1,000 1,001 First Chicago NBD, MTN 6.500%, 11/01/01 2,250 2,275 Ford Motor Credit 6.500%, 02/28/02 725 735 6.000%, 01/14/03 2,000 1,990 General Motors Acceptance 6.000%, 02/01/02 750 745 FINANCE --CONTINUED HFC Limited 6.000%, 06/30/98 $2,000 $ 2,000 Household Finance 9.625%, 07/15/00 1,250 1,337 International Lease Finance, MTN 5.810%, 07/10/00 2,000 1,995 Norwest Financial 7.200%, 04/01/04 1,000 1,054 --------- 26,433 --------- INDUSTRIAL (22.7%) Clark Equipment 9.750%, 03/01/01 1,250 1,350 Computer Associates (B) 6.375%, 04/15/05 2,300 2,297 Dayton Hudson 6.800%, 10/01/01 2,250 2,289 5.950%, 06/15/10 500 500 General Foods 6.000%, 06/15/01 500 498 IBM, MTN 6.037%, 08/07/00 1,250 1,255 Philip Morris 7.500%, 01/15/02 1,250 1,295 RJR Nabisco 6.800%, 09/01/01 1,500 1,526 Sears Roebuck Acceptance, MTN 6.920%, 06/17/04 2,250 2,337 Tenneco 10.075%, 02/01/01 3,000 3,278 TRW, MTN 9.000%, 02/09/01 1,000 1,071 Union Pacific 7.060%, 05/15/03 1,500 1,556 USAA, MTN (B) 8.880%, 09/21/99 2,000 2,071
87 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 SHORT-TERM BOND FUND--CONCLUDED
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- INDUSTRIAL--CONTINUED Wal-Mart, Callable/Putable 02/01/00 @ 100 5.650%, 02/01/10 $3,000 $ 2,985 Walt Disney, MTN 5.600%, 01/13/00 2,500 2,491 Walt Disney Euro, MTN 6.250%, 06/21/99 1,500 1,500 --------- 28,299 --------- UTILITIES (5.0%) Bellsouth Savings 9.125%, 07/01/03 1,767 1,935 Indiana & Michigan Power, MTN 6.400%, 03/01/00 2,250 2,264 NYNEX Credit, MTN 6.900%, 06/15/99 2,000 2,018 --------- 6,217 --------- Total Corporate Obligations (Cost $60,397) 60,949 --------- U.S. GOVERNMENT AGENCY OBLIGATIONS (6.7%) FFCB, Callable 11/06/98 @ 100 6.330%, 11/06/00 2,500 2,503 FHLB 5.510%, 02/06/01 2,750 2,736 FHLMC, Callable 06/30/98 @ 100 (C) 5.375%, 04/13/00 1,000 982 FNMA, MTN 5.760%, 02/26/01 2,100 2,095 --------- Total U.S. Government Agency Obligations (Cost $8,257) 8,316 --------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (2.4%) FHLMC 8.000%, 01/01/00 540 553 6.500%, 12/01/00 2,014 2,031 U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS--CONTINUED FNMA 8.500%, 11/01/01 $ 354 $ 366 --------- Total U.S. Agency Mortgage-Backed Obligations (Cost $2,932) 2,950 --------- ASSET-BACKED SECURITIES (8.5%) Arcadia Auto Receivables Trust, Ser 1997-B, Cl A3 6.300%, 07/16/01 2,500 2,509 Discover Card Master Trust, Ser 1997-2, Cl A 6.792%, 04/16/10 3,000 3,018 Iroquois Trust, Ser 1997-3, Cl A (B) 6.680%, 11/10/03 3,000 3,005 Metris Master Trust, Ser 1997-1, Cl A 6.870%, 10/20/05 2,000 2,066 --------- Total Asset-Backed Securities (Cost $10,555) 10,598 --------- CASH EQUIVALENT (3.9%) SEI Daily Income Trust Prime Obligation Portfolio (C) 4,869 4,869 --------- Total Cash Equivalent (Cost $4,869) 4,869 --------- Total Investments (99.5%) (Cost $122,992) 123,854 --------- OTHER ASSETS AND LIABILITIES, NET (0.5%) 627 ---------
88
- ----------------------------------------------------------- VALUE (000) - ----------------------------------------------------------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 11,978,220 outstanding shares of beneficial interest $ 119,361 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 193,503 outstanding shares of beneficial interest 1,935 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 209,663 outstanding shares of beneficial interest 2,103 Undistributed net investment income 143 Accumulated net realized gain on investments 77 Net unrealized appreciation on investments 862 --------- Total Net Assets (100.0%) $ 124,481 ========= Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 10.05 ========= Net Asset Value and Redemption Price Per Share -- Investor Shares $ 10.07 ========= Maximum Offering Price Per Share -- Investor Class ($10.07 / 98.00%) $ 10.28 ========= Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 10.07 =========
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95. 89 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 SHORT-TERM U.S. TREASURY SECURITIES FUND
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- U.S. TREASURY OBLIGATIONS (96.8%) U.S. Treasury Notes 5.500%, 11/15/98 $ 1,600 $ 1,600 6.375%, 05/15/99 1,900 1,915 6.875%, 07/31/99 4,250 4,312 6.000%, 08/15/99 2,500 2,513 5.875%, 11/15/99 2,000 2,009 5.625%, 11/30/99 17,000 17,021 5.875%, 02/15/00 2,250 2,262 6.875%, 03/31/00 1,250 1,279 6.125%, 07/31/00 2,250 2,276 5.750%, 10/31/00 2,000 2,009 5.375%, 02/15/01 12,800 12,743 --------- Total U.S. Treasury Obligations (Cost $49,758) 49,939 --------- CASH EQUIVALENT (1.7%) SEI Daily Income Trust Treasury II Portfolio (C) 872 872 --------- Total Cash Equivalent (Cost $872) 872 --------- Total Investments (98.5%) (Cost $50,630) 50,811 --------- OTHER ASSETS AND LIABILITIES, NET (1.5%) 799 --------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 4,708,139 outstanding shares of beneficial interest $ 46,966 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 328,871 outstanding shares of beneficial interest 3,311 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 142,073 outstanding shares of beneficial interest 1,416 Overdistributed net investment income (53) Accumulated net realized loss on investments (211) Net unrealized appreciation on investments 181 --------- Total Net Assets (100.0%) $ 51,610 ========= Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 9.97 ========= Net Asset Value and Redemption Price Per Share -- Investor Shares $ 9.96 ========= Maximum Offering Price Per Share -- Investor Class ($9.96 / 99.00%) $ 10.06 ========= Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 9.94 =========
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95. 90 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- U.S. TREASURY OBLIGATIONS (21.1%) U.S. Treasury Notes 7.875%, 08/15/01 $ 5,750 $ 6,130 6.375%, 09/30/01 8,900 9,106 6.250%, 01/31/02 14,300 14,603 --------- Total U.S. Treasury Obligations (Cost $29,786) 29,839 --------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (77.0%) FHLMC 8.000%, 06/01/02 655 667 7.000%, 10/01/02 3,639 3,689 8.000%, 12/01/02 1,998 2,042 7.000%, 03/01/04 11,345 11,519 FHLMC REMIC, Ser 1624-KC 6.000%, 06/15/08 11,084 11,044 FHLMC REMIC, Ser 1666-E 6.000%, 12/15/19 5,000 4,989 FHLMC REMIC, Ser 1614-H 6.000%, 06/15/20 4,550 4,545 FHLMC REMIC, Ser 29-Q 7.500%, 06/25/20 15,000 15,479 FHLMC TBA 6.500%, 02/01/13 10,300 10,355 FNMA 6.140%, 03/24/03 7,100 7,079 7.500%, 07/01/03 5,864 5,962 7.000%, 10/01/03 11,622 11,786 7.000%, 03/01/04 12,463 12,639 8.500%, 04/01/17 863 912 FNMA REMIC, Ser 1993-223PH 6.050%, 10/25/22 5,375 5,327 GNMA 9.000%, 11/15/17 1,090 1,180 --------- Total U.S. Agency Mortgage-Backed Obligations (Cost $108,381) 109,214 --------- CASH EQUIVALENT (8.8%) SEI Liquid Asset Trust Prime Obligation Portfolio (C) $12,436 $ 12,436 --------- Total Cash Equivalent (Cost $12,436) 12,436 --------- Total Investments (106.9%) (Cost $150,603) 151,489 --------- OTHER ASSETS AND LIABILITIES (-6.9%) Securities Purchased Payable (10,355) Other Assets and Liabilities, Net 602 --------- Total Other Assets and Liabilities (9,753) --------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 13,586,482 outstanding shares of beneficial interest 136,353 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 267,580 outstanding shares of beneficial interest 2,694 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 152,467 outstanding shares of beneficial interest 1,543 Overdistributed net investment income (2) Accumulated net realized gain on investments 262 Net unrealized appreciation on investments 886 --------- Total Net Assets (100.0%) $ 141,736 =========
91 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND--CONCLUDED
- ----------------------------------------------------------- VALUE - ----------------------------------------------------------- Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 10.12 ========= Net Asset Value and Redemption Price Per Share -- Investor Shares $ 10.11 ========= Maximum Offering Price Per Share -- Investor Class ($10.11 / 97.50%) $ 10.37 ========= Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 10.12 =========
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95. 92 U.S. GOVERNMENT SECURITIES FUND
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- U.S. TREASURY OBLIGATIONS (25.2%) U.S. Treasury Bonds 7.750%, 11/30/99 $ 200 $ 206 7.250%, 05/15/16 1,000 1,153 6.875%, 08/15/25 1,000 1,133 6.000%, 02/15/26 2,000 2,032 U.S. Treasury Notes 8.500%, 11/15/00 1,000 1,067 8.000%, 05/15/01 200 213 7.500%, 11/15/01 200 212 7.500%, 05/15/02 750 800 7.250%, 05/15/04 500 541 7.875%, 11/15/04 275 308 7.500%, 02/15/05 500 552 6.500%, 10/15/06 750 791 6.625%, 05/15/07 1,050 1,120 7.625%, 02/15/25 400 493 --------- Total U.S. Treasury Obligations (Cost $10,187) 10,621 --------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS (65.1%) FHLMC 6.000%, 02/01/01 93 93 7.000%, 01/01/09 104 107 7.000%, 04/01/09 287 293 7.000%, 08/01/10 726 741 7.000%, 05/01/12 868 886 6.500%, 12/01/12 1,586 1,596 FHLMC REMIC, Ser 2039, Cl PC 6.000%, 05/15/09 1,000 997 FNMA 6.000%, 11/01/07 874 874 7.500%, 06/01/11 737 760 7.000%, 09/17/11 1,107 1,129 7.000%, 05/01/12 902 920 7.000%, 06/01/12 880 898 7.000%, 07/01/12 872 889 7.000%, 10/01/16 762 773 7.500%, 04/01/27 815 839 6.500%, 03/01/28 998 992 FNMA REMIC, Ser 1997-6, Cl H 7.000%, 08/18/08 $1,058 $ 1,096 FNMA REMIC, Ser G93-40, Cl VC 6.500%, 08/25/10 261 259 FNMA REMIC, Ser 1997-34, Cl VC 7.500%, 05/01/12 1,000 1,029 FNMA REMIC, Ser 1996-9, Cl H 6.500%, 11/25/13 1,337 1,350 FNMA REMIC, Ser 1993-156, Cl B 6.500%, 04/25/18 100 100 FNMA REMIC, Ser 1996-68, Cl C 6.500%, 08/18/18 1,000 1,005 FNMA REMIC, Ser 1990-143, Cl J 8.750%, 12/25/20 111 118 GNMA 7.500%, 10/20/09 56 58 8.250%, 01/15/12 74 78 9.000%, 04/15/17 381 409 8.500%, 05/15/17 703 743 10.000%, 06/15/19 3 4 7.500%, 05/15/22 523 539 7.000%, 11/15/22 419 426 8.000%, 02/15/23 30 32 8.500%, 03/15/23 55 59 7.500%, 04/15/23 125 130 7.500%, 09/15/23 765 789 6.500%, 10/15/23 946 942 7.000%, 01/15/24 136 138 7.500%, 04/15/24 749 772 7.000%, 06/15/24 831 845 8.000%, 08/15/24 67 70 8.000%, 09/15/24 22 24 8.000%, 10/15/24 30 32 8.000%, 11/15/24 27 29 8.500%, 12/15/24 59 63 8.500%, 02/15/25 21 23 7.000%, 12/15/25 463 471 6.500%, 02/15/28 989 984
93 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 U.S. GOVERNMENT SECURITIES FUND--CONCLUDED
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- GNMA REMIC, Ser 1995-6A, Cl E 7.500%, 05/20/23 $1,000 $ 1,029 GNMA REMIC, Ser 1998-9, Cl D 6.500%, 08/20/24 1,000 994 --------- Total U.S. Agency Mortgage-Backed Obligations (Cost $26,868) 27,427 --------- CASH EQUIVALENTS (9.5%) SEI Daily Income Trust Government II Portfolio (C) 2,021 2,021 SEI Daily Income Trust Treasury II Portfolio (C) 2,004 2,004 --------- Total Cash Equivalents (Cost $4,025) 4,025 --------- Total Investments (99.8%) (Cost $41,080) 42,073 --------- OTHER ASSETS AND LIABILITIES, NET (0.2%) 73 --------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 3,337,251 outstanding shares of beneficial interest 34,056 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 308,451 outstanding shares of beneficial interest 3,145 Fund shares of the Flex Class (unlimited authorization -- no par value) based on 384,656 outstanding shares of beneficial interest 3,958 Accumulated net realized loss on investments (6) Net unrealized appreciation on investments 993 --------- Total Net Assets (100.0%) $ 42,146 ========= Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $ 10.46 ========= Net Asset Value and Redemption Price Per Share -- Investor Shares $ 10.45 ========= Maximum Offering Price Per Share -- Investor Class ($10.45 / 96.25%) $ 10.86 ========= Net Asset Value, Offering and Redemption Price Per Share -- Flex Shares (1) $ 10.46 =========
(1) THE FLEX SHARES HAVE A CONTINGENT SALES CHARGE. FOR A DESCRIPTION OF A POSSIBLE SALES CHARGE, SEE NOTES TO THE FINANCIAL STATEMENTS. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 95. 94 ================================================================================ KEY TO ABBREVIATIONS USED IN THE STATEMENT OF NET ASSETS ADR American Depository Receipt AMBAC Security insured by the American Municipal Bond Assurance Corporation AMT Alternative Minimum Tax Cl Class COP Certificate of Participation CV Convertible Security ETM Escrowed to Maturity F Foreign Registry Shares FFCB Federal Farm Credit Bank FGIC Security insured by the Financial Guaranty Insurance Company FHA Federal Housing Administration FHLB Federal Home Loan Bank FHLMC Federal Home Loan Mortgage Corporation FNMA Federal National Mortgage Association FSA Security insured by Financial Security Assurance GDR Global Depository Receipt GDS Global Depository Shares GNMA Government National Mortgage Association GO General Obligation MBIA Security Insured by the Municipal Bond Insurance Association MTN Medium Term Note PLC Public Limited Corporation RB Revenue Bond REIT Real Estate Investment Trust REMIC Real Estate Mortgage Investment Conduit Ser Series STRIPS Separately Traded Registered Interest and Principal Security STRYPES Structured Yield Product Exchange Securities TBA To Be Announced (see Notes to Financial Statements) TCRS Transferrable Custodial Receipts TRACES Trust Automatic Common Exchange Securities VRDN Variable Rate Demand Note * Non-income producing securities (A) Zero Coupon Bond (B) Private Placement Security (C) Variable rate security. The rate reported on the Statement of Net Assets is the rate in effect on May 31, 1998. (D) Put and demand features exist requiring the issuer to repurchase the instrument prior to maturity. (E) Securities are held in connection with a letter of credit issued by a major bank. (F) Collateralized by U.S. Government Securities (G) Collateralized by State and Local Government Securities (H) Tri-Party Repurchase Agreement 95 STATEMENT OF OPERATIONS (000) ================================================================================ STI CLASSIC FUNDS FOR THE YEAR ENDED MAY 31, 1998
MID-CAP SMALL-CAP VALUE INCOME EQUITY EQUITY STOCK FUND FUND FUND ---------- --------- --------- 06/01/97- 06/01/97- 06/01/97- 05/31/98 05/31/98 05/31/98 ---------- --------- --------- Income: Interest Income .................................................................. $ 7,447 $ 1,222 $ 639 Dividend Income .................................................................. 47,287 1,990 6,459 Less: Foreign Taxes Withheld ..................................................... -- -- -- -------- ------- ------- Total Investment Income .......................................................... 54,734 3,212 7,098 -------- ------- ------- Expenses: Investment Advisory Fees ......................................................... 15,826 4,269 3,579 Less: Investment Advisory Fees Waived ............................................ -- (423) (329) Administrator Fees ............................................................... 1,428 267 230 Transfer Agent Fees -- Trust Shares .............................................. 17 19 16 Transfer Agent Fees -- Investor Shares ........................................... 52 33 -- Transfer Agent Fees -- Flex Shares ............................................... 118 28 43 Transfer Agent Out of Pocket Fees ................................................ 221 42 41 Printing Expenses ................................................................ 171 44 53 Custody Fees ..................................................................... 86 15 15 Professional Fees ................................................................ 110 26 30 Trustee Fees ..................................................................... 31 6 5 Registration Fees ................................................................ 205 35 102 Distribution Fees -- Investor Shares ............................................. 631 100 -- Less: Distribution Fees Waived -- Investor Shares ................................ -- (29) -- Distribution Fees -- Flex Shares ................................................. 1,241 143 188 Less: Distribution Fees Waived -- Flex Shares .................................... (7) (19) (32) Insurance and Other Fees ......................................................... 42 8 8 Amortization of Deferred Organization Costs ...................................... 7 -- 22 -------- ------- ------- Total Expenses ................................................................... 20,179 4,564 3,971 -------- ------- ------- Net Investment Income (Loss) ..................................................... 34,555 (1,352) 3,127 -------- ------- ------- Net Realized and Unrealized Gain (Loss) on Investments: Net Realized Gain (Loss) on Securities Sold ...................................... 319,982 54,941 32,653 Net Realized Loss on Foreign Currency Transactions ............................... -- -- -- Net Change in Unrealized Appreciation (Depreciation) on Foreign Currency and Translation of Other Assets and Liabilities in Foreign Currency ................ -- -- -- Net Change in Unrealized Appreciation (Depreciation) on Investments .............. 44,518 14,034 16,045 -------- ------- ------- Total Net Realized and Unrealized Gain (Loss) on Investments ................................................................. 364,500 68,975 48,698 -------- ------- ------- Net Increase (Decrease) in Net Assets from Operations ............................ $399,055 $67,623 $51,825 ======== ======= ======= CAPITAL EMERGING GROWTH BALANCED MARKETS FUND FUND EQUITY FUND --------- --------- --------- 06/01/97- 06/01/97- 06/01/97- 05/31/98 05/31/98 05/31/98 --------- --------- --------- Income: Interest Income ................................................................... $ 10,774 $ 5,176 $ 167 Dividend Income ................................................................... 19,143 1,350 1,009 Less: Foreign Taxes Withheld ...................................................... -- -- (69) -------- ------- ------- Total Investment Income ........................................................... 29,917 6,526 1,107 -------- ------- ------- Expenses: Investment Advisory Fees .......................................................... 19,426 1,787 533 Less: Investment Advisory Fees Waived ............................................. (1,819) (225) (90) Administrator Fees ................................................................ 1,218 136 29 Transfer Agent Fees -- Trust Shares ............................................... 19 19 16 Transfer Agent Fees -- Investor Shares ............................................ 161 17 -- Transfer Agent Fees -- Flex Shares ................................................ 69 22 -- Transfer Agent Out of Pocket Fees ................................................. 187 21 4 Printing Expenses ................................................................. 133 10 8 Custody Fees ...................................................................... 74 9 89 Professional Fees ................................................................. 95 11 5 Trustee Fees ...................................................................... 26 3 1 Registration Fees ................................................................. 193 23 6 Distribution Fees -- Investor Shares .............................................. 1,677 19 -- Less: Distribution Fees Waived -- Investor Shares ................................. (235) (14) -- Distribution Fees -- Flex Shares .................................................. 674 138 -- Less: Distribution Fees Waived -- Flex Shares ..................................... 1 (12) -- Insurance and Other Fees .......................................................... 35 4 16 Amortization of Deferred Organization Costs ....................................... -- -- 22 -------- ------- ------- Total Expenses .................................................................... 21,934 1,968 639 -------- ------- ------- Net Investment Income (Loss) ...................................................... 7,983 4,558 468 -------- ------- ------- Net Realized and Unrealized Gain (Loss) on Investments: Net Realized Gain (Loss) on Securities Sold ....................................... 261,636 17,885 (875) Net Realized Loss on Foreign Currency Transactions ................................ -- -- (61) Net Change in Unrealized Appreciation (Depreciation) on Foreign Currency and Translation of Other Assets and Liabilities in Foreign Currency ................. -- -- (1) Net Change in Unrealized Appreciation (Depreciation) on Investments ............... 157,396 14,594 (7,440) -------- ------- ------- Total Net Realized and Unrealized Gain (Loss) on Investments .................................................................. 419,032 32,479 (8,377) -------- ------- ------- Net Increase (Decrease) in Net Assets from Operations ............................. $427,015 $37,037 $(7,909) ======== ======= ======= INTERNATIONAL INTERNATIONAL EQUITY EQUITY SUNBELT INDEX FUND FUND EQUITY FUND --------- --------- --------- 06/01/97- 06/01/97- 06/01/97- 05/31/98 05/31/98 05/31/98 --------- --------- --------- Income: Interest Income ................................................................... $ 34 $ 1,352 $ 326 Dividend Income ................................................................... 1,157 11,474 854 Less: Foreign Taxes Withheld ...................................................... (19) (819) -- ------- -------- ------- Total Investment Income ........................................................... 1,172 12,007 1,180 ------- -------- ------- Expenses: Investment Advisory Fees .......................................................... 543 7,201 5,288 Less: Investment Advisory Fees Waived ............................................. (77) (70) (516) Administrator Fees ................................................................ 43 416 330 Transfer Agent Fees -- Trust Shares ................................................ 17 19 20 Transfer Agent Fees -- Investor Shares ............................................. 19 18 48 Transfer Agent Fees -- Flex Shares ................................................. 14 19 21 Transfer Agent Out of Pocket Fees ................................................. 4 35 54 Printing Expenses ................................................................. 3 22 54 Custody Fees ...................................................................... 77 753 22 Professional Fees ................................................................. 2 19 35 Trustee Fees ...................................................................... 2 3 7 Registration Fees ................................................................. 1 44 29 Distribution Fees -- Investor Shares .............................................. 24 46 132 Less: Distribution Fees Waived -- Investor Shares ................................. (16) (12) (40) Distribution Fees -- Flex Shares .................................................. 10 158 67 Less: Distribution Fees Waived -- Flex Shares ..................................... (8) (9) (17) Insurance and Other Fees .......................................................... 12 23 10 Amortization of Deferred Organization Costs ....................................... 4 2 -- ------- -------- ------- Total Expenses .................................................................... 674 8,687 5,544 ------- -------- ------- Net Investment Income (Loss) ...................................................... 498 3,320 (4,364) ------- -------- ------- Net Realized and Unrealized Gain (Loss) on Investments: Net Realized Gain (Loss) on Securities Sold ....................................... 3,349 61,173 49,778 Net Realized Loss on Foreign Currency Transactions ................................ (46) (1,410) -- Net Change in Unrealized Appreciation (Depreciation) on Foreign Currency and Translation of Other Assets and Liabilities in Foreign Currency ................. 19 (93) -- Net Change in Unrealized Appreciation (Depreciation) on Investments ............... 9,866 50,891 46,313 ------- -------- ------- Total Net Realized and Unrealized Gain (Loss) on Investments .................................................................. 13,188 110,561 96,091 ------- -------- ------- Net Increase (Decrease) in Net Assets from Operations ............................. $13,686 $113,881 $91,727 ======= ======== ======= Amounts designated as "--" are either $0 or round to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 96 & 97 STATEMENT OF OPERATIONS (000) (concluded) ================================================================================ STI CLASSIC FUNDS FOR THE YEAR ENDED MAY 31, 1998
INVESTMENT GRADE FLORIDA TENNESSEE GEORGIA TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT BOND FUND BOND FUND BOND FUND BOND FUND --------- --------- --------- --------- 06/01/97- 06/01/97- 06/01/97- 06/01/97- 05/31/98 05/31/98 04/13/98* 05/31/98 --------- --------- --------- --------- Interest Income .............................................. $ 8,234 $4,010 $260 $2,881 ------- ------ ---- ------ Expenses: Investment Advisory Fees .................................. 1,327 540 34 394 Less: Investment Advisory Fees Waived ..................... (208) (121) (34) (93) Less: Contribution from Advisor ........................... -- -- (10) -- Administrator Fees ........................................ 128 61 4 44 Transfer Agent Fees -- Trust Shares ....................... 19 18 16 16 Transfer Agent Fees -- Investor Shares .................... 41 12 12 13 Transfer Agent Fees -- Flex Shares ........................ 14 14 11 15 Transfer Agent Out of Pocket Fees ......................... 23 9 1 7 Printing Expenses ......................................... 20 6 1 5 Custody Fees .............................................. 13 4 -- 3 Professional Fees ......................................... 18 6 -- 4 Trustee Fees .............................................. 6 1 -- 1 Registration Fees ......................................... 12 18 -- 11 Distribution Fees -- Investor Shares ...................... 126 6 2 7 Less: Distribution Fees Waived -- Investor Shares ......... (49) (6) (1) (7) Distribution Fees -- Flex Shares .......................... 59 61 26 61 Less: Distribution Fees Waived -- Flex Shares ............. (20) (31) (9) (31) Insurance and Other Fees .................................. 6 2 1 1 Amortization of Deferred Organization Costs ............... -- -- -- -- ------- ------ ---- ------ Total Expenses ............................................ 1,535 600 54 451 ------- ------ ---- ------ Net Investment Income ........................................ 6,699 3,410 206 2,430 ------- ------ ---- ------ Net Realized and Unrealized Gain (Loss) on Investments: Net Realized Gain on Securities Sold ...................... 6,478 720 34 195 Net Change in Unrealized Appreciation (Depreciation) on Investments ......................................... 1,225 2,334 (120) 1,962 ------- ------ ---- ------ Total Net Realized and Unrealized Gain on Investments ......................................... 7,703 3,054 (86) 2,157 ------- ------ ---- ------ Net Increase in Net Assets from Operations ................... $14,402 $6,464 $120 $4,587 ======= ====== ==== ====== SHORT-TERM INVESTMENT U.S. TREASURY LIMITED-TERM GRADE BOND SHORT-TERM SECURITIES FEDERAL MORTGAGE FUND BOND FUND FUND SECURITIES FUND --------- --------- --------- ---------------- 06/01/97- 06/01/97- 06/01/97- 06/01/97- 05/31/98 05/31/98 05/31/98 05/31/98 --------- --------- --------- --------- Interest Income ............................................ $49,084 $6,779 $2,059 $8,865 ------- ------ ------ ------ Expenses: Investment Advisory Fees ................................ 5,647 719 229 899 Less: Investment Advisory Fees Waived ................... (794) (165) (78) (159) Less: Contribution from Advisor ......................... -- -- -- -- Administrator Fees ...................................... 550 80 26 99 Transfer Agent Fees -- Trust Shares ..................... 16 18 17 20 Transfer Agent Fees -- Investor Shares .................. 31 14 13 13 Transfer Agent Fees -- Flex Shares ...................... 21 15 14 15 Transfer Agent Out of Pocket Fees ....................... 90 13 4 14 Printing Expenses ....................................... 86 12 3 10 Custody Fees ............................................ 36 4 1 6 Professional Fees ....................................... 59 6 2 3 Trustee Fees ............................................ 12 2 1 2 Registration Fees ....................................... 79 16 7 -- Distribution Fees -- Investor Shares .................... 141 5 6 6 Less: Distribution Fees Waived -- Investor Shares ....... (44) (5) (6) (5) Distribution Fees -- Flex Shares ........................ 87 14 13 15 Less: Distribution Fees Waived -- Flex Shares ........... (31) (13) (13) (15) Insurance and Other Fees ................................ 16 3 1 3 Amortization of Deferred Organization Costs ............. -- 5 3 3 ------- ------ ------ ------ Total Expenses .......................................... 6,002 743 243 929 ------- ------ ------ ------ Net Investment Income ...................................... 43,082 6,036 1,816 7,936 ------- ------ ------ ------ Net Realized and Unrealized Gain (Loss) on Investments: Net Realized Gain on Securities Sold .................... 10,888 502 47 502 Net Change in Unrealized Appreciation (Depreciation) on Investments ....................................... 24,005 1,163 211 1,031 ------- ------ ------ ------ Total Net Realized and Unrealized Gain on Investments ....................................... 34,893 1,665 258 1,533 ------- ------ ------ ------ Net Increase in Net Assets from Operations ................. $77,975 $7,701 $2,074 $9,469 ======= ====== ====== ====== U.S. GOVERNMENT SECURITIES FUND --------- 06/01/97- 05/31/98 --------- Interest Income ............................................ $2,183 ------ Expenses: Investment Advisory Fees ................................ 241 Less: Investment Advisory Fees Waived ................... (55) Less: Contribution from Advisor ......................... -- Administrator Fees ...................................... 24 Transfer Agent Fees -- Trust Shares ..................... 19 Transfer Agent Fees -- Investor Shares .................. 14 Transfer Agent Fees -- Flex Shares ...................... 16 Transfer Agent Out of Pocket Fees ....................... 3 Printing Expenses ....................................... 3 Custody Fees ............................................ 2 Professional Fees ....................................... 1 Trustee Fees ............................................ -- Registration Fees ....................................... 1 Distribution Fees -- Investor Shares .................... 10 Less: Distribution Fees Waived -- Investor Shares ....... (9) Distribution Fees -- Flex Shares ........................ 33 Less: Distribution Fees Waived -- Flex Shares ........... (16) Insurance and Other Fees ................................ -- Amortization of Deferred Organization Costs ............. 2 ------ Total Expenses .......................................... 289 ------ Net Investment Income ...................................... 1,894 ------ Net Realized and Unrealized Gain (Loss) on Investments: Net Realized Gain on Securities Sold .................... 55 Net Change in Unrealized Appreciation (Depreciation) on Investments ....................................... 1,207 ------ Total Net Realized and Unrealized Gain on Investments ....................................... 1,262 ------ Net Increase in Net Assets from Operations ................. $3,156 ====== *Discontinued operations Amounts designated as "--" are either $0 or round to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 98 & 99 STATEMENT OF CHANGES IN NET ASSETS (000) ================================================================================ STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31,
VALUE INCOME MID-CAP EQUITY SMALL CAP STOCK FUND FUND EQUITY FUND ------------------- ------------------- -------------------- 06/01/97- 06/01/96- 06/01/97- 06/01/96- 06/01/97- 01/31/97*- 05/31/98 05/31/97 05/31/98 05/31/97 05/31/98 05/31/97 --------- --------- --------- --------- --------- ---------- Operations: Net Investment Income (Loss) .............................. $ 34,555 $ 35,049 $ (1,352) $ 513 $ 3,127 $ 521 Net Realized Gain (Loss) on Investments ................... 319,982 243,189 54,941 33,978 32,653 1,757 Net Realized Loss on Foreign Currency Transactions ............................................ -- -- -- -- -- -- Net Change in Unrealized Appreciation (Depreciation) on Foreign Currency and Translation of Other Assets and Liabilities in Foreign Currency ......................... -- -- -- -- -- -- Net Change in Unrealized Appreciation (Depreciation) on Investments .......................................... 44,518 33,953 14,034 4,912 16,045 7,644 ---------- ---------- -------- -------- -------- -------- Increase (Decrease) in Net Assets from Operations ....... 399,055 312,191 67,623 39,403 51,825 9,922 ---------- ---------- -------- -------- -------- -------- Distributions to Shareholders: Net Investment Income: Trust Shares ............................................ (30,991) (30,805) -- (962) (2,704) (205) Investor Shares ......................................... (2,838) (2,820) -- (17) -- -- Flex Shares ............................................. (1,104) (606) -- -- (70) -- Capital Gains: Trust Shares ............................................ (262,191) (166,191) (44,446) (24,244) (14,480) -- Investor Shares ......................................... (29,671) (18,030) (3,025) (1,770) -- -- Flex Shares ............................................. (19,217) (5,570) (1,899) (676) (897) -- ---------- ---------- -------- -------- -------- -------- Total Distributions ....................................... (346,012) (224,022) (49,370) (27,669) (18,151) (205) ---------- ---------- -------- -------- -------- -------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued ............................. 381,039 380,339 146,386 113,386 272,776 126,046 Reinvestment of Cash Distributions ...................... 269,446 179,808 41,347 22,790 15,603 137 Cost of Shares Repurchased .............................. (459,701) (392,524) (153,972) (113,291) (61,475) (4,851) ---------- ---------- -------- -------- -------- -------- Increase (Decrease) in Net Assets From Trust Share Transactions ............................................ 190,784 167,623 33,761 22,885 226,904 121,332 ---------- ---------- -------- -------- -------- -------- Investor Shares: Proceeds from Shares Issued ............................. 35,483 31,242 6,110 5,664 -- -- Reinvestment of Cash Distributions ...................... 32,233 20,626 3,019 1,783 -- -- Cost of Shares Repurchased .............................. (28,503) (24,774) (5,606) (5,934) -- -- ---------- ---------- -------- -------- -------- -------- Increase (Decrease) in Net Assets From Investor Share Transactions ...................................... 39,213 27,094 3,523 1,513 -- -- ---------- ---------- -------- -------- -------- -------- Flex Shares: Proceeds from Shares Issued ............................. 106,762 43,363 10,574 5,680 42,359 -- Reinvestment of Cash Distributions ...................... 20,054 6,080 1,885 666 958 -- Cost of Shares Repurchased .............................. (20,844) (6,096) (3,934) (1,648) (3,490) -- ---------- ---------- -------- -------- -------- -------- Increase (Decrease) in Net Assets From Flex Share Transactions ................................. 105,972 43,347 8,525 4,698 39,827 -- ---------- ---------- -------- -------- -------- -------- Increase (Decrease) in Net Assets From Share Transactions .......................................... 335,969 238,064 45,809 29,096 266,731 121,332 ---------- ---------- -------- -------- -------- -------- Total Increase (Decrease) in Net Assets ............... 389,012 326,233 64,062 40,830 300,405 131,049 ---------- ---------- -------- -------- -------- -------- Net Assets: Beginning of Period ....................................... 1,727,527 1,401,294 317,735 276,905 131,049 -- ---------- ---------- -------- -------- -------- -------- End of Period ............................................. $2,116,539 $1,727,527 $381,797 $317,735 $431,454 $131,049 ========== ========== ======== ======== ======== ======== (1)Shares Issued and Redeemed: Trust Shares: Shares Issued ........................................... 26,871 29,343 10,517 9,011 22,065 12,290 Shares Issued in Lieu of Cash Distributions ............. 21,156 14,654 3,378 1,853 1,294 13 Shares Redeemed ......................................... (32,467) (30,076) (11,149) (9,008) (4,840) (466) ---------- ---------- -------- -------- -------- -------- Net Trust Share Transactions .............................. 15,560 13,921 2,746 1,856 18,519 11,837 ---------- ---------- -------- -------- -------- -------- Investor Shares: Shares Issued ........................................... 2,518 2,411 445 455 -- -- Shares Issued in Lieu of Cash Distributions ............. 2,538 1,683 248 145 -- -- Shares Redeemed ......................................... (2,003) (1,906) (407) (472) -- -- ---------- ---------- -------- -------- -------- -------- Net Investor Share Transactions ........................... 3,053 2,188 286 128 -- -- ---------- ---------- -------- -------- -------- -------- Flex Shares: Shares Issued ........................................... 7,617 3,360 777 459 3,366 -- Shares Issued in Lieu of Cash Distributions ............. 1,597 500 158 55 80 -- Shares Redeemed ......................................... (1,488) (470) (292) (134) (273) -- ---------- ---------- -------- -------- -------- -------- Net Flex Share Transactions ............................... 7,726 3,390 643 380 3,173 -- ========== ========== ======== ======== ======== ======== Net Change in Capital Shares .............................. 26,339 19,499 3,675 2,364 21,692 11,837 ---------- ---------- -------- -------- -------- --------
*Commencement of operations. Amounts designated as "--" are either $0 or round to $0. 100
EMERGING CAPITAL GROWTH FUND BALANCED FUND MARKETS EQUITY FUND ------------------- ------------------- -------------------- 06/01/97- 06/01/96- 06/01/97- 06/01/96- 06/01/97- 01/31/97*- 05/31/98 05/31/97 05/31/98 05/31/97 05/31/98 05/31/97 --------- --------- --------- --------- --------- ---------- Operations: Net Investment Income (Loss) .............................. $ 7,983 $ 8,603 $ 4,558 $ 3,521 $ 468 $ 144 Net Realized Gain (Loss) on Investments ................... 261,636 221,554 17,885 11,411 (875) 80 Net Realized Loss on Foreign Currency Transactions ............................................ -- -- -- -- (61) (18) Net Change in Unrealized Appreciation (Depreciation) on Foreign Currency and Translation of Other Assets and Liabilities in Foreign Currency ......................... -- -- -- -- (1) -- Net Change in Unrealized Appreciation (Depreciation) on Investments .......................................... 157,396 43,851 14,594 5,223 (7,440) 2,108 ---------- ---------- -------- -------- ------- ------- Increase (Decrease) in Net Assets from Operations ....... 427,015 274,008 37,037 20,155 (7,909) 2,314 ---------- ---------- -------- -------- ------- ------- Distributions to Shareholders: Net Investment Income: Trust Shares ............................................ (7,798) (7,993) (4,197) (3,051) (314) -- Investor Shares ......................................... (28) (338) (154) (139) -- -- Flex Shares ............................................. -- -- (204) (77) -- -- Capital Gains: Trust Shares ............................................ (200,074) (180,731) (12,908) (9,775) (544) -- Investor Shares ......................................... (36,216) (35,976) (536) (505) -- -- Flex Shares ............................................. (9,643) (3,858) (972) (388) -- -- ---------- ---------- -------- -------- ------- ------- Total Distributions ....................................... (253,759) (228,896) (18,971) (13,935) (858) -- ---------- ---------- -------- -------- ------- ------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued ............................. 466,511 295,281 53,532 75,303 23,819 42,043 Reinvestment of Cash Distributions ...................... 197,282 178,092 16,935 12,606 805 -- Cost of Shares Repurchased .............................. (358,832) (406,707) (49,610) (54,011) (20,798) (4,862) ---------- ---------- -------- -------- ------- ------- Increase (Decrease) in Net Assets From Trust Share Transactions ............................................ 304,961 66,666 20,857 33,898 3,826 37,181 ---------- ---------- -------- -------- ------- ------- Investor Shares: Proceeds from Shares Issued ............................. 29,116 22,778 2,150 1,430 -- -- Reinvestment of Cash Distributions ...................... 35,990 36,046 680 633 -- -- Cost of Shares Repurchased .............................. (37,738) (38,034) (1,166) (1,149) -- -- ---------- ---------- -------- -------- ------- ------- Increase (Decrease) in Net Assets From Investor Share Transactions ...................................... 27,368 20,790 1,664 914 -- -- ---------- ---------- -------- -------- ------- ------- Flex Shares: Proceeds from Shares Issued ............................. 67,377 23,389 21,409 3,065 -- -- Reinvestment of Cash Distributions ...................... 9,528 3,813 1,164 462 -- -- Cost of Shares Repurchased .............................. (12,730) (2,774) (2,194) (787) -- -- ---------- ---------- -------- -------- ------- ------- Increase (Decrease) in Net Assets From Flex Share Transactions ................................. 64,175 24,428 20,379 2,740 -- -- ---------- ---------- -------- -------- ------- ------- Increase (Decrease) in Net Assets From Share Transactions .......................................... 396,504 111,884 42,900 37,552 3,826 37,181 ---------- ---------- -------- -------- ------- ------- Total Increase (Decrease) in Net Assets ............... 569,760 156,996 60,966 43,772 (4,941) 39,495 ---------- ---------- -------- -------- ------- ------- Net Assets: Beginning of Period ....................................... 1,340,541 1,183,545 163,437 119,665 39,495 -- ---------- ---------- -------- -------- ------- ------- End of Period ............................................. $1,910,301 $1,340,541 $224,403 $163,437 $34,554 $39,495 ========== ========== ======== ======== ======= ======= (1)Shares Issued and Redeemed: Trust Shares: Shares Issued ........................................... 29,548 20,391 4,245 6,572 2,344 4,128 Shares Issued in Lieu of Cash Distributions ............. 13,725 13,369 1,402 1,122 92 -- Shares Redeemed ......................................... (22,177) (27,687) (3,922) (4,686) (2,199) (468) ---------- ---------- -------- -------- ------- ------- Net Trust Share Transactions .............................. 21,096 6,073 1,725 3,008 237 3,660 ---------- ---------- -------- -------- ------- ------- Investor Shares: Shares Issued ........................................... 1,812 1,573 167 122 -- -- Shares Issued in Lieu of Cash Distributions ............. 2,518 2,717 56 56 -- -- Shares Redeemed ......................................... (2,349) (2,607) (92) (99) -- -- ---------- ---------- -------- -------- ------- ------- Net Investor Share Transactions ........................... 1,981 1,683 131 79 -- -- ---------- ---------- -------- -------- ------- ------- Flex Shares: Shares Issued ........................................... 4,242 1,620 1,688 265 -- -- Shares Issued in Lieu of Cash Distributions ............. 674 289 97 41 -- -- Shares Redeemed ......................................... (795) (191) (173) (68) -- -- ---------- ---------- -------- -------- ------- ------- Net Flex Share Transactions ............................... 4,121 1,718 1,612 238 -- -- ========== ========== ======== ======== ======= ======= Net Change in Capital Shares .............................. 27,198 9,474 3,468 3,325 237 3,660 ---------- ---------- -------- -------- ------- ------- INTERNATIONAL INTERNATIONAL EQUITY EQUITY INDEX FUND FUND SUNBELT EQUITY FUND ------------------- ------------------- ------------------- 06/01/97- 06/01/96- 06/01/97- 06/01/96- 06/01/97- 06/01/96- 05/31/98 05/31/97 05/31/98 05/31/97 05/31/98 05/31/97 --------- --------- --------- --------- --------- --------- Operations: Net Investment Income (Loss) .............................. $ 498 $ 482 $ 3,320 $ 1,788 $ (4,364) $ (2,928) Net Realized Gain (Loss) on Investments ................... 3,349 4,148 61,173 31,885 49,778 24,062 Net Realized Loss on Foreign Currency Transactions ............................................ (46) (50) (1,410) (949) -- -- Net Change in Unrealized Appreciation (Depreciation) on Foreign Currency and Translation of Other Assets and Liabilities in Foreign Currency ......................... 19 (21) (93) 16 -- -- Net Change in Unrealized Appreciation (Depreciation) on Investments .......................................... 9,866 (466) 50,891 51,213 46,313 (18,818) ------- ------- -------- -------- -------- -------- Increase (Decrease) in Net Assets from Operations ....... 13,686 4,093 113,881 83,953 91,727 2,316 ------- ------- -------- -------- -------- -------- Distributions to Shareholders: Net Investment Income: Trust Shares ............................................ (489) (614) (1,649) (638) -- -- Investor Shares ......................................... (34) (35) (5) -- -- -- Flex Shares ............................................. -- -- -- -- -- -- Capital Gains: Trust Shares ............................................ (2,914) (1,696) (49,334) (9,573) (32,274) (29,932) Investor Shares ......................................... (343) (154) (1,347) (182) (2,333) (2,119) Flex Shares ............................................. (54) (27) (1,526) (75) (516) (360) ------- ------- -------- -------- -------- -------- Total Distributions ....................................... (3,834) (2,526) (53,861) (10,468) (35,123) (32,411) ------- ------- -------- -------- -------- -------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued ............................. 8,458 21,944 292,707 382,588 207,154 208,763 Reinvestment of Cash Distributions ...................... 3,057 1,958 47,572 9,386 30,202 27,551 Cost of Shares Repurchased .............................. (17,470) (62,693) (258,050) (187,406) (238,878) (239,412) ------- ------- -------- -------- -------- -------- Increase (Decrease) in Net Assets From Trust Share Transactions ............................................ (5,955) (38,791) 82,229 204,568 (1,522) (3,098) ------- ------- -------- -------- -------- -------- Investor Shares: Proceeds from Shares Issued ............................. 2,516 2,579 7,487 7,794 5,150 6,043 Reinvestment of Cash Distributions ...................... 375 189 1,351 181 2,323 2,111 Cost of Shares Repurchased .............................. (2,400) (2,981) (3,549) (2,060) (8,619) (7,103) ------- ------- -------- -------- -------- -------- Increase (Decrease) in Net Assets From Investor Share Transactions ...................................... 491 (213) 5,289 5,915 (1,146) 1,051 ------- ------- -------- -------- -------- -------- Flex Shares: Proceeds from Shares Issued ............................. 788 334 14,405 7,049 3,848 3,978 Reinvestment of Cash Distributions ...................... 53 27 1,507 74 515 354 Cost of Shares Repurchased .............................. (427) (410) (4,407) (424) (2,603) (1,172) ------- ------- -------- -------- -------- -------- Increase (Decrease) in Net Assets From Flex Share Transactions ................................. 414 (49) 11,505 6,699 1,760 3,160 ------- ------- -------- -------- -------- -------- Increase (Decrease) in Net Assets From Share Transactions .......................................... (5,050) (39,053) 99,023 217,182 (908) 1,113 ------- ------- -------- -------- -------- -------- Total Increase (Decrease) in Net Assets ............... 4,802 (37,486) 159,043 290,667 55,696 (29,982) ------- ------- -------- -------- -------- -------- Net Assets: Beginning of Period ....................................... 60,008 97,494 508,374 217,707 415,155 444,137 ------- ------- -------- -------- -------- -------- End of Period ............................................. $64,810 $60,008 $667,577 $508,374 $470,851 $415,155 ======= ======= ======== ======== ======== ======== (1)Shares Issued and Redeemed: Trust Shares: Shares Issued ........................................... 700 2,030 20,687 31,059 13,707 16,289 Shares Issued in Lieu of Cash Distributions ............. 277 184 3,744 785 2,213 2,176 Shares Redeemed ......................................... (1,473) (5,800) (18,402) (14,649) (16,065) (18,979) ------- ------- -------- -------- -------- -------- Net Trust Share Transactions .............................. (496) (3,586) 6,029 17,195 (145) (514) ------- ------- -------- -------- -------- -------- Investor Shares: Shares Issued ........................................... 210 241 526 634 353 473 Shares Issued in Lieu of Cash Distributions ............. 34 18 107 15 174 169 Shares Redeemed ......................................... (201) (277) (254) (166) (590) (569) ------- ------- -------- -------- -------- -------- Net Investor Share Transactions ........................... 43 (18) 379 483 (63) 73 ------- ------- -------- -------- -------- -------- Flex Shares: Shares Issued ........................................... 63 31 1,021 566 260 310 Shares Issued in Lieu of Cash Distributions ............. 5 3 121 6 39 29 Shares Redeemed ......................................... (36) (38) (322) (34) (184) (95) ------- ------- -------- -------- -------- -------- Net Flex Share Transactions ............................... 32 (4) 820 538 115 244 ======= ======= ======== ======== ======== ======== Net Change in Capital Shares .............................. (421) (3,608) 7,228 18,216 (93) (197) ------- ------- -------- -------- -------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 101 STATEMENT OF CHANGES IN NET ASSETS (000) (concluded) ================================================================================ STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31,
FLORIDA TENNESSEE INVESTMENT GRADE TAX- TAX-EXEMPT TAX-EXEMPT EXEMPT BOND FUND BOND FUND BOND FUND -------------------- --------------------- -------------------- 06/01/97- 06/01/96- 06/01/97- 06/01/96- 06/01/97- 06/01/96- 05/31/98 05/31/97 05/31/98 05/31/97 04/13/98* 05/31/97 --------- --------- --------- --------- --------- --------- Operations: Net Investment Income ...................... $ 6,699 $ 6,631 $ 3,410 $ 1,999 $ 206 $ 227 Net Realized Gain (Loss) on Investments .... 6,478 2,924 720 (209) 34 (11) Net Change in Unrealized Appreciation (Depreciation) on Investments ............ 1,225 2,169 2,334 1,157 (120) 153 -------- -------- -------- ------- ------ ------ Increase in Net Assets from Operations ... 14,402 11,724 6,464 2,947 120 369 -------- -------- -------- ------- ------ ------ Distributions to Shareholders: Net Investment Income: Trust Shares ............................. (5,523) (5,248) (3,070) (1,748) (66) (74) Investor Shares .......................... (1,002) (1,226) (128) (154) (46) (65) Flex Shares .............................. (173) (159) (211) (101) (94) (88) Capital Gains: Trust Shares ............................. (3,989) (2,384) (42) (126) -- -- Investor Shares .......................... (799) (623) (2) (11) (6) -- Flex Shares .............................. (152) (92) (3) (9) (16) -- -------- -------- -------- ------- ------ ------ Total Distributions ........................ (11,638) (9,732) (3,456) (2,149) (228) (227) -------- -------- -------- ------- ------ ------ Capital Transactions (1): Trust Shares: Proceeds from Shares Issued .............. 39,596 45,948 59,209 27,976 1,692 1,241 Reinvestment of Cash Distributions ....... 4,599 3,196 420 314 11 33 Cost of Shares Repurchased ............... (38,924) (36,027) (18,838) (9,265) (3,616) (1,174) -------- -------- -------- ------- ------ ------ Increase (Decrease) in Net Assets From Trust Share Transactions ................. 5,271 13,117 40,791 19,025 (1,913) 100 -------- -------- -------- ------- ------ ------ Investor Shares: Proceeds from Shares Issued .............. 2,484 2,163 870 923 169 450 Reinvestment of Cash Distributions ....... 1,614 1,619 101 128 43 51 Cost of Shares Repurchased ............... (8,284) (9,763) (955) (1,919) (1,782) (459) -------- -------- -------- ------- ------ ------ Increase (Decrease) in Net Assets From Investor Share Transactions .............. (4,186) (5,981) 16 (868) (1,570) 42 -------- -------- -------- ------- ------ ------ Flex Shares: Proceeds from Shares Issued .............. 6,179 1,973 6,969 1,182 1,061 836 Reinvestment of Cash Distributions ....... 296 222 172 80 82 53 Cost of Shares Repurchased ............... (2,842) (3,111) (2,189) (1,011) (3,632) (456) -------- -------- -------- ------- ------ ------ Increase (Decrease) in Net Assets From Flex Share Transactions .................. 3,633 (916) 4,952 251 (2,489) 433 -------- -------- -------- ------- ------ ------ Increase (Decrease) in Net Assets From Share Transactions ................ 4,718 6,220 45,759 18,408 (5,972) 575 -------- -------- -------- ------- ------ ------ Total Increase (Decrease) in Net Assets .......................... 7,482 8,212 48,767 19,206 (6,080) 717 -------- -------- -------- ------- ------ ------ Net Assets: Beginning of Period ........................ 175,682 167,470 56,713 37,507 6,080 5,363 -------- -------- -------- ------- ------ ------ End of Period .............................. $183,164 $175,682 $105,480 $56,713 $ -- $6,080 ======== ======== ======== ======= ====== ====== (1)Shares Issued and Redeemed: Trust Shares: Shares Issued ............................ 3,486 4,112 5,591 2,728 158 130 Shares Issued in Lieu of Cash Distributions ......................... 407 286 40 31 1 3 Shares Redeemed .......................... (3,425) (3,216) (1,777) (907) (364) (122) -------- -------- -------- ------- ------ ------ Net Trust Share Transactions ............... 468 1,182 3,854 1,852 (205) 11 -------- -------- -------- ------- ------ ------ Investor Shares: Shares Issued ............................ 218 193 82 89 11 47 Shares Issued in Lieu of Cash Distributions .......................... 142 144 10 13 4 5 Shares Redeemed .......................... (727) (869) (90) (188) (181) (48) -------- -------- -------- ------- ------ ------ Net Investor Share Transactions ............ (367) (532) 2 (86) (166) 4 -------- -------- -------- ------- ------ ------ Flex Shares: Shares Issued ............................ 544 176 658 115 100 88 Shares Issued in Lieu of Cash Distributions .......................... 26 20 16 8 8 6 Shares Redeemed .......................... (250) (277) (205) (99) (368) (48) -------- -------- -------- ------- ------ ------ Net Flex Share Transactions ................ 320 (81) 469 24 (260) 46 ======== ======== ======== ======= ====== ====== Net Change in Capital Shares ............... 421 569 4,325 1,790 (631) 61 -------- -------- -------- ------- ------ ------
*Discontinued operations Amounts designated as "--" are either $0 or round to $0. 102
GEORGIA TAX-EXEMPT INVESTMENT GRADE SHORT-TERM BOND FUND BOND FUND BOND FUND ------------------- ------------------- ------------------- 06/01/97- 06/01/96- 06/01/97- 06/01/96- 06/01/97- 06/01/96- 05/31/98 05/31/97 05/31/98 05/31/97 05/31/98 05/31/97 --------- --------- --------- --------- --------- --------- Operations: Net Investment Income ...................... $ 2,430 $ 1,589 $ 43,082 $ 37,964 $ 6,036 $ 5,152 Net Realized Gain (Loss) on Investments .... 195 7 10,888 (5,113) 502 (321) Net Change in Unrealized Appreciation (Depreciation) on Investments ............ 1,962 882 24,005 10,558 1,163 1,027 ------- ------- -------- -------- -------- ------- Increase in Net Assets from Operations ... 4,587 2,478 77,975 43,409 7,701 5,858 ------- ------- -------- -------- -------- ------- Distributions to Shareholders: Net Investment Income: Trust Shares ............................. (2,075) (1,285) (40,937) (35,713) (5,864) (4,983) Investor Shares .......................... (147) (139) (1,729) (1,950) (106) (120) Flex Shares .............................. (207) (165) (416) (270) (67) (51) Capital Gains: Trust Shares ............................. (61) (153) -- -- (100) (311) Investor Shares .......................... (4) (17) -- -- (2) (7) Flex Shares .............................. (7) (26) -- -- (1) (4) ------- ------- -------- -------- -------- ------- Total Distributions ........................ (2,501) (1,785) (43,082) (37,933) (6,140) (5,476) ------- ------- -------- -------- -------- ------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued .............. 34,479 29,571 258,775 218,768 59,682 43,385 Reinvestment of Cash Distributions ....... 924 761 30,522 27,532 3,238 3,426 Cost of Shares Repurchased ............... (14,516) (14,098) (162,448) (217,253) (33,705) (48,636) ------- ------- -------- -------- -------- ------- Increase (Decrease) in Net Assets From Trust Share Transactions ................. 20,887 16,234 126,849 29,047 29,215 (1,825) ------- ------- -------- -------- -------- ------- Investor Shares: Proceeds from Shares Issued .............. 1,508 573 5,860 5,838 190 602 Reinvestment of Cash Distributions ....... 131 137 1,609 1,770 103 111 Cost of Shares Repurchased ............... (1,314) (677) (8,920) (10,944) (560) (1,240) ------- ------- -------- -------- -------- ------- Increase (Decrease) in Net Assets From Investor Share Transactions .............. 325 33 (1,451) (3,336) (267) (527) ------- ------- -------- -------- -------- ------- Flex Shares: Proceeds from Shares Issued .............. 4,983 1,697 9,584 3,077 1,392 523 Reinvestment of Cash Distributions ....... 186 172 351 237 65 50 Cost of Shares Repurchased ............... (1,770) (1,499) (2,932) (2,217) (441) (469) ------- ------- -------- -------- -------- ------- Increase (Decrease) in Net Assets From Flex Share Transactions .................. 3,399 370 7,003 1,097 1,016 104 ------- ------- -------- -------- -------- ------- Increase (Decrease) in Net Assets From Share Transactions ................ 24,611 16,637 132,401 26,808 29,964 (2,248) ------- ------- -------- -------- -------- ------- Total Increase (Decrease) in Net Assets .......................... 26,697 17,330 167,294 32,284 31,525 (1,866) ------- ------- -------- -------- -------- ------- Net Assets: Beginning of Period ........................ 47,905 30,575 672,574 640,290 92,956 94,822 ------- ------- -------- -------- -------- ------- End of Period .............................. $74,602 $47,905 $839,868 $672,574 $124,481 $92,956 ======= ======= ======== ======== ======== ======= (1)Shares Issued and Redeemed: Trust Shares: Shares Issued ............................ 3,445 3,062 24,713 21,475 5,955 4,380 Shares Issued in Lieu of Cash Distributions ......................... 92 78 2,915 2,709 323 345 Shares Redeemed .......................... (1,456) (1,457) (15,497) (21,378) (3,364) (4,902) ------- ------- -------- -------- -------- ------- Net Trust Share Transactions ............... 2,081 1,683 12,131 2,806 2,914 (177) ------- ------- -------- -------- -------- ------- Investor Shares: Shares Issued ............................ 149 59 557 575 19 61 Shares Issued in Lieu of Cash Distributions .......................... 13 14 154 174 10 11 Shares Redeemed .......................... (131) (70) (852) (1,076) (56) (125) ------- ------- -------- -------- -------- ------- Net Investor Share Transactions ............ 31 3 (141) (327) (27) (53) ------- ------- -------- -------- -------- ------- Flex Shares: Shares Issued ............................ 495 175 908 303 139 52 Shares Issued in Lieu of Cash Distributions .......................... 19 18 33 23 6 5 Shares Redeemed .......................... (176) (154) (278) (218) (44) (47) ------- ------- -------- -------- -------- ------- Net Flex Share Transactions ................ 338 39 663 108 101 10 ======= ======= ======== ======== ======== ======= Net Change in Capital Shares ............... 2,450 1,725 12,653 2,587 2,988 (220) ------- ------- -------- -------- -------- ------- SHORT-TERM U.S. TREASURY LIMITED-TERM FEDERAL U. S. GOVERNMENT SECURITIES FUND MORTGAGE SECURITIES FUND SECURITIES FUND ------------------- ------------------- -------------------- 06/01/97- 06/01/96- 06/01/97- 06/01/96- 06/01/97- 06/01/96- 05/31/98 05/31/97 05/31/98 05/31/97 05/31/98 05/31/97 --------- --------- --------- --------- --------- --------- Operations: Net Investment Income ...................... $ 1,816 $ 1,238 $ 7,936 $ 6,160 $ 1,894 $ 1,220 Net Realized Gain (Loss) on Investments .... 47 (25) 502 1 55 (17) Net Change in Unrealized Appreciation (Depreciation) on Investments ............ 211 88 1,031 303 1,207 214 ------- ------- -------- -------- ------- ------- Increase in Net Assets from Operations ... 2,074 1,301 9,469 6,464 3,156 1,417 ------- ------- -------- -------- ------- ------- Distributions to Shareholders: Net Investment Income: Trust Shares ............................. (1,575) (934) (7,721) (5,933) (1,585) (916) Investor Shares .......................... (178) (205) (135) (146) (141) (147) Flex Shares .............................. (63) (99) (78) (81) (168) (157) Capital Gains: Trust Shares ............................. -- -- (194) (159) -- -- Investor Shares .......................... -- -- (3) (4) -- -- Flex Shares .............................. -- -- (2) (3) -- -- ------- ------- -------- -------- ------- ------- Total Distributions ........................ (1,816) (1,238) (8,133) (6,326) (1,894) (1,220) ------- ------- -------- -------- ------- ------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued .............. 33,653 17,856 43,610 75,207 20,160 19,904 Reinvestment of Cash Distributions ....... 661 465 5,346 4,139 380 297 Cost of Shares Repurchased ............... (9,594) (6,510) (36,666) (28,939) (6,142) (11,131) ------- ------- -------- -------- ------- ------- Increase (Decrease) in Net Assets From Trust Share Transactions ................. 24,720 11,811 12,290 50,407 14,398 9,070 ------- ------- -------- -------- ------- ------- Investor Shares: Proceeds from Shares Issued .............. 479 745 1,128 1,381 1,625 1,272 Reinvestment of Cash Distributions ....... 180 204 131 141 134 140 Cost of Shares Repurchased ............... (1,338) (1,238) (1,006) (1,615) (880) (1,599) ------- ------- -------- -------- ------- ------- Increase (Decrease) in Net Assets From Investor Share Transactions .............. (679) (289) 253 (93) 879 (187) ------- ------- -------- -------- ------- ------- Flex Shares: Proceeds from Shares Issued .............. 1,012 825 691 500 2,695 764 Reinvestment of Cash Distributions ....... 56 85 75 72 145 130 Cost of Shares Repurchased ............... (757) (2,259) (647) (517) (1,748) (958) ------- ------- -------- -------- ------- ------- Increase (Decrease) in Net Assets From Flex Share Transactions .................. 311 (1,349) 119 55 1,092 (64) ------- ------- -------- -------- ------- ------- Increase (Decrease) in Net Assets From Share Transactions ................ 24,352 10,173 12,662 50,369 16,369 8,819 ------- ------- -------- -------- ------- ------- Total Increase (Decrease) in Net Assets .......................... 24,610 10,236 13,998 50,507 17,631 9,016 ------- ------- -------- -------- ------- ------- Net Assets: Beginning of Period ........................ 27,000 16,764 127,738 77,231 24,515 15,499 ------- ------- -------- -------- ------- ------- End of Period .............................. $51,610 $27,000 $141,736 $127,738 $42,146 $24,515 ======= ======= ======== ======== ======= ======= (1)Shares Issued and Redeemed: Trust Shares: Shares Issued ............................ 3,381 1,806 4,313 7,497 1,949 1,986 Shares Issued in Lieu of Cash Distributions ......................... 66 47 529 413 37 30 Shares Redeemed .......................... (965) (659) (3,626) (2,886) (592) (1,110) ------- ------- -------- -------- ------- ------- Net Trust Share Transactions ............... 2,482 1,194 1,216 5,024 1,394 906 ------- ------- -------- -------- ------- ------- Investor Shares: Shares Issued ............................ 48 75 112 138 157 127 Shares Issued in Lieu of Cash Distributions .......................... 18 21 13 14 13 14 Shares Redeemed .......................... (134) (125) (100) (161) (85) (159) ------- ------- -------- -------- ------- ------- Net Investor Share Transactions ............ (68) (29) 25 (9) 85 (18) ------- ------- -------- -------- ------- ------- Flex Shares: Shares Issued ............................ 102 84 68 50 260 77 Shares Issued in Lieu of Cash Distributions .......................... 6 9 7 7 14 13 Shares Redeemed .......................... (76) (228) (64) (51) (169) (95) ------- ------- -------- -------- ------- ------- Net Flex Share Transactions ................ 32 (135) 11 6 105 (5) ======= ======= ======== ======== ======= ======= Net Change in Capital Shares ............... 2,446 1,030 1,252 5,021 1,584 883 ------- ------- -------- -------- ------- -------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 103 FINANCIAL HIGHLIGHTS ================================================================================ STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31. FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET REALIZED AND NET UNREALIZED GAINS NET ASSET VALUE INVESTMENT (LOSSES) DISTRIBUTIONS FROM DISTRIBUTIONS FROM BEGINNING OF PERIOD INCOME (LOSS) ON INVESTMENTS NET INVESTMENT INCOME REALIZED CAPITAL GAINS ------------------- ------------ ---------------- --------------------- ---------------------- VALUE INCOME STOCK FUND Trust Shares 1998 $13.71 $ 0.26 $ 2.62 $(0.27) $(2.42) 1997 13.15 0.30 2.32 (0.30) (1.76) 1996 11.59 0.35 2.71 (0.34) (1.16) 1995 10.54 0.32 1.56 (0.32) (0.51) 1994 10.23 0.29 0.70 (0.32) (0.36) Investor Shares 1998 $13.68 $ 0.20 $ 2.62 $(0.21) $(2.42) 1997 13.13 0.25 2.32 (0.26) (1.76) 1996 11.58 0.30 2.71 (0.30) (1.16) 1995 10.52 0.28 1.56 (0.27) (0.51) 1994 10.23 0.26 0.67 (0.27) (0.37) Flex Shares 1998 $13.61 $ 0.12 $ 2.57 $(0.13) $(2.42) 1997 13.08 0.18 2.29 (0.18) (1.76) 1996(1) 11.59 0.26 2.65 (0.26) (1.16) MID-CAP EQUITY FUND (B) Trust Shares 1998 $13.21 $ -- $ 2.54 $ -- $(1.96) 1997 12.76 0.03 1.69 (0.05) (1.22) 1996 11.00 0.08 2.63 (0.08) (0.87) 1995 9.85 0.08 1.15 (0.08) -- 1994(2) 10.00 0.02 (0.16) (0.01) -- Investor Shares 1998 $13.17 $(0.03) $ 2.49 $ -- $(1.96) 1997 12.74 (0.03) 1.69 (0.01) (1.22) 1996 10.99 0.03 2.62 (0.03) (0.87) 1995 9.84 0.03 1.15 (0.03) -- 1994(3) 10.00 0.01 (0.17) -- -- Flex Shares 1998 $13.04 $(0.04) $ 2.38 $ -- (1.96) 1997 12.69 (0.07) 1.64 -- (1.22) 1996(4) 11.13 -- 2.45 (0.02) (0.87) SMALL CAP EQUITY FUND Trust Shares 1998 $11.07 $ 0.14 $ 2.41 $(0.12) $(0.62) 1997(5) 10.00 0.05 1.04 (0.02) -- Flex Shares 1998(6) $11.28 $ 0.03 $ 2.17 $(0.06) $(0.62)
* Annualized. ** Return is for the period indicated and has not been annualized. (1) Commenced operations on June 1, 1995. (2) Commenced operations on February 2, 1994. (3) Commenced operations on February 1, 1994. 104
RATIO OF NET ASSET NET ASSETS RATIO OF NET INVESTMENT VALUE END TOTAL END OF EXPENSES TO INCOME (LOSS) TO OF PERIOD RETURN (A) PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS --------- --------- ----------- ------------------ ------------------ VALUE INCOME STOCK FUND Trust Shares 1998 $13.90 23.10% $1,725,418 0.92% 1.85% 1997 13.71 22.18% 1,488,062 0.91% 2.40% 1996 13.15 27.91% 1,244,399 0.92% 2.86% 1995 11.59 19.06% 991,977 0.95% 3.16% 1994 10.54 9.95% 573,082 0.88% 3.21% Investor Shares 1998 $13.87 22.71% $ 210,591 1.27% 1.47% 1997 13.68 21.69% 165,999 1.30% 2.01% 1996 13.13 27.39% 130,597 1.30% 2.47% 1995 11.58 18.71% 92,256 1.30% 2.80% 1994 10.52 9.27% 60,589 1.25% 2.80% Flex Shares 1998 $13.75 21.76% $ 180,530 2.01% 0.78% 1997 13.61 20.91% 73,466 2.00% 1.33% 1996(1) 13.08 26.52%* 26,298 2.00%* 1.72%* MID-CAP EQUITY FUND (B) Trust Shares 1998 $13.79 21.14% $ 337,825 1.16% (0.29%) 1997 13.21 14.23% 287,370 1.15% 0.23% 1996 12.76 25.54% 253,905 1.15% 0.70% 1995 11.00 12.56% 125,562 1.15% 0.88% 1994(2) 9.85 (1.39%)** 57,036 1.15%* 1.20%* Investor Shares 1998 $13.67 20.56% $ 24,930 1.61% (0.75%) 1997 13.17 13.76% 20,245 1.60% (0.21%) 1996 12.74 24.93% 17,971 1.60% 0.25% 1995 10.99 11.96% 7,345 1.60% 0.43% 1994(3) 9.84 (1.60%)** 3,004 1.60%* 0.74%* Flex Shares 1998 $13.42 19.80% $ 19,042 2.21% (1.37%) 1997 13.04 13.06% 10,120 2.20% (0.85%) 1996(4) 12.69 23.00%* 5,029 2.20%* (0.37%)* SMALL CAP EQUITY FUND Trust Shares 1998 $12.88 23.59% $ 390,841 1.21% 1.07% 1997(5) 11.07 10.97%** 131,049 1.20%* 1.86%* Flex Shares 1998(6) $12.80 22.29%** $ 40,613 2.06%* 0.01%* RATIO OF RATIO OF NET INVESTMENT EXPENSES TO INCOME (LOSS) TO AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE ------------------ ------------------- --------- VALUE INCOME STOCK FUND Trust Shares 1998 0.92% 1.85% 99% 1997 0.91% 2.40% 105% 1996 0.92% 2.86% 134% 1995 0.95% 3.16% 126% 1994 0.97% 3.12% 149% Investor Shares 1998 1.27% 1.47% 99% 1997 1.31% 2.00% 105% 1996 1.37% 2.40% 134% 1995 1.41% 2.69% 126% 1994 1.44% 2.61% 149% Flex Shares 1998 2.01% 0.78% 99% 1997 2.03% 1.30% 105% 1996(1) 2.15%* 1.57%* 134% MID-CAP EQUITY FUND (B) Trust Shares 1998 1.27% (0.40%) 129% 1997 1.26% 0.12% 152% 1996 1.29% 0.56% 116% 1995 1.32% 0.71% 66% 1994(2) 1.68%* 0.67%* 8% Investor Shares 1998 1.84% (0.98%) 129% 1997 1.85% (0.46%) 152% 1996 1.96% (0.11%) 116% 1995 2.27% (0.24%) 66% 1994(3) 4.60%* (2.26%)* 8% Flex Shares 1998 2.47% (1.63%) 129% 1997 2.58% (1.23%) 152% 1996(4) 3.04%* (1.21%)* 116% SMALL CAP EQUITY FUND Trust Shares 1998 1.31% 0.97% 55% 1997(5) 1.37%* 1.69%* 27% Flex Shares 1998(6) 2.35%* (0.28%)* 55% (4) Commenced operations on June 5, 1995. (5) Commenced operations on January 31, 1997. (6) Commenced operations on June 5, 1997. (A) Total return figures do not reflect applicable sales loads. (B) During the fiscal year ended May 31, 1996, the Aggressive Growth Fund changed its name to the Mid-Cap Equity Fund.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 105 FINANCIAL HIGHLIGHTS (continued) ================================================================================ STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31. FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET REALIZED AND NET UNREALIZED GAINS NET ASSET VALUE INVESTMENT (LOSSES) DISTRIBUTIONS FROM DISTRIBUTIONS FROM BEGINNING OF PERIOD INCOME (LOSS) ON INVESTMENTS NET INVESTMENT INCOME REALIZED CAPITAL GAINS ------------------- ------------ ---------------- --------------------- ---------------------- CAPITAL GROWTH FUND Trust Shares 1998 $15.09 $ 0.09 $ 3.96 $(0.09) $(2.57) 1997 14.90 0.12 3.13 (0.12) (2.94) 1996 12.18 0.12 3.32 (0.13) (0.59) 1995 11.99 0.16 0.57 (0.14) (0.40) 1994 11.95 0.16 0.31 (0.17) (0.26) Investor Shares 1998 $15.06 $(0.01) $ 3.95 $ -- $(2.57) 1997 14.89 0.03 3.10 (0.02) (2.94) 1996 12.17 0.03 3.32 (0.04) (0.59) 1995 11.98 0.09 0.57 (0.07) (0.40) 1994 11.93 0.09 0.31 (0.09) (0.26) Flex Shares 1998 $14.96 $(0.04) $ 3.87 $ -- $(2.57) 1997 14.84 (0.01) 3.07 -- (2.94) 1996(1) 12.20 0.02 3.26 (0.05) (0.59) BALANCED FUND Trust Shares 1998 $11.94 $ 0.31 $ 2.19 $(0.32) $(1.03) 1997 11.55 0.33 1.47 (0.32) (1.09) 1996 10.26 0.33 1.41 (0.34) (0.11) 1995 9.76 0.33 0.49 (0.32) -- 1994(2) 10.00 0.11 (0.29) (0.06) -- Investor Shares 1998 $11.99 $ 0.28 $ 2.19 $(0.29) $(1.03) 1997 11.60 0.29 1.48 (0.29) (1.09) 1996 10.30 0.30 1.41 (0.30) (0.11) 1995 9.79 0.28 0.51 (0.28) -- 1994(3) 10.00 0.03 (0.24) -- -- Flex Shares 1998 $11.90 $ 0.20 $ 2.16 $(0.21) $(1.03) 1997 11.53 0.22 1.45 (0.21) (1.09) 1996(4) 10.36 0.24 1.29 (0.25) (0.11) EMERGING MARKETS EQUITY FUND Trust Shares 1998 $10.79 $ 0.16 $(1.86) $(0.08) $(0.14) 1997(5) 10.00 0.04 0.75 -- -- INTERNATIONAL EQUITY INDEX FUND Trust Shares 1998 $11.34 $ 0.11 $ 2.65 $(0.11) $(0.68) 1997 10.96 0.10 0.69 (0.11) (0.30) 1996 10.24 0.10 0.84 (0.13) (0.09) 1995(6) 10.00 0.08 0.19 (0.02) (0.01) Investor Shares 1998 $11.26 $ 0.16 $ 2.53 $(0.07) $(0.68) 1997 10.88 0.03 0.72 (0.07) (0.30) 1996 10.20 0.05 0.85 (0.13) (0.09) 1995(6) 10.00 0.05 0.17 (0.01) (0.01) Flex Shares 1998 $11.24 $ 0.17 $ 2.44 $ -- $(0.68) 1997 10.87 (0.05) 0.72 -- (0.30) 1996(7) 10.24 -- 0.82 (0.10) (0.09)
* Annualized. ** Return is for the period indicated and has not been annualized. (1) Commenced operations on June 1, 1995. (2) Commenced operations on January 3, 1994. (3) Commenced operations on January 4, 1994. (4) Commenced operations on June 14, 1995. 106
RATIO OF NET ASSET NET ASSETS RATIO OF NET INVESTMENT VALUE END TOTAL END OF EXPENSES TO INCOME (LOSS) TO OF PERIOD RETURN (A) PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS --------- --------- ----------- ------------------ ------------------ CAPITAL GROWTH FUND Trust Shares 1998 $16.48 29.51% $1,532,587 1.16% 0.61% 1997 15.09 24.66% 1,085,128 1.15% 0.83% 1996 14.90 28.97% 981,498 1.15% 0.90% 1995 12.18 6.63% 984,205 1.15% 1.38% 1994 11.99 3.87% 891,870 1.15% 1.25% Investor Shares 1998 $16.43 28.71% $ 271,044 1.81% (0.03%) 1997 15.06 23.74% 218,660 1.80% 0.19% 1996 14.89 28.18% 191,078 1.80% 0.24% 1995 12.17 5.93% 160,875 1.80% 0.73% 1994 11.98 3.26% 170,795 1.80% 0.64% Flex Shares 1998 $16.22 28.12% $ 106,670 2.26% (0.46%) 1997 14.96 23.24% 36,753 2.27% (0.29%) 1996(1) 14.84 27.48%* 10,969 2.27%* (0.29%)* BALANCED FUND Trust Shares 1998 $13.09 22.15% $ 188,465 0.96% 2.51% 1997 11.94 16.66% 151,358 0.95% 2.89% 1996 11.55 17.26% 111,638 0.95% 3.00% 1995 10.26 8.72% 89,051 0.95% 3.44% 1994(2) 9.76 (1.78%)** 90,579 0.95%* 2.76%* Investor Shares 1998 $13.14 21.72% $ 8,313 1.26% 2.21% 1997 11.99 16.27% 6,012 1.25% 2.58% 1996 11.60 16.88% 4,896 1.25% 2.70% 1995 10.30 8.29% 3,765 1.25% 3.17% 1994(3) 9.79 (2.10%)** 2,311 1.25%* 2.46%* Flex Shares 1998 $13.02 20.85% $ 27,625 2.02% 1.41% 1997 11.90 15.40% 6,067 2.01% 1.84% 1996(4) 11.53 15.58%* 3,131 2.00%* 1.85%* EMERGING MARKETS EQUITY FUND Trust Shares 1998 $ 8.87 (15.74%) $ 34,554 1.56% 1.14% 1997(5) 10.79 7.90%** 39,495 1.55%* 1.37%* INTERNATIONAL EQUITY INDEX FUND Trust Shares 1998 $13.31 25.82% $ 56,200 1.06% 0.88% 1997 11.34 7.48% 53,516 1.05% 0.71% 1996 10.96 9.29% 90,980 1.05% 0.84% 1995(6) 10.24 2.69%** 89,446 1.05%* 1.13%* Investor Shares 1998 $13.20 25.25% $ 7,141 1.46% 0.50% 1997 11.26 7.12% 5,592 1.45% 0.28% 1996 10.88 8.90% 5,597 1.45% 0.48% 1995(6) 10.20 2.18%** 3,960 1.45%* 0.67%* Flex Shares 1998 $13.17 24.50% $ 1,469 2.11% (0.03%) 1997 11.24 6.41% 900 2.10% (0.39%) 1996(7) 10.87 8.32%** 917 2.10%* (0.24%)* RATIO OF RATIO OF NET INVESTMENT EXPENSES TO INCOME (LOSS) TO AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE ------------------ ------------------- --------- CAPITAL GROWTH FUND Trust Shares 1998 1.27% 0.50% 194% 1997 1.25% 0.73% 141% 1996 1.27% 0.78% 156% 1995 1.28% 1.25% 128% 1994 1.29% 1.11% 124% Investor Shares 1998 2.01% (0.23%) 194% 1997 2.02% (0.03%) 141% 1996 2.08% (0.04%) 156% 1995 2.10% 0.43% 128% 1994 2.11% 0.33% 124% Flex Shares 1998 2.37% (0.57%) 194% 1997 2.43% (0.45%) 141% 1996(1) 2.68%* (0.70%)* 156% BALANCED FUND Trust Shares 1998 1.08% 2.39% 154% 1997 1.08% 2.76% 197% 1996 1.09% 2.86% 155% 1995 1.11% 3.28% 157% 1994(2) 1.25%* 2.46%* 106% Investor Shares 1998 1.59% 1.88% 154% 1997 1.64% 2.19% 197% 1996 1.89% 2.06% 155% 1995 1.80% 2.62% 157% 1994(3) 4.91%* (1.20%)* 106% Flex Shares 1998 2.23% 1.20% 154% 1997 2.45% 1.40% 197% 1996(4) 2.97%* 0.88%* 155% EMERGING MARKETS EQUITY FUND Trust Shares 1998 1.78% 0.92% 74% 1997(5) 2.04%* 0.88%* 24% INTERNATIONAL EQUITY INDEX FUND Trust Shares 1998 1.18% 0.76% 1% 1997 1.15% 0.61% 2% 1996 1.19% 0.70% 30% 1995(6) 1.31%* 0.87%* 10% Investor Shares 1998 1.84% 0.12% 1% 1997 1.88% (0.15%) 2% 1996 2.06% (0.13%) 30% 1995(6) 2.44%* (0.32%)* 10% Flex Shares 1998 3.52% (1.44%) 1% 1997 3.69% (1.98%) 2% 1996(7) 4.14%* (2.28%)* 30% (5) Commenced operations on January 31, 1997. (6) Commenced operations on June 6, 1994. (7) Commenced operations on June 8, 1995. (A) Total return figures do not reflect applicable sales loads.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 107 FINANCIAL HIGHLIGHTS (continued) ================================================================================ STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31. FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET REALIZED AND NET UNREALIZED GAINS NET ASSET VALUE INVESTMENT (LOSSES) DISTRIBUTIONS FROM DISTRIBUTIONS FROM BEGINNING OF PERIOD INCOME (LOSS) ON INVESTMENTS NET INVESTMENT INCOME REALIZED CAPITAL GAINS ------------------- ------------ ---------------- --------------------- ---------------------- INTERNATIONAL EQUITY FUND Trust Shares 1998 $13.63 $ 0.04 $ 2.69 $(0.04) $(1.32) 1997 11.40 0.03 2.57 (0.02) (0.35) 1996(1) 10.00 0.05 1.35 -- -- Investor Shares 1998 $13.58 $ 0.02 $ 2.64 $ -- $(1.32) 1997 11.38 (0.01) 2.56 -- (0.35) 1996(2) 10.44 0.04 0.90 -- -- Flex Shares 1998 $13.47 $0.07 $ 2.46 $ -- $(1.32) 1997 11.37 (0.04) 2.49 -- (0.35) 1996(2) 10.44 0.02 0.91 -- -- SUNBELT EQUITY FUND Trust Shares 1998 $13.28 $0.01 $ 3.03 $ -- $(1.20) 1997 14.11 (0.09) 0.25 -- (0.99) 1996 10.03 (0.04) 4.32 -- (0.20) 1995 9.70 (0.01) 0.38 -- (0.04) 1994(3) 10.00 -- (0.30) -- -- Investor Shares 1998 $13.06 $(0.07) $ 2.98 $ -- $(1.20) 1997 13.95 (0.14) 0.24 -- (0.99) 1996 9.96 (0.11) 4.30 -- (0.20) 1995 9.69 (0.05) 0.36 -- (0.04) 1994(4) 10.00 (0.02) (0.29) -- -- Flex Shares 1998 $13.00 $(0.09) $ 2.89 $ -- $(1.20) 1997 13.97 (0.14) 0.16 -- (0.99) 1996(5) 10.20 (0.07) 4.04 -- (0.20) INVESTMENT GRADE TAX-EXEMPT BOND FUND Trust Shares 1998 $11.22 $ 0.44 $ 0.50 $(0.44) $(0.32) 1997 11.10 0.44 0.33 (0.44) (0.21) 1996 11.28 0.45 0.19 (0.45) (0.37) 1995 10.68 0.46 0.60 (0.46) -- 1994(6) 11.37 0.22 (0.34) (0.22) (0.35) Investor Shares 1998 $11.24 $ 0.39 $ 0.49 $(0.39) $(0.32) 1997 11.12 0.40 0.33 (0.40) (0.21) 1996 11.30 0.41 0.19 (0.41) (0.37) 1995 10.69 0.42 0.61 (0.42) -- 1994 10.79 0.33 0.25 (0.33) (0.35) Flex Shares 1998 $11.23 $ 0.33 $ 0.49 $(0.33) $(0.32) 1997 11.11 0.35 0.33 (0.35) (0.21) 1996(7) 11.30 0.37 0.18 (0.37) (0.37)
* Annualized. ** Return is for the period indicated and has not been annualized. (1) Commenced operations on December 1, 1995. (2) Commenced operations on January 2, 1996. (3) Commenced operations on January 3, 1994. (4) Commenced operations on January 4, 1994. 108
RATIO OF RATIO OF EXPENSES TO NET ASSET NET ASSETS RATIO OF NET INVESTMENT AVERAGE NET ASSETS VALUE END TOTAL END OF EXPENSES TO INCOME (LOSS) TO (EXCLUDING WAIVERS OF PERIOD RETURN (A) PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) --------- --------- ----------- ------------------ ------------------ ------------------ INTERNATIONAL EQUITY FUND Trust Shares 1998 $15.00 21.87% $ 628,870 1.47% 0.61% 1.48% 1997 13.63 23.29% 489,325 1.46% 0.51% 1.51% 1996(1) 11.40 14.00%** 213,306 1.46%* 1.36%* 1.65%* Investor Shares 1998 $14.92 21.39% $ 17,383 1.82% 0.24% 1.91% 1997 13.58 22.85% 10,674 1.81% 0.18% 2.05% 1996(2) 11.38 9.00%** 3,448 1.81%* 1.73%* 3.14%* Flex Shares 1998 $14.68 20.54% $ 21,164 2.52% (0.46%) 2.58% 1997 13.47 21.98% 8,375 2.51% (0.27%) 3.03% 1996(2) 11.37 8.91%** 953 2.51%* 1.08%* 5.86%* SUNBELT EQUITY FUND Trust Shares 1998 $15.12 23.86% $ 431,921 1.16% (0.90%) 1.27% 1997 13.28 1.48% 381,371 1.15% (0.65%) 1.26% 1996 14.11 43.19% 412,430 1.15% (0.34%) 1.28% 1995 10.03 3.81% 258,908 1.15% (0.12%) 1.30% 1994(3) 9.70 (2.99%)** 128,280 1.15%* (0.19%)* 1.58%* Investor Shares 1998 $14.77 23.25% $ 30,860 1.61% (1.35%) 1.86% 1997 13.06 1.05% 28,095 1.60% (1.10%) 1.84% 1996 13.95 42.58% 29,002 1.60% (0.79%) 1.93% 1995 9.96 3.20% 22,180 1.60% (0.57%) 1.98% 1994(4) 9.69 (3.10%)** 16,077 1.60%* (0.63%)* 2.04%* Flex Shares 1998 $14.60 22.48% $ 8,070 2.21% (1.96%) 2.58% 1997 13.00 0.46% 5,689 2.20% (1.72%) 2.69% 1996(5) 13.97 39.86%* 2,705 2.20%* (1.43%)* 3.62%* INVESTMENT GRADE TAX-EXEMPT BOND FUND Trust Shares 1998 $11.40 8.57% $ 146,606 0.76% 3.83% 0.88% 1997 11.22 7.13% 139,144 0.75% 3.96% 0.86% 1996 11.10 5.82% 124,507 0.75% 4.01% 0.89% 1995 11.28 10.21% 78,208 0.75% 4.34% 0.91% 1994(6) 10.68 (1.10%)** 44,595 0.75%* 3.46%* 0.95%* Investor Shares 1998 $11.41 8.05% $ 28,159 1.16% 3.43% 1.43% 1997 11.24 6.69% 31,857 1.15% 3.56% 1.38% 1996 11.12 5.40% 37,427 1.15% 3.61% 1.42% 1995 11.30 9.91% 41,693 1.15% 3.88% 1.43% 1994 10.69 5.37% 46,182 1.14% 2.96% 1.51% Flex Shares 1998 $11.40 7.50% $ 8,399 1.64% 2.95% 2.10% 1997 11.23 6.19% 4,681 1.63% 3.08% 2.15% 1996(7) 11.11 4.91%* 5,536 1.63%* 3.12%* 2.25%* RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO (EXCLUDING WAIVERS TURNOVER AND REIMBURSEMENTS) RATE ------------------- --------- INTERNATIONAL EQUITY FUND Trust Shares 1998 0.60% 108% 1997 0.46% 139% 1996(1) 1.17%* 113% Investor Shares 1998 0.15% 108% 1997 (0.06%) 139% 1996(2) 0.40%* 113% Flex Shares 1998 (0.52%) 108% 1997 (0.79%) 139% 1996(2) (2.27%)* 113% SUNBELT EQUITY FUND Trust Shares 1998 (1.01%) 70% 1997 (0.76%) 72% 1996 (0.47%) 106% 1995 (0.27%) 80% 1994(3) (0.62%)* 21% Investor Shares 1998 (1.60%) 70% 1997 (1.34%) 72% 1996 (1.12%) 106% 1995 (0.95%) 80% 1994(4) (1.07%)* 21% Flex Shares 1998 (2.33%) 70% 1997 (2.21%) 72% 1996(5) (2.85%)* 106% INVESTMENT GRADE TAX-EXEMPT Trust Shares 1998 3.71% 378% 1997 3.85% 489% 1996 3.87% 514% 1995 4.18% 592% 1994(6) 3.26%* 432% Investor Shares 1998 3.16% 378% 1997 3.33% 489% 1996 3.34% 514% 1995 3.60% 592% 1994 2.59% 432% Flex Shares 1998 2.49% 378% 1997 2.56% 489% 1996(7) 2.50%* 514% (6) Commenced operations on October 21, 1993. (7) Commenced operations on June 1, 1995. (A) Total return figures do not reflect applicable sales loads.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS 109 FINANCIAL HIGHLIGHTS (continued) ================================================================================ STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31. FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET REALIZED AND NET UNREALIZED GAINS NET ASSET VALUE INVESTMENT (LOSSES) DISTRIBUTIONS FROM DISTRIBUTIONS FROM BEGINNING OF PERIOD INCOME ON INVESTMENTS NET INVESTMENT INCOME REALIZED CAPITAL GAINS ------------------- ------------ ---------------- --------------------- ---------------------- FLORIDA TAX-EXEMPT BOND FUND Trust Shares 1998 $10.28 $ 0.44 $ 0.45 $(0.44) $(0.01) 1997 10.06 0.46 0.25 (0.46) (0.03) 1996 10.18 0.46 (0.07) (0.46) (0.05) 1995 9.75 0.44 0.43 (0.44) -- 1994(1) 10.00 0.13 (0.25) (0.13) -- Investor Shares 1998 $10.29 $ 0.42 $ 0.44 $(0.42) $(0.01) 1997 10.07 0.44 0.25 (0.44) (0.03) 1996 10.18 0.44 (0.06) (0.44) (0.05) 1995 9.75 0.42 0.43 (0.42) -- 1994(2) 10.00 0.13 (0.25) (0.13) -- Flex Shares 1998 $10.30 $ 0.37 $ 0.45 $(0.37) $(0.01) 1997 10.08 0.39 0.25 (0.39) (0.03) 1996(3) 10.19 0.39 (0.06) (0.39) (0.05) TENNESSEE TAX-EXEMPT BOND FUND Trust Shares 1998(4) $ 9.63 $ 0.36 $ 0.25 $(0.36) $(0.07) 1997 9.40 0.43 0.23 (0.43) -- 1996 9.50 0.43 (0.11) (0.42) -- 1995 9.22 0.44 0.28 (0.44) -- 1994(5) 10.00 0.12 (0.77) (0.13) -- Investor Shares 1998(4) $ 9.65 $ 0.35 $ 0.23 $(0.35) $(0.07) 1997 9.42 0.41 0.23 (0.41) -- 1996 9.53 0.41 (0.10) (0.42) -- 1995 9.23 0.44 0.29 (0.43) -- 1994(6) 10.00 0.13 (0.77) (0.13) -- Flex Shares 1998(4) $ 9.64 $ 0.31 $ 0.24 $(0.31) $(0.07) 1997 9.41 0.37 0.23 (0.37) -- 1996(7) 9.59 0.37 (0.18) (0.37) -- GEORGIA TAX-EXEMPT BOND FUND Trust Shares 1998 $ 9.73 $ 0.41 $ 0.39 $(0.41) $(0.01) 1997 9.56 0.42 0.22 (0.42) (0.05) 1996 9.63 0.43 (0.05) (0.43) (0.02) 1995 9.42 0.42 0.21 (0.42) -- 1994 (2) 10.00 0.14 (0.58) (0.14) -- Investor Shares 1998 $ 9.74 $ 0.39 $ 0.40 $(0.39) $(0.01) 1997 9.58 0.40 0.21 (0.40) (0.05) 1996 9.65 0.41 (0.05) (0.41) (0.02) 1995 9.44 0.40 0.21 (0.40) -- 1994 (6) 10.00 0.13 (0.56) (0.13) -- Flex Shares 1998 $ 9.73 $ 0.34 $ 0.40 $(0.34) $(0.01) 1997 9.56 0.35 0.22 (0.35) (0.05) 1996(8) 9.72 0.36 (0.14) (0.36) (0.02)
* Annualized. ** Return is for the period indicated and has not been annualized. (1) Commenced operations on January 25, 1994. (2) Commenced operations on January 18, 1994. (3) Commenced operations on June 1, 1995. (4) Discontinued operations on April 13, 1998. (5) Commenced operations on January 27, 1994. 110
RATIO OF NET ASSET NET ASSETS RATIO OF NET INVESTMENT VALUE END TOTAL END OF EXPENSES TO INCOME TO OF PERIOD RETURN (A) PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS --------- --------- ----------- ------------------ ------------------ FLORIDA TAX-EXEMPT BOND FUND Trust Shares 1998 $10.72 8.77% $93,939 0.66% 4.16% 1997 10.28 7.22% 50,487 0.65% 4.48% 1996 10.06 3.87% 30,790 0.65% 4.49% 1995 10.18 9.26% 10,118 0.65% 4.63% 1994(1) 9.75 (1.19%)** 3,192 0.65%* 3.86%* Investor Shares 1998 $10.72 8.46% $ 3,381 0.86% 3.98% 1997 10.29 7.00% 3,226 0.85% 4.28% 1996 10.07 3.76% 4,025 0.85% 4.28% 1995 10.18 9.04% 3,320 0.85% 4.36% 1994(2) 9.75 (1.22%)** 2,280 0.85%* 3.67%* Flex Shares 1998 $10.74 8.04% $ 8,160 1.36% 3.45% 1997 10.30 6.48% 3,000 1.35% 3.78% 1996(3) 10.08 3.27%* 2,692 1.35%* 3.79%* TENNESSEE TAX-EXEMPT BOND FUND Trust Shares 1998(4) $ 9.81 6.47%** $ -- 0.66% 4.67% 1997 9.63 7.16% 1,973 0.65% 4.51% 1996 9.40 3.43% 1,823 0.65% 4.49% 1995 9.50 8.17% 1,664 0.65% 4.90% 1994(5) 9.22 (6.52%)** 594 0.65%* 4.24%* Investor Shares 1998(4) $ 9.81 6.06%** $ -- 0.86% 4.37% 1997 9.65 6.93% 1,602 0.85% 4.31% 1996 9.42 3.28% 1,523 0.85% 4.29% 1995 9.53 8.24% 1,170 0.85% 4.70% 1994(6) 9.23 (6.39%)** 1,127 0.85%* 3.74%* Flex Shares 1998(4) $ 9.81 5.75%** $ -- 1.36% 3.39% 1997 9.64 6.42% 2,505 1.35% 3.81% 1996(7) 9.41 1.98%* 2,017 1.34%* 3.80%* GEORGIA TAX-EXEMPT BOND FUND Trust Shares 1998 $10.11 8.37% $62,363 0.66% 4.09% 1997 9.73 6.79% 39,732 0.65% 4.31% 1996 9.56 3.89% 22,950 0.65% 4.36% 1995 9.63 6.94% 13,187 0.65% 4.56% 1994 (2) 9.42 (4.43%)** 4,338 0.65%* 4.12%* Investor Shares 1998 $10.13 8.26% $ 3,975 0.86% 3.89% 1997 9.74 6.47% 3,511 0.85% 4.10% 1996 9.58 3.69% 3,418 0.85% 4.17% 1995 9.65 6.70% 3,268 0.85% 4.31% 1994 (6) 9.44 (4.29%)** 3,300 0.85%* 3.93%* Flex Shares 1998 $10.12 7.74% $ 8,264 1.36% 3.39% 1997 9.73 6.06% 4,662 1.35% 3.60% 1996(8) 9.56 2.25%* 4,207 1.35%* 3.66%* RATIO OF RATIO OF NET INVESTMENT EXPENSES TO INCOME TO AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE ------------------ ------------------- --------- FLORIDA TAX-EXEMPT BOND FUND Trust Shares 1998 0.80% 4.02% 69% 1997 0.80% 4.33% 135% 1996 0.88% 4.26% 63% 1995 1.13% 4.15% 105% 1994(1) 1.12%* 3.39%* 53% Investor Shares 1998 1.34% 3.50% 69% 1997 1.31% 3.82% 135% 1996 1.36% 3.77% 63% 1995 1.50% 3.71% 105% 1994(2) 3.20%* 1.32%* 53% Flex Shares 1998 2.01% 2.80% 69% 1997 2.28% 2.85% 135% 1996(3) 2.54%* 2.60%* 63% TENNESSEE TAX-EXEMPT BOND FUND Trust Shares 1998(4) 1.79% 3.54% 14% 1997 1.72% 3.44% 16% 1996 1.68% 3.46% 41% 1995 2.65% 2.90% 28% 1994(5) 1.43%* 3.46%* 13% Investor Shares 1998(4) 2.04% 3.19% 14% 1997 1.76% 3.40% 16% 1996 2.08% 3.06% 41% 1995 2.10% 3.45% 28% 1994(6) 6.60%* (2.01%)* 13% Flex Shares 1998(4) 2.26% 2.49% 14% 1997 2.34% 2.82% 16% 1996(7) 2.74%* 2.40%* 41% GEORGIA TAX-EXEMPT BOND FUND Trust Shares 1998 0.81% 3.94% 7% 1997 0.81% 4.15% 15% 1996 0.89% 4.12% 60% 1995 0.98% 4.23% 25% 1994 (2) 1.06%* 3.71%* 26% Investor Shares 1998 1.30% 3.45% 7% 1997 1.33% 3.62% 15% 1996 1.41% 3.61% 60% 1995 1.43% 3.73% 25% 1994 (6) 2.36%* 2.42%* 26% Flex Shares 1998 2.02% 2.73% 7% 1997 2.07% 2.88% 15% 1996(8) 2.35%* 2.66%* 60% (6) Commenced operations on January 19, 1994. (7) Commenced operations on June 5, 1995. (8) Commenced operations on June 6, 1995. (A) Total return figures do not reflect applicable sales loads.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 111 FINANCIAL HIGHLIGHTS (continued) ================================================================================ STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31. FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET REALIZED AND NET UNREALIZED GAINS NET ASSET VALUE INVESTMENT (LOSSES) DISTRIBUTIONS FROM DISTRIBUTIONS FROM BEGINNING OF PERIOD INCOME ON INVESTMENTS NET INVESTMENT INCOME REALIZED CAPITAL GAINS ------------------- ------------ ---------------- --------------------- ---------------------- INVESTMENT GRADE BOND FUND Trust Shares 1998 $10.16 $ 0.60 $ 0.49 $(0.60) $ -- 1997 10.07 0.60 0.09 (0.60) -- 1996 10.26 0.60 (0.19) (0.60) -- 1995 9.89 0.61 0.37 (0.61) -- 1994 10.45 0.50 (0.36) (0.50) (0.20) Investor Shares 1998 $10.16 $ 0.55 $ 0.49 $(0.55) $ -- 1997 10.06 0.56 0.10 (0.56) -- 1996 10.26 0.56 (0.20) (0.56) -- 1995 9.89 0.57 0.38 (0.58) -- 1994 10.44 0.46 (0.35) (0.46) (0.20) Flex Shares 1998 $10.17 $ 0.51 $ 0.49 $(0.51) $ -- 1997 10.07 0.51 0.10 (0.51) -- 1996(1) 10.33 0.52 (0.26) (0.52) -- SHORT-TERM BOND FUND Trust Shares 1998 $ 9.90 $ 0.55 $ 0.16 $(0.55) $(0.01) 1997 9.86 0.53 0.07 (0.53) (0.03) 1996 9.98 0.54 (0.10) (0.54) (0.02) 1995 9.79 0.53 0.19 (0.53) -- 1994 10.01 0.42 (0.21) (0.42) (0.01) Investor Shares 1998 $ 9.91 $ 0.53 $ 0.17 $(0.53) $(0.01) 1997 9.88 0.51 0.06 (0.51) (0.03) 1996 10.01 0.52 (0.10) (0.53) (0.02) 1995 9.81 0.51 0.19 (0.50) -- 1994 10.03 0.40 (0.21) (0.40) (0.01) Flex Shares 1998 $ 9.91 $ 0.50 $ 0.17 $(0.50) $(0.01) 1997 9.88 0.48 0.06 (0.48) (0.03) 1996(2) 10.02 0.47 (0.12) (0.47) (0.02)
* Annualized. (1) Commenced operations on June 7, 1995. (2) Commenced operations on June 20, 1995. (A) Total return figures do not reflect applicable sales loads. 112
RATIO OF NET ASSET NET ASSETS RATIO OF NET INVESTMENT VALUE END TOTAL END OF EXPENSES TO INCOME TO OF PERIOD RETURN (A) PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS --------- --------- ----------- ------------------ ------------------ INVESTMENT GRADE BOND FUND Trust Shares 1998 $10.65 10.92% $793,488 0.76% 5.67% 1997 10.16 6.99% 633,646 0.75% 5.89% 1996 10.07 4.02% 599,514 0.75% 5.81% 1995 10.26 10.39% 543,308 0.75% 6.22% 1994 9.89 1.17% 460,538 0.75% 4.77% Investor Shares 1998 $10.65 10.49% $ 33,269 1.14% 5.29% 1997 10.16 6.66% 33,165 1.15% 5.48% 1996 10.06 3.50% 36,155 1.15% 5.40% 1995 10.26 10.04% 33,772 1.15% 5.79% 1994 9.89 0.86% 35,775 1.14% 4.39% Flex Shares 1998 $10.66 9.99% $ 13,111 1.65% 4.76% 1997 10.17 6.16% 5,763 1.64% 5.00% 1996(1) 10.07 2.50%* 4,621 1.64%* 4.84%* SHORT-TERM BOND FUND Trust Shares 1998 $10.05 7.31% $120,422 0.66% 5.47% 1997 9.90 6.30% 89,701 0.65% 5.37% 1996 9.86 4.45% 91,156 0.65% 5.39% 1995 9.98 7.60% 60,952 0.65% 5.49% 1994 9.79 2.02% 34,772 0.65% 4.15% Investor Shares 1998 $10.07 7.19% $ 1,949 0.86% 5.27% 1997 9.91 5.97% 2,182 0.85% 5.16% 1996 9.88 4.23% 2,700 0.85% 5.20% 1995 10.01 7.44% 2,609 0.85% 5.24% 1994 9.81 1.81% 2,381 0.85% 3.94% Flex Shares 1998 $10.07 6.84% $ 2,110 1.21% 4.93% 1997 9.91 5.62% 1,073 1.20% 4.82% 1996(2) 9.88 3.73%* 966 1.20%* 4.77%* RATIO OF RATIO OF NET INVESTMENT EXPENSES TO INCOME TO AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE ------------------ ------------------- --------- INVESTMENT GRADE BOND FUND Trust Shares 1998 0.86% 5.57% 109% 1997 0.85% 5.79% 298% 1996 0.87% 5.69% 184% 1995 0.88% 6.09% 238% 1994 0.88% 4.64% 259% Investor Shares 1998 1.38% 5.05% 109% 1997 1.41% 5.22% 298% 1996 1.44% 5.11% 184% 1995 1.49% 5.45% 238% 1994 1.41% 4.12% 259% Flex Shares 1998 2.11% 4.30% 109% 1997 2.20% 4.44% 298% 1996(1) 2.49%* 3.99%* 184% SHORT-TERM BOND FUND Trust Shares 1998 0.79% 5.34% 87% 1997 0.78% 5.24% 118% 1996 0.81% 5.23% 163% 1995 0.85% 5.29% 200% 1994 0.85% 3.95% 75% Investor Shares 1998 1.71% 4.42% 87% 1997 1.58% 4.43% 118% 1996 1.72% 4.33% 163% 1995 1.56% 4.53% 200% 1994 2.52% 2.27% 75% Flex Shares 1998 2.85% 3.29% 87% 1997 3.02% 3.00% 118% 1996(2) 4.06%* 1.91%* 163%
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 113 FINANCIAL HIGHLIGHTS (concluded) ================================================================================ STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31. FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET REALIZED AND NET UNREALIZED GAINS NET ASSET VALUE INVESTMENT (LOSSES) DISTRIBUTIONS FROM DISTRIBUTIONS FROM BEGINNING OF PERIOD INCOME ON INVESTMENTS NET INVESTMENT INCOME REALIZED CAPITAL GAINS ------------------- ------------ ---------------- --------------------- ---------------------- SHORT-TERM U.S. TREASURY SECURITIES FUND Trust Shares 1998 $ 9.88 $ 0.51 $ 0.10 $(0.52) $ -- 1997 9.84 0.51 0.04 (0.51) -- 1996 9.93 0.55 (0.09) (0.55) -- 1995 9.82 0.47 0.11 (0.47) -- 1994 9.98 0.33 (0.11) (0.33) (0.05) Investor Shares 1998 $ 9.88 $ 0.49 $ 0.09 $(0.50) $ -- 1997 9.84 0.50 0.04 (0.50) -- 1996 9.94 0.54 (0.10) (0.54) -- 1995 9.83 0.46 0.11 (0.46) -- 1994 9.99 0.32 (0.12) (0.31) (0.05) Flex Shares 1998 $ 9.85 $ 0.47 $ 0.10 $(0.48) $ -- 1997 9.82 0.47 0.03 (0.47) -- 1996(1) 9.96 0.48 (0.14) (0.48) -- LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND Trust Shares 1998 $10.02 $ 0.58 $ 0.11 $(0.58) $(0.01) 1997 9.99 0.58 0.04 (0.58) (0.01) 1996 10.11 0.62 (0.14) (0.60) -- 1995(2) 10.00 0.58 0.13 (0.60) -- Investor Shares 1998 $10.00 $ 0.56 $ 0.12 $(0.56) $(0.01) 1997 9.97 0.56 0.04 (0.56) (0.01) 1996 10.11 0.60 (0.14) (0.60) -- 1995(3) 9.98 0.58 0.13 (0.58) -- Flex Shares 1998 $10.02 $ 0.52 $ 0.11 $(0.52) $(0.01) 1997 9.99 0.52 0.04 (0.52) (0.01) 1996(4) 10.14 0.55 (0.15) (0.55) -- U.S. GOVERNMENT SECURITIES FUND Trust Shares 1998 $10.02 $ 0.61 $ 0.44 $(0.61) $ -- 1997 9.91 0.62 0.11 (0.62) -- 1996 10.27 0.62 (0.33) (0.62) (0.03) 1995(5) 9.98 0.53 0.29 (0.53) -- Investor Shares 1998 $10.02 $ 0.57 $ 0.43 $(0.57) $ -- 1997 9.90 0.58 0.12 (0.58) -- 1996 10.26 0.59 (0.33) (0.59) (0.03) 1995(6) 10.00 0.56 0.26 (0.56) -- Flex Shares 1998 $10.02 $ 0.52 $ 0.44 $(0.52) $ -- 1997 9.91 0.53 0.11 (0.53) -- 1996(4) 10.31 0.52 (0.37) (0.52) (0.03)
* Annualized. ** Return is for the period indicated and has not been annualized. (1) Commenced operations on June 22, 1995. (2) Commenced operations on June 7, 1994. (3) Commenced operations on July 17, 1994. 114
RATIO OF NET ASSET NET ASSETS RATIO OF NET INVESTMENT VALUE END TOTAL END OF EXPENSES TO INCOME TO OF PERIOD RETURN (A) PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS --------- --------- ----------- ------------------ ------------------ SHORT-TERM U.S. TREASURY SECURITIES FUND Trust Shares 1998 $ 9.97 6.30% $ 46,920 0.66% 5.19% 1997 9.88 5.76% 21,988 0.65% 5.23% 1996 9.84 4.73% 10,149 0.65% 5.56% 1995 9.93 6.11% 9,599 0.65% 4.91% 1994 9.82 2.17% 12,723 0.65% 3.23% Investor Shares 1998 $ 9.96 6.04% $ 3,277 0.81% 5.07% 1997 9.88 5.59% 3,921 0.80% 5.05% 1996 9.84 4.52% 4,192 0.80% 5.43% 1995 9.94 6.03% 7,144 0.80% 4.74% 1994 9.83 2.01% 4,841 0.78% 3.11% Flex Shares 1998 $ 9.94 5.90% $ 1,413 1.06% 4.81% 1997 9.85 5.19% 1,091 1.05% 4.75% 1996(1) 9.82 3.72%* 2,423 1.05%* 5.03%* LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND Trust Shares 1998 $10.12 7.12% $137,488 0.66% 5.75% 1997 10.02 6.43% 123,903 0.65% 5.81% 1996 9.99 4.84% 73,370 0.65% 6.04% 1995(2) 10.11 7.50%** 41,823 0.65%* 6.43%* Investor Shares 1998 $10.11 6.95% $ 2,705 0.91% 5.50% 1997 10.00 6.17% 2,426 0.90% 5.55% 1996 9.97 4.59% 2,512 0.90% 5.75% 1995(3) 10.11 7.45%** 623 0.90%* 6.27%* Flex Shares 1998 $10.12 6.49% $ 1,543 1.26% 5.16% 1997 10.02 5.80% 1,409 1.25% 5.20% 1996(4) 9.99 4.10%* 1,349 1.25%* 5.38%* U.S. GOVERNMENT SECURITIES FUND Trust Shares 1998 $10.46 10.76% $ 34,899 0.76% 5.93% 1997 10.02 7.54% 19,471 0.75% 6.19% 1996 9.91 2.77% 10,277 0.75% 6.05% 1995(5) 10.27 8.64%** 3,291 0.75%* 6.67%* Investor Shares 1998 $10.45 10.23% $ 3,225 1.16% 5.53% 1997 10.02 7.21% 2,243 1.15% 5.76% 1996 9.90 2.47% 2,396 1.15% 5.68% 1995(6) 10.26 8.61%** 589 1.15%* 6.08%* Flex Shares 1998 $10.46 9.78% $ 4,022 1.67% 5.02% 1997 10.02 6.57% 2,801 1.66% 5.26% 1996(4) 9.91 1.42%* 2,826 1.66%* 5.18%* RATIO OF RATIO OF NET INVESTMENT EXPENSES TO INCOME TO AVERAGE NET ASSETS AVERAGE NET ASSETS PORTFOLIO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE ------------------ ------------------- --------- SHORT-TERM U.S. TREASURY SECURITIES FUND Trust Shares 1998 0.84% 5.01% 39% 1997 0.92% 4.96% 93% 1996 1.00% 5.21% 94% 1995 1.08% 4.48% 88% 1994 0.81% 3.07% 117% Investor Shares 1998 1.33% 4.55% 39% 1997 1.35% 4.50% 93% 1996 1.32% 4.91% 94% 1995 1.33% 4.21% 88% 1994 1.41% 2.48% 117% Flex Shares 1998 2.87% 3.00% 39% 1997 2.51% 3.29% 93% 1996(1) 2.97%* 3.11%* 94% LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND Trust Shares 1998 0.77% 5.64% 163% 1997 0.78% 5.68% 133% 1996 0.84% 5.85% 83% 1995(2) 0.93%* 6.15%* 68% Investor Shares 1998 1.51% 4.90% 163% 1997 1.48% 4.97% 133% 1996 2.25% 4.40% 83% 1995(3) 7.74%* (0.57%)* 68% Flex Shares 1998 2.72% 3.70% 163% 1997 2.66% 3.79% 133% 1996(4) 3.59%* 3.04%* 83% U.S. GOVERNMENT SECURITIES FUND Trust Shares 1998 0.92% 5.77% 14% 1997 1.02% 5.92% 21% 1996 1.25% 5.55% 83% 1995(5) 3.33%* 4.09%* 30% Investor Shares 1998 1.76% 4.93% 14% 1997 1.79% 5.12% 21% 1996 2.50% 4.33% 83% 1995(6) 6.84%* 0.39%* 30% Flex Shares 1998 2.32% 4.37% 14% 1997 2.42% 4.50% 21% 1996(4) 2.86%* 3.98%* 83% (4) Commenced operations on June 7, 1995. (5) Commenced operations on July 31, 1994. (6) Commenced operations on June 9, 1994. (A) Total return figures do not reflect applicable sales loads.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 115 NOTES TO FINANCIAL STATEMENTS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 1. Organization: The STI Classic Funds (the "Trust") was organized as a Massachusetts Business Trust under a Declaration of Trust dated January 15, 1992. The Trust is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company with twenty-two portfolios: the Value Income Stock Fund, the Mid-Cap Equity Fund, the Small Cap Equity Fund, the Capital Growth Fund, the Balanced Fund, the Emerging Markets Equity Fund, the International Equity Index Fund, the International Equity Fund, the Sunbelt Equity Fund, the Investment Grade Tax-Exempt Bond Fund, the Florida Tax-Exempt Bond Fund, the Georgia Tax-Exempt Bond Fund, the Investment Grade Bond Fund, the Short-Term Bond Fund, the Short-Term U.S. Treasury Securities Fund, the Limited-Term Federal Mortgage Securities Fund, and the U.S. Government Securities Fund, (collectively the "Non-Dollar Funds"), the Prime Quality Money Market Fund, the U.S. Government Securities Money Market Fund, the Tax-Exempt Money Market Fund, the Classic Institutional Cash Management Money Market Fund and the Classic Institutional U.S. Treasury Securities Money Market Fund, (collectively the "Money Market Funds"). The assets of each portfolio are segregated, and a shareholder's interest is limited to the Fund in which shares are held. Each Fund's prospectus provides a description of the Fund's investment objectives, policies and strategies. The financial statements of the Classic Institutional Cash Management Money Market Fund, the Classic Institutional U.S. Treasury Money Market Fund, the Prime Quality Money Market Fund, the U.S. Government Securities Money Market Fund and the Tax-Exempt Money Market Fund are not presented herein, but are presented separately. 2. Significant Accounting Policies: The following is a summary of significant accounting policies followed by the Trust. SECURITY VALUATION -- Investment securities held by the Non-Dollar Funds that are listed on a securities exchange for which market quotations are available are valued at the last quoted sales price each business day. If there is no such reported sale, these securities and unlisted securities for which market quotations are readily available are valued at the most recently quoted bid price. Foreign securities in the Emerging Markets Equity Fund, the International Equity Fund and the International Equity Index Fund are valued based upon quotations from the primary market in which they are traded. Debt obligations with sixty days or less remaining until maturity may be valued at their amortized cost. FEDERAL INCOME TAXES -- It is each Fund's intention to qualify as a regulated investment company for Federal income tax purposes and distribute all of its taxable income and net capital gains. Accordingly, no provisions for Federal income taxes are required. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are accounted for on the date the security is purchased or sold (trade date). Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Costs used in determining net realized gains and losses on the sales of investment securities are those of the specific securities sold adjusted for the accretion and amortization of purchase discounts and premiums during the respective holding period. Purchase discounts and premiums on securities held by the Non-Dollar Funds are accreted and amortized to maturity using the scientific interest method, which approximates the effective interest method. REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase agreements are held by the custodian bank until the respective agreements mature. Provisions of the repurchase agreements ensure that the market value of the collateral, including accrued interest thereon, is sufficient in the event of default of the counterparty. If the counterparty defaults and the value of the collateral declines or if the counterparty enters into an 116 ================================================================================ insolvency proceeding, realization of the collateral by the Funds may be delayed or limited. NET ASSET VALUE PER SHARE -- The net asset value per share of each Fund is calculated each business day, by dividing the total value of each Fund's assets, less liabilities, by the number of shares outstanding. The maximum offering price per share for Investor shares of the Investment Grade Bond, the Investment Grade Tax-Exempt Bond, the Capital Growth, the Value Income Stock, the Sunbelt Equity, the Mid-Cap Equity, the Balanced, the Florida Tax-Exempt Bond, the Georgia Tax-Exempt Bond, the U.S. Government Securities, the International Equity, and the International Equity Index Funds is equal to the net asset value per share plus a sales load of 3.75%. The maximum offering price per share for Investor shares of the Short-Term U.S. Treasury Securities Fund is equal to the net asset value per share plus a sales load of 1.00%. The maximum offering price per share for Investor shares of the Short-Term Bond Fund is equal to the net asset value per share plus a sales load of 2.00%. The maximum offering price per share for Investor shares of the Limited-Term Federal Mortgage Securities Fund is equal to the net asset value per share plus a sales load of 2.50%. Flex Shares of the Funds may be purchased at their net asset value. Shares redeemed within the first year after purchase will be subject to a contingent deferred sales charge ("CDSC") equal to 2.00% of the net asset value of the shares at the time of redemption. The CDSC will not apply to shares redeemed after such time. FOREIGN CURRENCY TRANSLATION -- The books and records of the Emerging Markets Equity, the International Equity and the International Equity Index Funds are maintained in U.S. dollars on the following basis: (I) market value of investment securities, assets and liabilities at the current rate of exchange; and (II) purchases and sales of investment securities, income and expenses at the relevant rates of exchange prevailing on the respective dates of such transactions. The Emerging Markets Equity, the International Equity and the International Equity Index Funds do not isolate that portion of gains and losses on investments in equity securities that is due to changes in the foreign exchange rates from that which is due to changes in market prices of equity securities. The Emerging Markets Equity, the International Equity and the International Equity Index Funds report certain foreign currency related transactions as components of realized and unrealized gains and losses for financial reporting purposes, whereas such components are treated as ordinary income for Federal income tax purposes. TBA PURCHASE COMMITMENTS -- The Fixed Income Portfolios may enter into "TBA" (To Be Announced) purchase commitments to purchase securities for a fixed price at a future date beyond customary settlement time. TBA purchase commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to settlement date, which risk is in addition to the risk of decline in the value of the funds' other assets. Unsettled TBA purchase commitments are valued at the current market value of the underlying securities, generally according to the procedures described under "Security Valuation." OTHER -- Expenses that are directly related to a specific Fund are charged to that Fund. Class specific expenses are borne by that class. Other 117 NOTES TO FINANCIAL STATEMENTS (continued) ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 operating expenses of the Trust are pro-rated to the Funds on the basis of relative net assets. Fund expenses are pro-rated to the respective classes on the basis of relative net assets. Distributions from net investment income of the Investment Grade Bond, the Investment Grade Tax-Exempt Bond, the Short-Term U.S. Treasury Securities, the Short-Term Bond, the Florida Tax-Exempt Bond, the Georgia Tax-Exempt Bond, the U.S. Government Securities and the Limited-Term Federal Mortgage Securities Funds are declared each business day and paid to shareholders on a monthly basis. Distributions from net investment income are declared and paid each calendar quarter by the Capital Growth, the Value Income Stock, the Sunbelt Equity, the Mid-Cap Equity, the Small Cap Equity and the Balanced Funds. Distributions from net investment income are declared and paid annually by the Emerging Markets Equity, the International Equity and the International Equity Index Funds. Any net realized capital gains on sales of securities are distributed to shareholders at least annually. RECLASSIFICATION OF COMPONENTS OF NET ASSETS -- The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from generally accepted accounting principles. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These book/tax differences may be temporary or permanent in nature. To the extent these differences are permanent, they are charged or credited to paid-in-capital or accumulated net realized gain, as appropriate, in the period that the differences arise. Accordingly, the following permanent differences, primarily attributable to a net operating loss in the Sunbelt Equity and Mid-Cap Equity Funds and the classification of short-term capital gains and ordinary income for tax purposes related to the other funds, have been reclassified to/from the following accounts:
UNDISTRIBUTED ACCUMULATED NET INVESTMENT PAID-IN-CAPITAL REALIZED GAIN INCOME (000) (000) (000) -------------- ------------- -------------- Mid-Cap Equity Fund $ -- $(1,361) $1,361 International Equity Index Fund -- (67) 67 Sunbelt Equity Fund -- (4,365) 4,365 Investment Grade Bond Fund -- 188 (188) Short Term U.S. Treasury Securities Fund 53 -- (53)
These reclassifications have no effect on net assets or net asset values per share. USE OF ESTIMATES -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates. 3. Organization Costs and Transactions with Affiliates: The Trust incurred organization costs of approximately $808,836 including approximately $395,594 relating to state registration fees. These costs have been deferred in the accounts of the Funds and are being amortized on a straight line basis over a period of sixty months commencing with operations with the exception of state registration fees, which are being amortized over a period of twelve months. The costs include legal fees of approximately $60,383 for organizational work performed by a law firm of which two officers of the Trust are partners. On March 18, 1992, the Trust sold initial shares of beneficial interest to SEI Fund Resources (the "Administrator"). In the event any of the initial shares of the Trust are 118 ================================================================================ redeemed by any holder thereof during the period that the Trust is amortizing its organizational costs, the redemption proceeds payable to the holder thereof will be reduced by the unamortized organizational costs in the same ratio as the number of initial shares being redeemed bears to the number of initial shares outstanding at the time of redemption. In April 1998, the AICPA issued Statement of Position (SOP) No. 98-5, "Reporting on the Costs of Start-Up Activities." This SOP provides guidance on the financial reporting of start-up costs and organization costs and requires costs of start-up activities and organization costs to be expensed as incurred. Investment companies that began operations prior to June 30, 1998 can adopt the SOP prospectively. Therefore, previously capitalized organization costs will continue to be amortized as discussed above. Any future start-up or organization costs will be expensed as incurred. Certain officers of the Trust are also officers of the Administrator and/or SEI Investments Distribution Co. (the "Distributor"). Such officers are paid no fees by the Trust for serving as officers of the Trust. 4. Administration, Transfer Agency Servicing and Distribution Agreements: The Trust and the Administrator are parties to an Administration Agreement dated May 29, 1995, as amended November 19, 1997 under which the Administrator provides administrative services for an annual fee (expressed as a percentage of the combined average daily net assets of the Trust and STI Classic Variable Trust) of: .12% up to $1 billion, .09% on the next $4 billion, .07% on the next $3 billion, .065% on the next $2 billion and .06% for over $10 billion. The Trust and Federated Services Company are parties to a Transfer Agency servicing agreement dated May 14, 1994 under which Federated Services Company provides transfer agency services to the Trust. The Trust and the Distributor are parties to a Distribution Agreement dated May 29, 1995 regarding the Flex Shares and a Distribution Agreement dated November 21, 1995 with respect to the Trust and Investor shares. The Distributor will receive no fees for its distribution services under this agreement for the Trust Shares of any Fund. With respect to the Investor Shares and Flex Shares, the Distributor receives amounts, pursuant to a Distribution Plan and (in the case of Flex Shares) a Distribution and Service Plan, as outlined in the table in footnote 5 under the column titled "Distribution Fee". 5. Investment Advisory and Custodian Agreements: The Trust and STI Capital Management, N.A., ("STI Capital Management, N.A."), Trusco Capital Management ("Trusco") and the SunTrust Bank, Atlanta have entered into advisory agreements dated May 29, 1992, June 15, 1993, and December 20, 1993 respectively. Under terms of the respective agreements, the Funds are charged the following annual fees based upon average daily net assets:
MAXIMUM FLEX SHARE MAXIMUM DISTRI- MAXIMUM TRUST INVESTOR INVESTOR BUTION FLEX ANNUAL SHARE SHARE SHARE AND SHARE ADVISORY MAXIMUM DISTRI- MAXIMUM SERVICE MAXIMUM FEE EXPENSE BUTION FEE EXPENSE FEE EXPENSE -------- ------- ---------- --------- --------- --------- TRUSCO: International Equity Index Fund* ........... .90% 1.07% .38% 1.47% 1.00% 2.12% Sunbelt Equity Fund ............ 1.15% 1.17% .43% 1.62% 1.00% 2.22% Short-Term Bond Fund ............ .65% .67% .23% .87% 1.00% 1.22% Short-Term U.S. Treasury Securities Fund ............ .65% .67% .18% .82% 1.00% 1.07% U.S. Government Securities Fund ............ .74% .77% .38% 1.17% 1.00% 1.68%
119 NOTES TO FINANCIAL STATEMENTS (continued) ================================================================================ STI CLASSIC FUNDS MAY 31, 1998
MAXIMUM FLEX SHARE MAXIMUM DISTRI- MAXIMUM TRUST INVESTOR INVESTOR BUTION FLEX ANNUAL SHARE SHARE SHARE AND SHARE ADVISORY MAXIMUM DISTRI- MAXIMUM SERVICE MAXIMUM FEE EXPENSE BUTION FEE EXPENSE FEE EXPENSE -------- ------- ---------- --------- --------- --------- STI CAPITAL MANAGEMENT, N.A.: Value Income Stock Fund ..... .80% .97% .33% 1.32% 1.00% 2.02% Mid-Cap Equity Fund ........... 1.15% 1.17% .43% 1.62% 1.00% 2.22% Capital Growth Fund ........... 1.15% 1.17% .68% 1.82% 1.00% 2.29% Balanced Fund ... .95% .97% .28% 1.27% 1.00% 2.03% Small Cap Equity Fund .... 1.15% 1.22% -- -- 1.00% 2.27% Investment Grade Tax-Exempt Bond Fund ...... .74% .77% .43% 1.17% 1.00% 1.65% Florida Tax-Exempt Bond Fund ...... .65% .67% .18% .87% 1.00% 1.37% Investment Grade Bond Fund ........... .74% .77% .43% 1.17% 1.00% 1.66% Limited-Term Federal Mortgage Securities Fund ........... .65% .67% .23% .92% 1.00% 1.27% International Equity Fund .... 1.25% 1.48% .33% 1.83% 1.00% 2.53% Emerging Markets Equity Fund .... 1.30% 1.57% -- -- -- -- SUNTRUST BANK, ATLANTA: Georgia Tax-Exempt Bond Fund ...... .65% .67% .18% .87% 1.00% 1.37%
- ----------------- *Trusco and STI Capital Management, N.A. serve as joint advisors to the International Equity Index Fund. The Investment Advisors, the Administrator and the Distributor have voluntarily agreed to waive all or a portion of their fees (and to reimburse Funds' expenses) in order to limit operating expenses to an amount as outlined in the table above. Fee waivers and expense reimbursements are voluntary and may be terminated at any time. SunTrust Bank, Atlanta, formerly Trust Company Bank, acts as custodian for all the Funds except the Emerging Markets Equity, the International Equity and the International Equity Index Funds who utilize the Bank of New York as custodian. Fees of the Custodians are paid on the basis of the net assets of the Funds. The Custodians play no role in determining the investment policies of the Trust or which securities are to be purchased or sold in the Funds. 6. Investment Transactions: The cost of purchases and the proceeds from sales of securities, excluding short-term investments and U.S. Government Securities, for the period ended May 31, 1998, were as follows:
PURCHASES SALES (000) (000) ---------- ---------- Value Income Stock Fund ......................... $1,823,064 $1,833,225 Mid-Cap Equity Fund ............................. 462,331 452,146 Small Cap Equity Fund ........................... 395,884 165,654 Capital Growth Fund ............................. 3,011,738 2,973,522 Balanced Fund ................................... 243,053 224,046 Emerging Markets Equity Fund .................... 32,742 28,074 International Equity Index Fund ................. 380 9,635 International Equity Fund ....................... 618,831 592,164 Sunbelt Equity Fund ............................. 315,836 349,887 Investment Grade Tax-Exempt Bond Fund ........... 622,469 612,020 Florida Tax-Exempt Bond Fund .................... 107,098 54,005 Georgia Tax-Exempt Bond Fund .................... 27,063 4,038 Investment Grade Bond Fund ...................... 400,821 403,885 Short-Term Bond Fund ............................ 71,095 49,153 Short-Term U.S. Treasury Securities Fund ........ -- -- Limited-Term Federal Mortgage Securities Fund ... -- -- U.S. Government Securities Fund ................. -- --
The cost of purchases and proceeds from sales of U.S. Government Securities were:
PURCHASES SALES (000) (000) ---------- -------- Value Income Stock Fund ......................... -- -- Mid-Cap Equity Fund ............................. -- -- Small Cap Equity Fund ........................... -- -- Capital Growth Fund ............................. -- -- Balanced Fund ................................... $ 56,022 $ 42,074 Sunbelt Equity .................................. -- -- Investment Grade Tax-Exempt Bond Fund ........... -- -- Florida Tax-Exempt Bond Fund .................... -- -- Georgia Tax-Exempt Bond Fund .................... -- -- Investment Grade Bond Fund ...................... 523,591 391,661 Short-Term Bond Fund ............................ 41,473 37,414 Short-Term U.S. Treasury Securities Fund ........ 36,733 13,221 Limited-Term Federal Mortgage Securities Fund ... 227,048 214,041 U.S. Government Securities Fund ................. 18,245 4,491
120 ================================================================================ At May 31, 1998, the total cost of securities and the net realized gains or losses on securities sold for Federal income tax purposes were not materially different from amounts reported for financial reporting purposes. The aggregate gross unrealized appreciation and depreciation for securities held by the Funds at May 31, 1998, were as follows:
VALUE INCOME MID-CAP SMALL CAP CAPITAL STOCK EQUITY EQUITY GROWTH FUND FUND FUND FUND (000) (000) (000) (000) ------------ ------ --------- ------- Aggregate gross unrealized appreciation .......... $250,063 $60,515 $47,134 $365,433 Aggregate gross unrealized depreciation .......... (51,128) (20,646) (23,445) (27,225) -------- ------- ------- -------- Net unrealized appreciation $198,935 $39,869 $23,689 $338,208 ======== ======= ======= ========
EMERGING INTERNATIONAL INTERNATIONAL SUNBELT BALANCED MARKETS EQUITY EQUITY EQUITY FUND EQUITY FUND INDEX FUND FUND FUND (000) (000) (000) (000) (000) -------- ----------- ------------ ------------- ------- Aggregate gross unrealized appreciation ...... $28,791 $ 3,787 $25,403 $134,163 $141,883 Aggregate gross unrealized depreciation ...... (2,291) (9,120) (7,035) (18,442) (14,007) ------- ------- ------- -------- -------- Net unrealized appreciation/ (depreciation) .... $26,500 $(5,333) $18,368 $115,721 $127,876 ======= ======= ======= ======== ========
INVESTMENT GRADE TAX-EXEMPT FLORIDA BOND TAX-EXEMPT FUND BOND FUND (000) (000) ---------- ---------- Aggregate gross unrealized appreciation ... $2,731 $3,227 Aggregate gross unrealized depreciation ... (33) (93) ------ ------ Net unrealized appreciation ............... $2,698 $3,134 ====== ====== INVESTMENT GEORGIA GRADE SHORT- TAX-EXEMPT BOND TERM BOND FUND FUND FUND (000) (000) (000) ---------- ---------- --------- Aggregate gross unrealized appreciation .. $2,313 $24,778 $934 Aggregate gross unrealized depreciation .. (49) (468) (72) ------ ------- ---- Net unrealized appreciation .............. $2,264 $24,310 $862 ====== ======= ==== SHORT- LIMITED- TERM TERM U.S. FEDERAL U.S. TREASURY MORTGAGE GOVERNMENT SECURITIES SECURITIES SECURITIES FUND FUND FUND (000) (000) (000) ---------- ---------- ---------- Aggregate gross unrealized appreciation $182 $909 $995 Aggregate gross unrealized depreciation (1) (23) (2) ---- ---- ---- Net unrealized appreciation $181 $886 $993 ==== ==== ====
Subsequent to October 31, 1997, the Funds recognized net capital losses for tax purposes that have been deferred to 1998 and can be used to offset future capital gains at May 31, 1998. The Funds also had capital loss carryforwards at May 31, 1998 as follows:
CAPITAL LOSS POST CARRYOVER EXPIRES EXPIRES EXPIRES 10/31 5/31/98 2003 2004 2005 DEFERRED FUND (000) (000) (000) (000) LOSS ------------ ------- ------- ------- -------- Emerging Markets EquityFund $ -- $ -- $-- $-- $1,283 Short-Term U.S. Treasury Securities Fund 211 182 29 -- --
For tax purposes, the losses in the Funds can be carried forward for a maximum of eight years to offset any net realized capital gains. 7. Concentration of Credit Risk: The Investment Grade Bond Fund, the Short-Term Bond Fund and the Balanced Fund invest primarily in investment grade obligations rated at least BBB or better by S&P or Baa or better by Moody's or, if not rated, are determined by the Advisor to be of comparable quality. The Investment Grade Tax-Exempt Fund invests primarily in investment grade municipal securities. Municipal securities must be rated BBB or better by S&P or Baa or better by Moody's in the case of bonds; SP-1, SP-2 or MIG-1, MIG-2 in the case of notes; A-1, A-2 or P-1, P-2 in the case of commercial 121 NOTES TO FINANCIAL STATEMENTS (concluded) ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 paper; and VMIG-1, VMIG-2 in the case of variable rate demand obligations. The Short-Term U.S. Treasury Securities Fund invests exclusively in obligations issued by the U.S. Treasury with a maximum remaining maturity of 3 years or less. The Florida Tax-Exempt Bond Fund and the Georgia Tax-Exempt Bond Fund, invest primarily in municipal bonds concentrated in each of their respective states. Municipal securities must be rated BBB or better by S&P or Baa or better by Moody's in the case of bonds; A-1, A-2 or P-1, P-2 in the case of tax-exempt commercial paper; and VMIG-1, VMIG-2 in the case of variable rate demand obligations. The U.S. Government Securities Fund invests primarily in obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities, including mortgage backed securities. The Limited-Term Federal Mortgage Securities Fund invests in mortgage related securities issued or guaranteed by U.S. Government agencies. Up to 35% of the U.S. Government Securities Fund and the Limited-Term Federal Mortgage Securities Fund may be invested in corporate, or government bonds that carry a rating of BBB or better by S&P or Baa or better by Moody's. The ability of the issuers of the securities held by the Funds to meet their obligations may be affected by economic developments in a specific industry, state or region, or by changing business conditions. 122 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 PRIME QUALITY MONEY MARKET FUND
- ------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------ COMMERCIAL PAPER (23.2%) FINANCE (6.1%) Bank of New York 5.540%, 07/07/98 $20,645 $ 20,531 First Chicago 5.460%, 06/01/98 20,000 20,000 General Electric Capital 5.500%, 09/11/98 8,125 7,998 GMAC 5.500%, 06/12/98 20,000 19,966 KFW International 5.600%, 06/15/98 5,000 4,989 5.580%, 06/19/98 6,250 6,233 Prudential Funding 5.500%, 06/05/98 30,000 29,982 Transamerica 5.530%, 07/14/98 17,500 17,384 UBS Financial 5.700%, 06/01/98 12,495 12,495 ---------- 139,578 ---------- INDUSTRIAL (15.1%) Allied Signal 5.630%, 06/09/98 21,200 21,173 British Petroleum America 5.650%, 06/01/98 50,000 50,000 Dominion Semiconductor 5.560%, 07/20/98 35,000 34,735 5.570%, 07/23/98 19,000 18,847 5.580%, 07/23/98 20,000 19,839 Eaton 5.500%, 06/17/98 14,000 13,966 5.480%, 07/31/98 25,000 24,772 General Re 5.510%, 06/25/98 40,000 39,853 J.C. Penney 5.500%, 06/25/98 60,000 59,780 RTZ America 5.500%, 06/12/98 15,000 14,975 5.500%, 06/18/98 15,000 14,961 COMMERCIAL PAPER--CONTINUED U.S. Borax 5.500%, 06/12/98 $16,000 $ 15,973 5.500%, 06/16/98 10,000 9,977 5.500%, 06/22/98 5,000 4,984 5.500%, 07/06/98 2,500 2,487 ---------- 346,322 ---------- UTILITIES (2.0%) GTE Funding 5.680%, 06/01/98 29,220 29,220 5.550%, 06/18/98 16,000 15,958 ---------- 45,178 ---------- Total Commercial Paper (Cost $531,078) 531,078 ---------- CORPORATE OBLIGATIONS (12.7%) FINANCE (10.7%) Associates Corporation of North America (C) 5.730%, 01/04/99 20,000 19,994 5.640%, 04/23/99 20,000 19,984 Bankers Trust, New York (A) (C) 5.602%, 02/10/99 25,000 24,997 5.679%, 02/19/99 25,000 24,998 Caterpillar Financial Service, MTN 6.960%, 06/01/98 5,000 5,000 6.040%, 03/01/99 3,300 3,306 Caterpillar Financial Service, MTN (C) 5.755%, 05/09/99 45,000 45,000 Ford Motor Credit, MTN (C) 5.660%, 11/09/98 13,800 13,787 General Electric Capital (C) 5.596%, 11/27/98 50,000 50,000 Household Finance 6.180%, 06/30/98 5,000 5,002 IBM Credit (C) 6.099%, 07/30/98 5,000 5,003
3 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 PRIME QUALITY MONEY MARKET FUND--CONTINUED
- ------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------ CORPORATE OBLIGATIONS--CONTINUED International Lease Finance, MTN 8.250%, 10/19/98 $1,500 $ 1,513 6.570%, 11/16/98 5,000 5,018 John Deere Capital, MTN (C) 5.678%, 09/14/98 5,000 5,002 John Hancock Capital, MTN 6.260%, 08/13/98 2,000 2,001 Morgan Stanley Group, MTN 6.125%, 01/05/99 1,000 1,002 Morgan Stanley Group, MTN (C) 5.872%, 08/22/98 7,850 7,854 5.758%, 12/28/98 1,500 1,501 Paccar Financial, MTN 5.330%, 11/02/98 1,000 998 Toyota Motor Credit, MTN 6.375%, 08/05/98 3,759 3,760 ---------- 245,720 ---------- INDUSTRIAL (0.5%) Pet 5.750%, 07/01/98 1,800 1,800 Philip Morris 8.625%, 03/01/99 3,000 3,060 7.750%, 05/01/99 2,000 2,031 Texaco Capital, MTN 8.030%, 10/15/98 1,900 1,917 Walt Disney 15.000%, 12/14/98 2,000 2,095 ---------- 10,903 ---------- UTILITIES (1.5%) Bell Atlantic, MTN 5.300%, 09/01/98 3,200 3,195 Pacific Gas & Electric 5.375%, 08/01/98 5,290 5,285 Virginia Electric & Power 9.375%, 06/01/98 24,950 24,950 ---------- 33,430 ---------- Total Corporate Obligations (Cost $290,053) $ 290,053 ---------- BANK NOTES (16.1%) American Express Centurion (C) 5.606%, 03/24/99 $45,000 45,000 Bank One, Dayton (C) 5.780%, 08/21/98 8,000 8,001 Comerica Bank (C) 5.695%, 10/21/98 50,000 49,992 CoreStates Bank (C) 5.602%, 07/30/98 10,000 10,000 Credit Suisse First Boston, New York (C) 5.725%, 10/27/98 50,000 50,000 FCC National Bank (C) 5.703%, 04/09/99 50,000 49,983 First National Bank, Chicago (C) 5.722%, 04/19/99 62,000 61,973 PNC Bank N.A. (C) 5.660%, 07/01/98 20,000 19,998 Northern Trust (C) 5.715%, 04/09/99 70,000 69,977 Wachovia Bank N.A. 5.810%, 10/08/98 1,000 1,000 5.600%, 03/08/99 3,500 3,498 ---------- Total Bank Notes (Cost $369,422) 369,422 ---------- U.S. GOVERNMENT AGENCY OBLIGATIONS (4.6%) Federal Farm Credit (C) 5.443%, 03/02/99 40,000 39,985 Federal Home Loan Bank 5.745%, 11/12/98 10,000 10,000 FNMA (C) (F) 0.000%, 02/18/99 6,020 5,785 SLMA, Callable 07/06/98 @ 100 (C) 5.365%, 02/08/99 5,000 4,995 SLMA (C) 5.595%, 04/01/99 45,000 44,986 ----------
4 ================================================================================
- ------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------ Total U.S. Government Agency Obligations (Cost $105,751) $ 105,751 ---------- CERTIFICATES OF DEPOSIT (25.2%) Bank America 5.625%, 06/18/98 $60,000 60,001 Bank America, Canada 5.570%, 07/28/98 10,000 10,000 Bankers Trust 5.610%, 06/22/98 20,000 20,000 Barclays Bank 5.800%, 04/29/99 50,000 49,974 Bayerische Landesbank (C) 5.666%, 04/21/99 62,000 61,972 Commerzbank (C) 5.720%, 04/14/99 25,000 24,990 5.725%, 04/14/99 40,000 39,986 Credit Suisse First Boston, New York (C) 5.795%, 04/14/99 25,000 25,000 Deutsche Bank (C) 5.715%, 04/14/99 50,000 49,979 Deutsche Bank AG, New York 5.640%, 03/23/99 18,000 17,986 National Westminster Bank, New York 5.820%, 05/06/99 59,000 58,969 Rabobank 5.750%, 04/27/99 50,000 49,978 Societe Generale, New York 5.580%, 02/10/99 25,000 24,997 5.800%, 04/01/99 35,000 34,990 Swiss Bank, New York 5.650%, 03/24/99 20,000 19,986 5.810%, 04/29/99 30,000 29,984 ---------- Total Certificates of Deposit (Cost $578,792) 578,792 ---------- ASSET-BACKED SECURITIES (6.0%) Americredit Auto Receivable Trust, Ser 1997-D, Cl A1 5.800%, 11/05/98 $ 7,718 $ 7,718 Americredit Auto Receivable Trust, Ser 1998-B, Cl A1 5.629%, 06/12/99 29,500 29,500 Arcadia Auto Receivable Trust, Ser 1997-D, Cl A1 5.888%, 01/15/99 2,834 2,834 Arcadia Auto Receivable Trust, Ser 1998-A, Cl A1 5.628%, 03/15/99 19,643 19,643 Chase Manhattan Auto Owner Trust, Ser 1999-B, Cl A1 5.578%, 05/10/99 23,131 23,131 Key Auto Finance Trust, Ser 1997-2, Cl A1 5.835%, 01/05/99 12,644 12,644 TMS Auto Grantor Trust, Ser 1997-4, Cl A1 5.909%, 01/08/99 7,308 7,310 WFS Financial Owner Trust, Ser 1997-C, Cl A1 5.710%, 09/20/98 4,264 4,264 WFS Financial Owner Trust, Ser 1997-D, Cl A1 5.910%, 12/20/98 30,793 30,793 ---------- Total Asset-Backed Securities (Cost $137,837) 137,837 ---------- REPURCHASE AGREEMENTS (12.1%) Barclays 5.58%, dated 05/29/98, matures 06/01/98, repurchase price $108,814,139 (collateralized by FHLMC and FNMA obligations: total market value $110,938,837) (E) 108,764 108,764
5 STATEMENT OF NET ASSETS/SCHEDULE OF INVESTMENTS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 PRIME QUALITY MONEY MARKET FUND--CONCLUDED
- ------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------ REPURCHASE AGREEMENTS--CONTINUED Deutsche Bank 5.58%, dated 05/29/98, matures 06/01/98, repurchase price $50,707,894 (collateralized by FNMA obligations: total market value $51,698,292) (E) $50,684 $ 50,684 Greenwich 5.58%, dated 05/29/98, matures 06/01/98, repurchase price $10,313,338 (collateralized by FHLMC and FNMA obligations: total market value $10,514,868) (E) 10,309 10,309 Salomon Brothers 5.58%, dated 05/29/98, matures 06/01/98, repurchase price $89,995,939 (collateralized by FHLMC and FNMA obligations: total market value $91,754,760) (E) 89,954 89,954 Union Bank of Switzerland 5.58%, dated 05/29/98, matures 06/01/98, repurchase price $17,609,554 (collateralized by FNMA obligation: market value $17,956,938) (E) 17,601 17,601 ---------- Total Repurchase Agreements (Cost $277,312) 277,312 ---------- Total Investments (99.9%) (Cost $2,290,245) 2,290,245 ---------- OTHER ASSETS AND LIABILITIES, NET (0.1%) 1,805 ---------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 1,880,536,125 outstanding shares of beneficial interest $1,880,536 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 411,869,991 outstanding shares of beneficial interest 411,870 Overdistribution of net investment income (27) Accumulated net realized loss on investments (329) ---------- Total Net Assets 100.0% $2,292,050 ========== Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $1.00 ========== Net Asset Value, Offering Price and Redemption Price Per Share -- Investor Shares $1.00 ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 19. 6 ================================================================================ U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
- ------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------- U.S. TREASURY OBLIGATIONS (14.2%) U.S. Treasury Notes 5.500%, 02/28/99 $15,000 $ 14,996 6.375%, 05/15/99 40,000 40,258 ---------- Total U.S. Treasury Obligations (Cost $55,254) 55,254 ---------- REPURCHASE AGREEMENTS (85.8%) Barclays 5.52%, dated 05/29/98, matures 06/01/98, repurchase price $20,823,948 (collateralized by U.S. Treasury Note: market value $21,231,348) (E) 20,814 20,814 Deutsche Bank 5.52%, dated 5/29/98, matures 06/01/98, repurchase price $20,200,660 (collateralized by U.S. Treasury Note and U.S. Treasury Bond: total market value $20,596,215) (E) 20,191 20,191 Greenwich 5.52%, dated 05/29/98, matures 06/01/98, repurchase price $20,582,977 (collateralized by U.S. Government STRIPS: market value 20,985,820) (E) 20,574 20,574 Merrill Lynch 5.52%, dated 05/29/98, matures 06/01/98, repurchase price $104,953,255 (collateralized by various GNMA obligations: total market value $107,007,565) (E) 104,905 104,905 Morgan Stanley 5.52%, dated 05/29/98, matures 06/01/98, repurchase price $105,346,846 (collateralized by various GNMA obligations: total market value $107,908,600) (E) $105,298 $105,298 Salomon Brothers 5.52%, dated 05/29/98, matures 06/01/98, repurchase price $20,534,527 (collateralized by U.S. Government STRIPS: market value $20,976,498) (E) 20,525 20,525 Swiss Bank 5.52%, dated 05/29/98, matures 06/01/98, repurchase price $20,290,758 (collateralized by U.S. Treasury Note and U.S. Treasury Bond: total market value $20,697,104) (E) 20,282 20,282 Union Bank of Switzerland 5.52%, dated 05/29/98, matures 06/01/98, repurchase price $20,541,270 (collateralized by U.S. Treasury Bills: total market value $20,943,876) (E) 20,532 20,532 ---------- Total Repurchase Agreements (Cost $333,121) 333,121 ---------- Total Investments (89.0% of Net Assets) (Cost $388,375) 388,375 ----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 19. 7 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 TAX-EXEMPT MONEY MARKET FUND
- ------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------ MUNICIPAL BONDS (99.7%) ALABAMA (1.7%) McIntosh, Industrial Development Board, Pollution Control, Ciba- Geigy Project, Ser A, RB, VRDN (B) (C) (D) 3.900%, 06/03/98 $3,500 $ 3,500 McIntosh, Industrial Development Board, Solid Waste Disposal, Ciba-Geigy Project, RB, VRDN (B) 3.800%, 06/03/98 5,400 5,400 Special Care Facilities, Montgomery Hospital, RB, VRDN (FGIC) (C) (D) 3.900%, 06/03/98 1,200 1,200 ---------- 10,100 ---------- ARIZONA (0.3%) Phoenix, Series 95-2, GO, VRDN (C) 3.950%, 06/01/98 1,400 1,400 ---------- ARKANSAS (0.2%) State, Development Financial Authority, Potlatch Projects, Ser A, RB, VRDN, AMT (B) (C) (D) 3.900%, 06/03/98 1,000 1,000 ---------- CALIFORNIA (1.3%) Contra Costa County, Multi-Family Mortgage, Delta Square Project, Ser A, RB, VRDN (B) (C) (D) 3.700%, 06/03/98 4,200 4,200 Higher Education Loan Authority, Student Loan Revenue, RB, VRDN (B) (C) (D) 4.000%, 07/01/98 2,000 2,000 Higher Education Loan Authority, Student Loan Revenue, Ser E-5, RB, VRDN, AMT (B) (C) (D) 3.950%, 06/01/98 1,200 1,200 ---------- 7,400 ---------- COLORADO (0.9%) North Glen, Industrial Development, Castle Garden Retirement Center, VRDN (B) (C) (D) 3.700%, 06/04/98 $1,200 $ 1,200 State, Ser A, RB, TRAN 4.500%, 06/26/98 4,000 4,002 ---------- 5,202 ---------- DELAWARE (2.4%) State, Economic Development Authority, Industrial Development, Delaware Clean Power Project, Ser A, RB, VRDN, AMT (B) (C) (D) 3.850%, 06/03/98 5,000 5,000 State, Economic Development Authority, Solid Waste-Sewer Facilities, Ciba Geigy Project, Ser A, VRDN (B) (C) 3.950%, 06/01/98 7,100 7,100 State, Educational Development Authority, VRDN (B) (C) (D) 4.075%, 06/04/98 1,875 1,875 ---------- 13,975 ---------- DISTRICT OF COLUMBIA (1.6%) District of Columbia, Ser B, TRAN (B) 4.500%, 09/30/98 7,000 7,014 District of Columbia, Ser C, TRAN (B) 5.000%, 09/30/98 2,200 2,208 ---------- 9,222 ---------- FLORIDA (2.4%) Citrus Park, Community Development, RB, VRDN (B) (C) (D) 3.900%, 06/03/98 1,500 1,500
8 ================================================================================
- ------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------ FLORIDA--CONTINUED City of Jacksonville, Florida Pollution Control, Ser 1992, TECP 3.750%, 08/12/98 $ 2,700 $ 2,700 Dade County, Water & Sewer System, Ser 1994, RB, VRDN (FGIC) (C) (D) 3.900%, 06/03/98 10,000 10,000 ---------- 14,200 ---------- GEORGIA (6.0%) Cobb-Marietta, Coliseum & Exhibit Hall Authority, VRDN (MBIA) (C) (D) 4.020%, 06/04/98 3,145 3,145 Fulton County, Industrial Development Authority, American Red Cross Project, RB, VRDN (B) (C) (D) 3.850%, 06/04/98 1,300 1,300 Gordon County, Development Authority, Sara Lee Corporation, VRDN (C) (D) 3.850%, 06/04/98 1,400 1,400 Henry County, Water & Sewer Authority, VRDN (AMBAC) (C) (D) 4.020%, 06/04/98 3,710 3,710 Lafayette, Industrial Development Authority, Blue-Bird Project, Ser 1991, VRDN (B) (C) (D) 3.850%, 06/04/98 1,000 1,000 Marietta, Housing Finance Authority, Franklin Walk Apartments Project, VRDN (B) (C) 3.825%, 06/04/98 1,600 1,600 GEORGIA--CONTINUED Monroe County, Industrial Development Authority, Forsyth Inns Project, VRDN (B) (C) (D) 3.900%, 06/03/98 $2,525 $ 2,525 Municipal Electric Authority, TECP (B) 3.750%, 07/09/98 4,500 4,500 Municipal Electric Authority, VRDN (MBIA) (C) 4.020%, 06/04/98 4,675 4,675 State, GO 6.750%, 09/01/98 2,000 2,016 State, Municipal Electric Authority, RB, VRDN (B) (C) (D) 3.850%, 06/03/98 4,000 4,000 State, Municipal Electric Authority, RB, VRDN (FGIC) (C) (D) 4.020%, 06/04/98 3,000 3,000 Summerville, Development Authority, Ser 1997, RB, VRDN, AMT (B) (C) 4.000%, 07/02/98 2,000 2,000 ---------- 34,871 ---------- HAWAII (0.7%) State, GO, VRDN (MBIA) (C) 4.020%, 06/03/98 4,260 4,260 ---------- IDAHO (0.5%) Nez Pierce County, Pollution Control, Potlatch Project, RB, VRDN (B) (C) (D) 3.800%, 06/03/98 2,000 2,000 3.800%, 06/04/98 1,000 1,000 ---------- 3,000 ----------
9 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 TAX-EXEMPT MONEY MARKET FUND--CONTINUED
- ------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------ ILLINOIS (11.1%) Bloomington, Airport Authority, GO, VRDN (B) (C) (D) 3.850%, 06/03/98 $ 1,400 $ 1,400 Chicago, O'Hare International Airport (AMBAC) (D) 3.800%, 06/01/98 8,890 8,890 Hoffman Estates, Economic Development Project (AMBAC) 4.500%, 11/15/98 2,145 2,150 Oak Forest, Mode-Homewood Pool, RB, VRDN (B) (C) (D) 3.800%, 06/03/98 10,000 10,000 Savanna, Industrial Development Authority, Metform Project, Ser A, RB, VRDN (B) (C) (D) 3.950%, 06/03/98 500 500 Savanna, Industrial Development Authority, Metform Project, Ser B, RB, VRDN (B) (C) (D) 3.950%, 06/03/98 1,400 1,400 State, Development Financial Authority, Chicago Symphony, RB, VRDN (B) (C) (D) 3.800%, 06/03/98 5,000 5,000 State, Development Financial Authority, Museum Contemporary Art Project, RB, VRDN (C) (D) 3.800%, 06/03/98 4,800 4,800 State, Development Financial Authority, Pollution Control, Illinois Power, Ser A, RB, VRDN (B) (C) 3.900%, 06/03/98 5,000 5,000 State, Development Financial Authority, Derby Project, RB, VRDN, AMT (B) (C) (D) 3.950%, 06/03/98 1,000 1,000 ILLINOIS--CONTINUED State, Educational Facilities Authority, Chicago Childrens Museum, RB, VRDN (B) (C) (D) 3.800%, 06/03/98 $1,600 $ 1,600 State, Educational Facilities Authority, Museum of Science and Industry, RB, VRDN (B) (C) 3.800%, 06/04/98 5,800 5,800 State, Health Facilities Authority, RB, VRDN (C) 4.020%, 06/04/98 3,000 3,000 State, Health Facilities Authority, Advocate Health Care, Ser B, RB, VRDN (C) (D) 4.050%, 06/03/98 2,900 2,900 State, Health Facilities Authority, Health Care Project-A,RB, VRDN (B) (C) (D) 3.850%, 08/17/98 3,800 3,800 State, Health Facilities Authority, Streeterville Corporation, RB, VRDN (B) (C) (D) 3.800%, 06/03/98 2,000 2,000 State, Health Facilities Authority, Streeterville Corporation, Ser A, RB, VRDN (B) (C) 3.800%, 06/03/98 1,500 1,500 State, Health Facilities Authority, University of Chicago Hospital Project, Ser C, RB, VRDN (MBIA) (C) (D) 3.850%, 06/03/98 4,000 4,000 ---------- 64,740 ----------
10 ================================================================================
- ------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------ INDIANA (3.9%) Allen County, Industrial Economic Development Authority, Mattel Power Wheels Project, RB, VRDN, AMT (C) (D) 4.150%, 06/03/98 $1,500 $ 1,500 Fort Wayne, Economic Development Authority, ND Tech Project, RB, VRDN, AMT (A) (B) (C) (D) 3.950%, 06/03/98 1,000 1,000 Indianapolis, Industrial Economic Development Authority, Allied Signal, RB, VRDN (A) (C) (D) 3.950%, 06/03/98 3,500 3,500 Indianapolis, Multi-Family Housing, RB, VRDN, AMT (B) (C) (D) 4.050%, 06/03/98 6,200 6,200 Michigan City, Industrial Economic Development, Performance Packaging, RB, VRDN, AMT (A) (B) (C) (D) 3.950%, 06/03/98 900 900 Princeton, Pollution Control, PSI Energy Project, RB, VRDN (B) (C) 3.900%, 06/01/98 2,800 2,800 Rockport County, Pollution Control, Aep Generating Company Project, Ser B, RB, VRDN (AMBAC) (C) (D) 4.000%, 06/01/98 700 700 State, Development Financial Authority, Culver Educational Facilities, RB, VRDN (B) (C) 3.800%, 06/03/98 2,000 2,000 State, Development Financial Authority, Dekko International Project, RB, VRDN (B) (C) (D) 4.000%, 06/04/98 610 610 INDIANA--CONTINUED State, Development Financial Authority, Educational Facility, Indiana Historical Society, RB, VRDN (B) (C) 3.800%, 06/03/98 $1,200 $ 1,200 State, Health Facility Financing Authority, Clarian Health Partners, Ser B, RB, VRDN (C) (D) 4.000%, 06/03/98 2,000 2,000 ---------- 22,410 ---------- IOWA (0.4%) West Des Moines, Commercial Development, Greyhound Lines Project, VRDN (B) (C) (D) 3.850%, 06/03/98 2,500 2,500 ---------- KENTUCKY (1.7%) Jefferson County, Industrial Building, Fisher-Klosterman Project, RB, VRDN, AMT (B) (C) (D) 4.000%, 06/04/98 2,335 2,335 Pendleton County, RB, VRDN (B) (C) (D) 3.950%, 07/01/98 3,400 3,400 State, Asset/Liability Common General Fund, Ser A, RB, TRAN 4.500%, 06/25/98 2,500 2,501 State, Economic Development, Hospital Facilities, RB, VRDN (B) (C) (D) 3.850%, 06/04/98 1,400 1,400 ---------- 9,636 ---------- LOUISIANA (2.2%) Plaqeumines, Port Facilities, International Marine Terminal Project, RB, VRDN (B) (C) (D) 3.750%, 09/15/98 1,000 1,000
11 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 TAX-EXEMPT MONEY MARKET FUND--CONTINUED
- ------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------ LOUISIANA--CONTINUED Saint James Parish, Pollution Control Revenue, TECP 3.900%, 06/16/98 $5,000 $ 5,000 State, Offshore Terminal Authority, Deepwater Port, First Stage A-Loop Project, Ser A, RB, VRDN (B) (C) (D) 3.800%, 06/03/98 2,000 2,000 State, Port Authority, Occidental Petroleum Project, VRDN (B) (C) (D) 3.850%, 06/03/98 4,500 4,500 ---------- 12,500 ---------- MARYLAND (2.4%) Baltimore County, Allied Signal Project, VRDN (B) (C) (D) 3.900%, 06/03/98 1,000 1,000 Baltimore County, Gas & Electric, TECP 3.300%, 06/04/98 4,000 4,000 3.800%, 06/04/98 100 100 State, Health & Higher Education Authority, Pooled Loan Program, Ser B, VRDN (B) (C) (D) 3.700%, 06/03/98 5,000 5,000 University of Maryland, Revolving Equipment Loan Program, Ser B, RB, VRDN (B) (C) 3.750%, 06/03/98 4,100 4,100 ---------- 14,200 ---------- MICHIGAN (4.2%) Delta County, Environmental Improvement Revenue, Escanaba Paper Project, RB, VRDN, AMT (B) (C) 4.000%, 06/01/98 2,500 2,500 MICHIGAN--CONTINUED Oakland County, Economic Development Authority, Moody Family Ltd. Project, RB, VRDN, AMT (A) (B) (C) 3.900%, 06/03/98 $1,000 $ 1,000 State, Ser 1985, TECP 3.750%, 08/11/98 7,100 7,100 State, Housing Development Authority, RB, VRDN, AMT (B) (C) (D) 3.900%, 06/03/98 1,000 1,000 State, Housing Development Authority, Harbortown, RB, VRDN (B) (C) (D) 3.825%, 06/04/98 3,000 3,000 State, Industrial Development Authority, RB, VRDN (A) (B) (C) (D) 3.600%, 06/02/98 3,000 3,000 State, Municipal Bond Authority, Ser B 4.500%, 07/02/98 4,000 4,002 State, Strategic Fund Pollution Control, Dow Chemical, TECP 3.850%, 06/03/98 3,000 3,000 ---------- 24,602 ---------- MISSOURI (1.5%) Carthage, Industrial Development Authority, Schrieber Project, RB, VRDN, AMT (B) (C) (D) 3.950%, 06/03/98 3,100 3,100 Saint Charles County, Industrial Development Authority, Casalon Apartment Project, Ser 95, RB, VRDN (B) (C) (D) 3.850%, 06/04/98 3,100 3,100
12 ================================================================================
- ------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------ MISSOURI--CONTINUED State, Custody Receipt, Third Street Building Project, Ser A, VRDN (C) (D) 3.900%, 06/03/98 $ 2,000 $ 2,000 State, Environmental Improvement & Energy Resource Authority, Utilicorp United Project, RB, VRDN, AMT (B) (C) (D) 3.950%, 06/03/98 700 700 ---------- 8,900 ---------- NEBRASKA (0.3%) Investment Finance Authority, Single Family Mortgage, Ser B, RB, VRDN (FGIC) (C) (D) 3.700%, 07/15/98 2,000 2,000 ---------- NEVADA (2.1%) Clark County, Airport Improvement Authority, Ser A-1, RB, VRDN (B) (C) (D) 3.900%, 06/03/98 4,200 4,200 Clark County, School District, VRDN (C) 3.920%, 06/04/98 8,000 8,000 ---------- 12,200 ---------- NEW HAMPSHIRE (1.0%) State, Housing Finance Authority, Multi-Family Housing, Fairways Project, RB, VRDN, AMT (B) (C) (D) 4.000%, 06/03/98 5,000 5,000 State, Pollution Control Authority, RB, VRDN (B) (C) (D) 3.900%, 06/03/98 800 800 ---------- 5,800 ---------- NEW JERSEY (1.7%) State, TECP 3.900%, 06/15/98 $10,000 $ 10,000 ---------- NEW MEXICO (2.0%) Educational Assistance Foundation, Student Loan Program, RB, VRDN (AMBAC) (C) 4.040%, 06/04/98 $2,720 2,720 State, TRAN 4.500%, 06/30/98 3,000 3,002 State, Ser A, TRAN 4.500%, 06/30/98 3,000 3,002 State, Financial Authority, Ser B, RB 3.400%, 01/01/99 2,840 2,840 ---------- 11,564 ---------- NEW YORK (6.2%) Long Island, Power Authority, Ser 3, TECP (B) 3.750%, 08/19/98 2,000 2,000 Long Island, Power Authority, Ser 4, TECP (B) 3.750%, 08/19/98 3,000 3,000 Nassau County, Ser B, TRAN 4.250%, 08/31/98 5,000 5,007 Nassau County, Ser C, TRAN 4.250%, 12/22/98 4,500 4,513 New York, Ser A, TRAN 4.500%, 06/30/98 4,000 4,003 Southeast Industrial Development, Unilock Project, RB, VRDN, AMT (B) (C) (D) 3.950%, 06/03/98 6,200 6,200 State, Urban Development Corporation, Senior Lien, VRDN (C) 3.922%, 06/04/98 11,600 11,600 ---------- 36,323 ----------
13 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 TAX-EXEMPT MONEY MARKET FUND--CONTINUED
- ------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------ NORTH CAROLINA (1.5%) Mecklenburg County, Industrial Facilities & Pollution Control, Sterigenics International Project, RB, VRDN, AMT (A) (B) (C) (D) 3.950%, 06/03/98 $2,000 $ 2,000 State, Eastern Municipal Power Authority, TECP (B) 3.850%, 06/11/98 3,950 3,950 State, Educational Facilities, Guilford College, VRDN (B) (C) (D) 3.900%, 06/03/98 2,200 2,200 State, Housing Finance Agency, Ser F, RB, VRDN (B) (C) (D) 3.450%, 09/01/98 485 485 ---------- 8,635 ---------- NORTH DAKOTA (0.3%) Mercer County, Solid Waste Disposal Authority, United Power Project, RB, VRDN (B) (C) (D) 3.800%, 06/01/98 2,000 2,000 ---------- OHIO (6.8%) Cincinnati, Student Loan Funding, Ser A-1, VRDN 3.950%, 06/03/98 5,000 5,000 Lorraine County, Catholic Healthcare Partners, TECP 3.400%, 06/10/98 10,000 10,000 State, Air Quality Development Authority, JMG Limited Partnership, Ser A, RB, VRDN, AMT (B) (C) (D) 4.000%, 06/03/98 3,000 3,000 State, Higher Education Authority, Lake Erie Project, VRDN (B) (C) (D) 3.900%, 06/04/98 4,945 4,945 OHIO--CONTINUED State, Pollution Control Authority, Duquesne Project, RB, VRDN, AMT (B) (C) (D) 4.000%, 06/03/98 $ 3,000 $ 3,000 State, Solid Waste Disposal, USG Corporation Project, RB, VRDN (B) (C) (D) 3.700%, 06/03/98 13,700 13,700 ---------- 39,645 ---------- OKLAHOMA (0.3%) State, Water Resources, Broad Street Program, RB, VRDN (B) (C) (D) 3.550%, 09/01/98 1,400 1,400 ---------- OREGON (1.0%) Metropolitan Service District, Convention Center, Ser A, GO 5.500%, 07/01/98 1,000 1,001 Port of Saint Helens, Pollution Control, Portland General Electric, Ser A, RB, VRDN (B) (C) (D) 3.900%, 06/01/98 2,400 2,400 State, Housing and Community Service Department, Single Family Mortgage Program, Ser C, RB (D) 3.750%, 05/13/99 2,500 2,500 ---------- 5,901 ---------- PENNSYLVANIA (3.6%) Beaver County, Industrial Development Authority, Duquesne Light Company Project, Ser B, RB, VRDN (C) (D) 3.850%, 06/03/98 1,000 1,000
14 ================================================================================
- ------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------ PENNSYLVANIA--CONTINUED Lackawanna County, VRDN (AMBAC) (C) 4.020%, 06/04/98 $ 3,585 $ 3,585 Philadelphia, Ser A, TRAN 4.500%, 06/30/98 10,000 10,004 State, Ser A, VRDN (C) (D) 3.920%, 06/04/98 6,500 6,500 ---------- 21,089 ---------- SOUTH CAROLINA (0.9%) York County, Pollution Control, Ser N-3, RB, VRDN (C) (D) 3.500%, 09/15/98 5,000 4,999 ---------- TENNESSEE (1.9%) Covington, Industrial Development Board, Charms Project, RB, VRDN, AMT (B) (C) (D) 3.950%, 06/03/98 3,000 3,000 Hamilton County, Industrial Development Board, Lease Rent, RB (FGIC) 5.100%, 09/01/98 500 501 Hamilton County, Industrial Development Board, Tennessee Aquarium Project, RB, VRDN (B) (C) (D) 3.900%, 06/04/98 3,000 3,000 Memphis-Shelby County, Industrial Development Board, Ponderosa Fibres American Project, RB, VRDN, AMT (A) (B) (C) (D) 4.000%, 06/04/98 1,400 1,400 Nashville & Davidson County, Industrial Development Authority, Multi-Family Mortgage, Chimneytop II Project, RB, VRDN (B) (C) (D) 3.850%, 06/03/98 1,325 1,325 TENNESSEE--CONTINUED Nashville & Davidson County, Vanderbilt University, RB, VRDN (C) (D) 3.650%, 07/15/98 $ 2,000 $ 2,000 ---------- 11,226 ---------- TEXAS (14.1%) Brazos River Authority, AMT, TECP 3.850%, 06/03/98 3,950 3,950 Brazas River Authority, AMT, TECP (B) 3.650%, 06/05/98 6,000 6,000 Brazas River Authority, Pollution Control, AMT, TECP (B) 3.650%, 09/04/98 5,170 5,170 Brazos River Authority, Pollution Control, Ser 1988, AMT, TECP (B) 3.400%, 06/25/98 2,700 2,700 Brazos River Authority, Pollution Control, Utilities Electric, Ser C, RB, VRDN, AMT (AMBAC) (C) (D) 4.150%, 06/01/98 2,000 2,000 Brownsville, Utility Systems, Ser A, TECP 3.500%, 06/11/98 4,000 4,000 Georgetown, Higher Education Financing Authority, Southwestern University Project, Ser 1984, RB, VRDN (B) (C) (D) 3.900%, 06/03/98 2,000 2,000 Gulf Coast, Industrial Development Authority, Amoco Oil Project, RB, VRDN (C) (D) 3.800%, 06/01/98 1,000 1,000 Gulf Coast, Waste Disposal, Texwater Pollution Control, Amoco Oil - Amoco Chems, RB, VRDN (C) (D) 3.750%, 07/15/98 5,000 5,001
15 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 TAX-EXEMPT MONEY MARKET FUND--CONTINUED
- ------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------ TEXAS--CONTINUED Harris County, Health Facilities Authority, Memorial Hospital Project, Ser B, RB, VRDN (C) (D) 3.900%, 06/03/98 $ 1,500 $ 1,500 Harris County, Housing Finance Corporation, Ser 1985, RB, VRDN (C) (D) 4.075%, 06/04/98 700 700 Harris County, Industrial Development Authority, Lubrizol Project, RB, VRDN (C) (D) 3.850%, 06/03/98 1,600 1,600 Lone Star, Airport Improvement Authority, RB, VRDN (B) (C) (D) 4.000%, 06/01/98 1,700 1,700 Sabine, River Authority, Pollution Control, RB, VRDN (MBIA) (C) (D) 3.700%, 06/03/98 8,000 8,000 San Antonio, Gas Ser A, TECP 3.750%, 07/09/98 5,000 5,000 State, RB, VRDN (C) (D) 3.825%, 06/04/98 4,935 4,935 State, Ser A, TRAN 4.750%, 08/31/98 10,000 10,022 State, Higher Education Authority, RB, VRDN (MBIA) (C) (D) 4.000%, 06/03/98 5,000 5,000 State, Public Finance Authority, TECP 3.450%, 08/03/98 10,000 10,000 State, Veterans Housing Assistance, Ser A-1, GO, AMT 3.800%, 06/03/98 2,000 2,000 ---------- 82,278 ---------- UTAH (3.0%) Carbon County, Pollution Control Authority, Pacificorp Project, RB, VRDN (AMBAC) (C) (D) 4.000%, 06/01/98 $ 1,600 $ 1,600 Intermountain Power Agency, TECP (AMBAC) 3.800%, 06/04/98 5,000 5,000 Intermountain Power Agency, Power Supply, Ser B, TECP 3.650%, 06/09/98 5,000 5,000 Intermountain Power Agency, Power Supply, Ser E, RB, VRDN (B) (C) (D) 3.450%, 09/15/98 1,000 1,000 Intermountain Power Agency, Power Supply, Ser F, RB, VRDN (B) (C) (D) 3.800%, 06/15/98 4,000 4,000 State, Water Finance Agency, Pooled Loan, Ser A, RB (MBIA) 4.050%, 10/01/98 500 500 ---------- 17,100 ---------- VIRGINIA (3.0%) Alexandria, Redevelopment & Housing Authority, Multi-Family First Mortgage, Goodwin Project, Ser B, RB, VRDN (A) (B) (C) (D) 4.000%, 06/01/98 2,000 2,000 Chesterfield County, Industrial Development Authority, Allied Signal Project, RB, VRDN (C) 3.950%, 06/03/98 3,000 3,000 Commonwealth, Ser 1994, VRDN (C) (D) 4.020%, 06/04/98 4,000 4,000
16 ================================================================================
- ------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------ VIRGINIA--CONTINUED Front Royal & Warren County, Industrial Development Authority, Pen Tab Industries Project, RB, VRDN, AMT (A) (B) (C) (D) 3.900%, 06/04/98 $2,800 $ 2,800 State, Housing Development Authority, Ser C, RB, VRDN (B) (C) 3.800%, 06/10/98 5,800 5,800 ---------- 17,600 ---------- WASHINGTON (1.9%) Pierce County, Washington Economic Development, Weyerhaeuser Real Estate Project, RB, VRDN (B) (C) (D) 3.850%, 06/03/98 3,000 3,000 Port of Seattle, VRDN (C) (D) 3.900%, 06/03/98 1,400 1,400 State, Public Power Supply System, Nuclear Project #1, Ser 1A-3, RB, VRDN (B) (C) (D) 3.750%, 06/03/98 3,400 3,400 State, Student Loan Finance Association, VRDN, AMT (B) (C) (D) 3.750%, 06/04/98 3,000 3,000 ---------- 10,800 ---------- WEST VIRGINIA (0.7%) Marshall County, Pollution Control Authority, Allied Signal Project, RB, VRDN (A) (C) (D) 3.950%, 06/03/98 2,000 2,000 WEST VIRGINIA--CONTINUED Marshall County, Pollution Control Authority, PPG Industries Project, RB, VRDN (C) (D) 4.000%, 06/04/98 $2,000 $ 2,000 ---------- 4,000 ---------- WISCONSIN (0.9%) Carlton, Pollution Control, Power and Light Company, Project B, RB, VRDN (C) (D) 4.000%, 06/01/98 1,200 1,200 Janesville, School District, TRAN 4.100%, 09/21/98 2,250 2,251 Wisconsin, Health Facilities, Saint Lukes Medical Center, RB, VRDN (B) (C) (D) 3.800%, 06/03/98 1,900 1,900 ---------- 5,351 ---------- WYOMING (1.1%) Sweetwater, VRDN (C) 3.600%, 06/03/98 4,600 4,600 Uinta County, Pollution Control, Amoco Company, RB, VRDN (C) (D) 3.850%, 12/01/98 2,000 2,000 ---------- 6,600 ---------- Total Municipal Bonds (Cost $578,629) 580,629 ----------
17 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 TAX-EXEMPT MONEY MARKET FUND--CONCLUDED
- ------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------ CASH EQUIVALENTS (0.1%) AIM Management Institutional Tax-Free Portfolio (C) $453 $ 454 SEI Tax-Exempt Trust Institutional Tax-Free Portfolio (C) 123 124 -------- Total Cash Equivalents (Cost $578) 578 -------- Total Investments (99.8%) (Cost $581,207) 581,207 -------- OTHER ASSETS AND LIABILITIES, NET (0.2%) 1,354 -------- NET ASSETS: Fund shares of the Trust Class (unlimited authorization -- no par value) based on 448,021,834 outstanding shares of beneficial interest $448,022 Fund shares of the Investor Class (unlimited authorization -- no par value) based on 134,543,601 outstanding shares of beneficial interest 134,544 Overdistributed net investment income (1) Accumulated net realized loss on investments (4) -------- Total Net Assets (100.0%) $582,561 ======== Net Asset Value, Offering and Redemption Price Per Share -- Trust Shares $1.00 ======== Net Asset Value, Offering Price and Redemption Price Per Share -- Investor Shares $1.00 ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. FOR DESCRIPTIONS OF ABBREVIATIONS, PLEASE SEE PAGE 19. 18 ================================================================================ KEY TO ABBREVIATIONS USED IN THE STATEMENT OF NET ASSETS AMBAC Security insured by the American Municipal Bond Assurance Company AMT Alternative Minimum Tax Cl Class FGIC Security insured by the Financial Guaranty Insurance Corporation FHLMC Federal Home Loan Mortgage Corporation FNMA Federal National Mortgage Association GNMA Government National Mortgage Association GO General Obligation MBIA Security insured by the Municipal Bond Investors Assurance MTN Medium Term Note RB Revenue Bond Ser Series SLMA Student Loan Marketing Association STRIPS Separately Traded Registered Interest and Principal Security TECP Tax Exempt Commercial Paper TRAN Tax & Revenue Anticipation Note VRDN Variable Rate Demand Note (A) Private Placement Security (B) Securities are held in connection with a letter of credit issued by a major bank. (C) Variable rate security. The rate reported on the Statement of Net Assets is the rate in effect on May 31, 1998. (D) Put and demand features exist requiring the issuer to repurchase the instrument prior to maturity. (E) Tri-Party Repurchase Agreement (F) Zero Coupon Bond THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 19 STATEMENT OF ASSETS AND LIABILITIES (000) ================================================================================ STI CLASSIC FUNDS FOR THE PERIOD ENDED MAY 31, 1998
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND --------------- Assets: Investments at market value (Cost $388,375) ....................................................... $388,375 Accrued income .................................................................................... 2,030 Receivables for investment securities sold ........................................................ 49,510 Receivables for capital shares sold ............................................................... 2 Other assets ...................................................................................... 67 -------- Total Assets ...................................................................................... 439,984 -------- Liabilities: Accrued expenses .................................................................................. (378) Distribution payable .............................................................................. (1,799) Other liabilities ................................................................................. (1,564) -------- Total Liabilities ................................................................................. (3,741) -------- Net Assets: Fund Shares of the Trust Shares (unlimited authorization -- no par value) based on 377,407,674 outstanding shares of beneficial interest .................................. 377,408 Fund Shares of the Investor Shares (unlimited authorization -- no par value) based on 58,751,567 outstanding shares of beneficial interest ................................... 58,751 Accumulated net realized gain on investments ...................................................... 84 -------- Total Net Assets .................................................................................. $436,243 ======== Net Asset Value, Offering Price and Redemption Price Per Share -- Trust Shares ..................... $ 1.00 ======== Net Asset Value, Offering Price and Redemption Price Per Share -- Investor Shares .................. $ 1.00 ========
20 [This Page Left Intentionally Blank] STATEMENT OF OPERATIONS (000) ================================================================================ STI CLASSIC FUNDS FOR THE YEAR ENDED MAY 31, 1998
TAX-EXEMPT PRIME QUALITY U.S. GOVERNMENT MONEY MONEY MARKET SECURITIES MONEY MARKET FUND MARKET FUND FUND --------- --------- --------- 06/01/97- 06/01/97- 06/01/97- 05/31/98 05/31/98 05/31/98 --------- --------- --------- Interest Income .................................................. $106,833 $21,869 $20,595 -------- ------- ------- Expenses: Investment Advisory Fees ...................................... 12,211 2,564 3,101 Less: Investment Advisory Fees Waived ......................... (2,699) (580) (881) Administrator Fees ............................................ 1,356 283 408 Less: Administrator Fees Waived ............................... (571) (47) (10) Transfer Agent Fees -- Trust Shares ........................... 16 19 19 Transfer Agent Fees -- Investor Shares ........................ 28 5 19 Transfer Agent Out of Pocket Fees ............................. 209 47 63 Printing Expenses ............................................. 143 44 47 Custody Fees .................................................. 72 22 24 Professional Fees ............................................. 104 26 31 Trustee Fees .................................................. 29 10 9 Registration Fees ............................................. 322 51 66 Distribution Fees -- Investor Shares .......................... 716 97 190 Less: Distribution Fees Waived -- Investor Shares ............. (251) (27) (64) Insurance and Other Fees ...................................... 16 13 5 -------- ------- ------- Total Expenses ................................................ 11,701 2,527 3,027 -------- ------- ------- Net Investment Income ......................................... 95,132 19,342 17,568 -------- ------- ------- Net Realized Gain on Securities Sold ............................. 50 146 -- -------- ------- ------- Net Increase in Net Assets from Operations ....................... $ 95,182 $19,488 $17,568 ======== ======= ======= Amounts designated as "--" are either $0 or round to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 22 STATEMENT OF CHANGES IN NET ASSETS (000) ================================================================================ STI CLASSIC FUNDS FOR THE YEARS ENDED MAY 31, 1998
PRIME QUALITY U.S. GOVERNMENT SECURITIES TAX-EXEMPT MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND --------------------- -------------------------- --------------------- 06/01/97- 06/01/96- 06/01/97- 06/01/96- 06/01/97- 06/01/96- 05/31/98 05/31/97 05/31/98 05/31/97 05/31/98 05/31/97 ---------- --------- ------------ ------------ --------- --------- Operations: Net Investment Income .............................. $ 95,132 $ 73,281 $ 19,342 $ 17,800 $ 17,568 $ 12,958 Net Realized Gain (Loss) on Investments ............ 50 (121) 146 (51) -- 10 ---------- ---------- -------- --------- ---------- --------- Increase in Net Assets from Operations ......... 95,182 73,160 19,488 17,749 17,568 12,968 ---------- ---------- -------- --------- ---------- --------- Distributions to Shareholders: Net Investment Income: Trust Shares ..................................... (77,500) (60,224) (16,621) (14,924) (13,717) (10,054) Investor Shares .................................. (17,632) (13,057) (2,723) (2,876) (3,852) (2,904) Capital Gains: Trust Shares ..................................... -- -- -- -- -- -- Investor Shares .................................. -- -- -- -- -- -- ---------- ---------- -------- --------- ---------- --------- Total Distributions ............................ (95,132) (73,281) (19,344) (17,800) (17,569) (12,958) ---------- ---------- -------- --------- ---------- --------- Capital Transactions (1): Trust Shares: Proceeds from Shares Issued ...................... 3,915,486 2,786,281 776,773 705,839 1,039,352 980,872 Reinvestment of Cash Distributions ............... 3,699 2,069 380 274 -- -- Cost of Shares Redeemed .......................... (3,125,552) (2,752,496) (744,136) (687,215) (924,334) (921,487) ---------- ---------- -------- --------- ---------- --------- Increase in Net Assets From Trust Share Transactions .............................. 793,633 35,854 33,017 18,898 115,018 59,385 ---------- ---------- -------- --------- ---------- --------- Investor Shares: Proceeds from Shares Issued ...................... 806,517 928,946 178,312 182,325 346,323 305,724 Reinvestment of Cash Distributions ............... 15,979 10,375 2,600 2,379 3,314 2,569 Cost of Shares Redeemed .......................... (694,228) (871,451) (185,358) (180,124) (317,112) (301,505) ---------- ---------- -------- --------- ---------- --------- Increase (Decrease) in Net Assets From Investor Share Transactions .............................. 128,268 67,870 (4,446) 4,580 32,525 6,788 ---------- ---------- -------- --------- ---------- --------- Increase in Net Assets From Share Transactions ... 921,901 103,724 28,571 23,478 147,543 66,173 ---------- ---------- -------- --------- ---------- --------- Total Increase in Net Assets ................... 921,951 103,603 28,715 23,427 147,542 66,183 ---------- ---------- -------- --------- ---------- --------- Net Assets: Beginning of Period ................................ 1,370,099 1,266,496 407,528 384,101 435,019 368,836 ---------- ---------- -------- --------- ---------- --------- End of Period ...................................... $2,292,050 $1,370,099 $436,243 $ 407,528 $ 582,561 $ 435,019 ========== ========== ======== ========= ========== ========= (1) Shares Issued and Redeemed: Trust Shares: Shares Issued .................................... 3,915,486 2,786,281 776,773 705,839 1,039,352 980,872 Shares Issued in Lieu of Cash Distributions ...... 3,699 2,069 380 274 -- -- Shares Redeemed .................................. (3,125,552) (2,752,496) (744,136) (687,215) (924,334) (921,487) ---------- ---------- -------- --------- ---------- --------- Net Trust Share Transactions ................... 793,633 35,854 33,017 18,898 115,018 59,385 ---------- ---------- -------- --------- ---------- --------- Investor Shares: Shares Issued .................................... 806,517 928,946 178,312 182,325 346,323 305,724 Shares Issued in Lieu of Cash Distributions ...... 15,979 10,375 2,600 2,379 3,314 2,569 Shares Redeemed .................................. (694,228) (871,451) (185,358) (180,124) (317,112) (301,505) ---------- ---------- -------- --------- ---------- --------- Net Investor Share Transactions ................ 128,268 67,870 (4,446) 4,580 32,525 6,788 ---------- ---------- -------- --------- ---------- --------- Amounts designated as "--" are either $0 or round to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 23 FINANCIAL HIGHLIGHTS ================================================================================ STI CLASSIC FUNDS FOR THE PERIODS ENDED MAY 31. FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
NET NET REALIZED NET ASSET VALUE INVESTMENT GAINS (LOSSES) DISTRIBUTIONS FROM DISTRIBUTIONS FROM BEGINNING OF PERIOD INCOME ON INVESTMENTS NET INVESTMENT INCOME REALIZED CAPITAL GAINS ------------------- ---------- -------------- --------------------- ---------------------- PRIME QUALITY MONEY MARKET FUND Trust Shares 1998 $1.00 $ 0.05 $ -- $(0.05) $ -- 1997 1.00 0.05 -- (0.05) -- 1996 1.00 0.05 -- (0.05) -- 1995 1.00 0.05 -- (0.05) -- 1994 1.00 0.03 -- (0.03) -- Investor Shares 1998 $1.00 $ 0.05 $ -- $(0.05) $ -- 1997 1.00 0.05 -- (0.05) -- 1996 1.00 0.05 -- (0.05) -- 1995 1.00 0.05 -- (0.05) -- 1994 1.00 0.03 -- (0.03) -- U.S. GOVERNMENT SECURITIES MONEY MARKET FUND Trust Shares 1998 $1.00 $ 0.05 $ -- $(0.05) $ -- 1997 1.00 0.05 -- (0.05) -- 1996 1.00 0.05 -- (0.05) -- 1995 1.00 0.05 -- (0.05) -- 1994 1.00 0.03 -- (0.03) -- Investor Shares 1998 $1.00 $ 0.05 $ -- $(0.05) $ -- 1997 1.00 0.05 -- (0.05) -- 1996 1.00 0.05 -- (0.05) -- 1995 1.00 0.04 -- (0.04) -- 1994 1.00 0.03 -- (0.03) -- TAX-EXEMPT MONEY MARKET FUND Trust Shares 1998 $1.00 $ 0.03 $ -- $(0.03) $ -- 1997 1.00 0.03 -- (0.03) -- 1996 1.00 0.03 -- (0.03) -- 1995 1.00 0.03 -- (0.03) -- 1994 1.00 0.02 -- (0.02) -- Investor Shares 1998 $1.00 $ 0.03 $ -- $(0.03) $ -- 1997 1.00 0.03 -- (0.03) -- 1996 1.00 0.03 -- (0.03) -- 1995 1.00 0.03 -- (0.03) -- 1994 1.00 0.02 -- (0.02) -- 24 RATIO OF RATIO OF EXPENSES TO NET ASSET NET ASSETS RATIO OF NET INVESTMENT AVERAGE NET ASSETS VALUE END TOTAL END OF EXPENSES TO INCOME TO (EXCLUDING WAIVERS OF PERIOD RETURN PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) --------- ------ ------------ ------------------ ------------------ ------------------ PRIME QUALITY MONEY MARKET FUND Trust Shares 1998 $1.00 5.22% $1,880,229 0.59% 5.10% 0.77% 1997 1.00 5.01% 1,086,555 0.58% 4.90% 0.76% 1996 1.00 5.25% 1,050,800 0.58% 5.11% 0.78% 1995 1.00 4.79% 799,189 0.58% 4.77% 0.79% 1994 1.00 2.88% 583,399 0.58% 2.86% 0.79% Investor Shares 1998 $1.00 5.04% $ 411,821 0.76% 4.93% 0.98% 1997 1.00 4.84% 283,544 0.75% 4.74% 0.97% 1996 1.00 5.08% 215,696 0.75% 4.94% 1.00% 1995 1.00 4.62% 157,616 0.75% 4.55% 1.01% 1994 1.00 2.71% 129,415 0.75% 2.67% 0.99% U.S. GOVERNMENT SECURITIES MONEY MARKET FUND Trust Shares 1998 $1.00 5.04% $ 377,490 0.62% 4.92% 0.78% 1997 1.00 4.83% 344,350 0.61% 4.73% 0.76% 1996 1.00 5.14% 325,493 0.61% 5.02% 0.78% 1995 1.00 4.67% 434,111 0.61% 4.64% 0.80% 1994 1.00 2.77% 309,228 0.61% 2.69% 0.77% Investor Shares 1998 $1.00 4.90% $ 58,753 0.76% 4.79% 0.96% 1997 1.00 4.69% 63,178 0.75% 4.59% 0.96% 1996 1.00 4.99% 58,608 0.75% 4.88% 0.99% 1995 1.00 4.51% 46,639 0.75% 4.51% 1.02% 1994 1.00 2.63% 32,395 0.75% 2.54% 0.97% TAX-EXEMPT MONEY MARKET FUND Trust Shares 1998 $1.00 3.21% $ 448,023 0.51% 3.14% 0.67% 1997 1.00 3.09% 333,006 0.50% 3.04% 0.66% 1996 1.00 3.28% 273,613 0.50% 3.23% 0.68% 1995 1.00 3.10% 215,413 0.45% 3.12% 0.70% 1994 1.00 2.08% 143,982 0.42% 2.05% 0.71% Investor Shares 1998 $1.00 3.09% $ 134,538 0.62% 3.04% 0.83% 1997 1.00 2.97% 102,013 0.62% 2.92% 0.83% 1996 1.00 3.16% 95,223 0.62% 3.10% 0.85% 1995 1.00 3.00% 87,647 0.55% 3.00% 0.87% 1994 1.00 1.96% 61,675 0.54% 1.93% 0.88% RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (EXCLUDING WAIVERS AND REIMBURSEMENTS) ------------------ PRIME QUALITY MONEY MARKET FUND Trust Shares 1998 4.92% 1997 4.72% 1996 4.91% 1995 4.56% 1994 2.65% Investor Shares 1998 4.71% 1997 4.52% 1996 4.69% 1995 4.29% 1994 2.43% U.S. GOVERNMENT SECURITIES MONEY MARKET FUND Trust Shares 1998 4.76% 1997 4.58% 1996 4.85% 1995 4.45% 1994 2.53% Investor Shares 1998 4.59% 1997 4.38% 1996 4.64% 1995 4.24% 1994 2.32% TAX-EXEMPT MONEY MARKET FUND Trust Shares 1998 2.98% 1997 2.88% 1996 3.05% 1995 2.87% 1994 1.76% Investor Shares 1998 2.83% 1997 2.71% 1996 2.87% 1995 2.68% 1994 1.59%
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 25 NOTES TO FINANCIAL STATEMENTS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 1. Organization: The STI Classic Funds (the "Trust") was organized as a Massachusetts Business Trust under a Declaration of Trust dated January 15, 1992. The Trust is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company with twenty-two portfolios: the Value Income Stock Fund, the Mid-Cap Equity Fund, the Small Cap Equity Fund, the Capital Growth Fund, the Balanced Fund, the Emerging Markets Equity Fund, the International Equity Index Fund, the International Equity Fund the Sunbelt Equity Fund, the Investment Grade Tax-Exempt Bond Fund, the Florida Tax-Exempt Bond Fund, the Georgia Tax-Exempt Bond Fund, the Investment Grade Bond Fund, the Short-Term Bond Fund, the Short-Term U.S. Treasury Securities Fund, the Limited-Term Federal Mortgage Securities Fund, and the U.S. Government Securities Fund, (collectively the "Non-Dollar Funds"), the Prime Quality Money Market Fund, the U.S. Government Securities Money Market Fund, the Tax-Exempt Money Market Fund, the Classic Institutional Cash Management Money Market Fund and the Classic Institutional U.S. Treasury Securities Money Market Fund, (collectively the "Money Market Funds"). The assets of each portfolio are segregated, and a shareholder's interest is limited to the Fund in which shares are held. Each Fund's prospectus provides a description of the Fund's investment objectives, policies and strategies. The financial statements of the Prime Quality Money Market Fund, the U.S. Government Securities Money Market Fund, and the Tax-Exempt Money Market Fund (collectively the "Funds") are included herein. The financial statements of the remaining Funds are presented separately. 2. Significant Accounting Policies: The following is a summary of significant accounting policies followed by the Trust: SECURITY VALUATION -- Investment securities held by the Funds are stated at amortized cost, which approximates market value. FEDERAL INCOME TAXES -- It is each Fund's intention to qualify as a regulated investment company for Federal income tax purposes and distribute all of its taxable income and net capital gains. Accordingly, no provisions for Federal income taxes are required. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are accounted for on the date the security is purchased or sold (trade date). Interest income is recognized on an accrual basis. Costs used in determining net realized gains and losses on the sales of investment securities are those of the specific securities sold adjusted for the accretion and amortization of purchase discounts and premiums during the respective holding period. Purchase discounts and premiums on securities held by the Funds are accreted and amortized ratably to maturity and are included in interest income. REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase agreements are held by the custodian bank until the respective agreements mature. Provisions of the repurchase agreements ensure that the market value of the collateral, including accrued interest thereon, is sufficient in the event of default of the counterparty. If the counterparty defaults and the value of the collateral declines or if the counterparty enters into an insolvency proceeding, realization of the collateral by the Funds may be delayed or limited. 26 ================================================================================ NET ASSET VALUE PER SHARE -- The net asset value per share of each Fund is calculated each business day, by dividing the total value of each Fund's assets, less liabilities, by the number of shares outstanding. OTHER -- Expenses that are directly related to a specific Fund are charged to that Fund. Class specific expenses are borne by that class. Other operating expenses of the Trust are pro-rated to the Funds on the basis of relative net assets. Fund expenses are pro-rated to the respective classes on the basis of relative net assets. Distributions from net investment income of each of the Funds are declared on each business day and paid to shareholders on a monthly basis. Any net realized capital gains on sales of securities are distributed to shareholders at least annually. RECLASSIFICATION OF COMPONENTS OF NET ASSETS -- The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from generally accepted accounting principles. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These book/tax differences may be temporary or permanent in nature. To the extent these differences are permanent, they are charged or credited to paid-in-capital or accumulated net realized gain, as appropriate, in the period that the differences arise. Accordingly, the following permanent difference, primarily attributable to the classification of short-term capital gains and ordinary income for tax purposes related to the other funds, has been reclassified to/from the following accounts:
UNDISTRIBUTED ACCUMULATED NET INVESTMENT REALIZED GAIN INCOME (000) (000) -------------- -------------- Prime Quality Money Market Fund $27 $(27)
These reclassifications have no effect on net assets or net asset values per share. USE OF ESTIMATES -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates. 3. Transactions with Affiliates: Certain officers of the Trust are also officers of the Administrator and/or SEI Investments Distribution Co. (the "Distributor"). Such officers are paid no fees by the Trust for serving as officers of the Trust. 4. Administration and Transfer Agency Servicing Agreements: The Trust and the Administrator are parties to an Administration Agreement dated May 29, 1995, as amended November 19, 1997, under which the Administrator provides administrative services for an annual fee (expressed as a percentage of the combined average daily net assets of the Trust and STI Classic Variable Annuity Trust) of: .12% up to $1 billion, .09% on the next $4 billion, .07% on the next $3 billion, .065% on the next $2 billion and .06% for over $10 billion. 27 NOTES TO FINANCIAL STATEMENTS (concluded) ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 The Trust and Federated Services Company are parties to a Transfer Agency servicing agreement dated May 14, 1994 under which Federated Services Company provides transfer agency services to the Trust. 5. Investment Advisory and Custodian Agreements: The Trust and Trusco Capital Management have entered into an advisory agreement dated July 15, 1993. Under terms of the respective agreements, the Funds are charged the following annual fees based upon average daily net assets:
MAXIMUM MAXIMUM TRUST INVESTOR INVESTOR ANNUAL SHARE SHARE SHARE ADVISORY MAXIMUM DISTRIBUTION MAXIMUM FEE EXPENSE FEE EXPENSE -------- ------- ------------ -------- Prime Quality Money Market Fund .65% .60% .20% .77% U.S. Government Securities Money Market Fund .65% .63% .17% .77% U.S. Tax-Exempt Money Market Fund .55% .62% .15% .74%
The Investment Advisor and the Administrator have voluntarily agreed to waive all or a portion of their fees (and to reimburse Funds' expenses) in order to limit operating expenses to an amount as outlined in the table above. Fee waivers and expense reimbursements are voluntary and may be terminated at any time. SunTrust Bank, Atlanta, formerly Trust Company Bank, acts as custodian for the Funds. Fees of the Custodian are paid on the basis of the net assets of the Funds. The Custodian plays no role in determining the investment policies of the Trust or which securities are to be purchased or sold in the Funds. 6. Investment Transactions: The Funds had capital loss carryforwards at May 31, 1998 as follows:
CAPITAL LOSS CARRYOVER EXPIRES EXPIRES EXPIRES 5/31/98 2003 2004 2005 FUND (000) (000) (000) (000) - ---- --------- ------- ------- ------- Prime Quality Money Market Fund $329 $125 $-- $204 Tax-Exempt Money Market Fund 4 -- 4 --
For tax purposes, the losses in the Funds can be carried forward for a maximum of eight years to offset any net realized capital gains. 7. Concentration of Credit Risk: The Prime Quality Money Market Fund invests primarily in high quality money market instruments rated in the highest short-term rating category by Standard & Poor's Ratings Group ("S&P") or Moody's Investors Services, Inc. (Moody's) or, if not rated, are determined by the Advisor to be of comparable quality. The U.S. Government Securities Money Market Fund invests exclusively in U.S. Treasury obligations, U.S. Government subsidiary corporation securities which are backed by the full faith and credit of the U.S. Government and repurchase agreements with approved dealers collateralized by U.S. Treasury securities and U.S. Government subsidiary corporation securities. The Tax-Exempt Money Market Fund invests in high quality, U.S. dollar denominated municipal securities rated in one of the two highest short-term rating categories or, if not rated, are determined by the Advisor to be of comparable quality. 28 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 To the Shareholders and Board of Trustees of STI Classic Funds: We have audited the accompanying statements of net assets of the Prime Quality Money Market and Tax-Exempt Money Market Funds, and the statement of assets and liabilities, including the schedule of investments, of the U.S. Government Securities Money Market Fund of STI Classic Funds (the "Trust") as of May 31, 1998, and the related statements of operations, changes in net assets, and financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 1998, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Prime Quality Money Market, U.S. Government Securities Money Market, and Tax-Exempt Money Market Funds of STI Classic Funds as of May 31, 1998, the results of their operations, changes in their net assets, and financial highlights for the periods presented, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Philadelphia, PA July 24, 1998 29 STI CLASSIC FUNDS INVESTMENT ADVISOR: TRUSCO CAPITAL MANAGEMENT, INC. This Statement of Additional Information is not a prospectus. It is intended to provide additional information regarding the activities and operations of the Trust and should be read in conjunction with the Trust's Classic Institutional Cash Management and Classic Institutional U.S. Treasury Securities Money Market Fund prospectus dated October 1, 1998. The prospectus may be obtained through the Distributor, SEI Investments Distribution Co., Oaks, Pennsylvania 19456. TABLE OF CONTENTS PAGE THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-2 DESCRIPTION OF PERMITTED INVESTMENTS . . . . . . . . . . . . . . . . .B-2 INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . .B-8 INVESTMENT ADVISOR . . . . . . . . . . . . . . . . . . . . . . . . . B-10 THE ADMINISTRATOR. . . . . . . . . . . . . . . . . . . . . . . . . . B-11 THE DISTRIBUTOR. . . . . . . . . . . . . . . . . . . . . . . . . . . B-12 TRUSTEES AND OFFICERS OF THE TRUST . . . . . . . . . . . . . . . . . B-12 PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . B-16 CALCULATION OF TOTAL RETURN. . . . . . . . . . . . . . . . . . . . . B-17 PURCHASE AND REDEMPTION OF SHARES. . . . . . . . . . . . . . . . . . B-18 DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . B-19 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-19 FUND TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . B-21 TRADING PRACTICES AND BROKERAGE. . . . . . . . . . . . . . . . . . . B-21 DESCRIPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . B-23 SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . B-24 LIMITATION OF TRUSTEES' LIABILITY. . . . . . . . . . . . . . . . . . B-24 YEAR 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-24 5% AND 25% SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . B-25 EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-25 October 1, 1998 THE TRUST STI Classic Funds (the "Trust") is a diversified, open-end management investment company established under Massachusetts law as a Massachusetts business trust under a Declaration of Trust dated January 15, 1992. The Declaration of Trust permits the Trust to offer separate series ("Funds") of units of beneficial interest ("shares") and different classes of shares of each Fund. This Statement of Additional Information relates to the Trust's Classic Institutional Cash Management Money Market Fund and Classic Institutional U.S. Treasury Securities Money Market Fund (collectively, the "Funds"), each of which currently offers one class of shares. DESCRIPTION OF PERMITTED INVESTMENTS FOREIGN SECURITIES The Institutional Cash Management Money Market Fund may invest in U.S. dollar denominated obligations or securities of foreign issuers. Possible investments include equity securities of foreign entities, obligations of foreign branches of U.S. banks and of foreign banks, including, without limitation, European Certificates of Deposit, European Time Deposits, European Bankers' Acceptances, Canadian Time Deposits and Yankee Certificates of Deposit, and investments in Canadian Commercial Paper, Europaper and foreign securities. These instruments may subject the Fund to investment risks that differ in some respects from those related to investments in obligations of U.S. domestic issuers. Such risks include future adverse political and economic developments, the possible imposition of withholding taxes on interest or other income, possible seizure, nationalization, or expropriation of foreign deposits, the possible establishment of exchange controls or taxation at the source, greater fluctuations in value due to changes in exchange rates, or the adoption of other foreign governmental restrictions which might adversely affect the payment of principal and interest on such obligations. Such investments may also entail higher custodial fees and sales commissions than domestic investments. Foreign issuers of securities or obligations are often subject to accounting treatment and engage in business practices different from those respecting domestic issuers of similar securities or obligations. Foreign branches of U.S. banks and foreign banks may be subject to less stringent reserve requirements than those applicable to domestic branches of U.S. banks. INVESTMENT COMPANY SHARES Investment companies typically incur fees that are separate from those fees incurred directly by the Funds. A Fund's purchase of such investment company securities results in the layering of expenses, such that Shareholders would indirectly bear a proportionate share of the operating expenses of such investment companies, including advisory fees. B-2 MUNICIPAL SECURITIES The Funds may invest in municipal securities. The two principal classifications of municipal securities are "general obligation" and "revenue" issues. General obligation issues are issues involving the credit of an issuer possessing taxing power and are payable from the issuer's general unrestricted revenues, although the characteristics and method of enforcement of general obligation issues may vary according to the law applicable to the particular issue. Revenue issues are payable only from the revenues derived from a particular facility or class of facilities or other specific revenue source. A Fund may also invest in "moral obligation" issues, which are normally issued by special purpose authorities. Moral obligation issues are not backed by the full faith and credit of the state and are generally backed by the agreement of the issuing authority to request appropriations from the state legislative body. Municipal securities include debt obligations issued by governmental entities to obtain funds for various public purposes, such as the construction of a wide range of public facilities, the refunding of outstanding obligations, the payment of general operating expenses, and the extension of loans to other public institutions and facilities. Certain private activity bonds that are issued by or on behalf of public authorities to finance various privately-owned or operated facilities are included within the term "Municipal Securities." Private activity bonds are industrial development bonds are generally revenue bonds, the credit and quality of which are directly related to the credit of the private user of the facilities. Municipal securities may also include general obligation notes, tax anticipation notes, bond anticipation notes, revenue anticipation notes, project notes, certificates of indebtedness, demand notes, tax-exempt commercial paper, construction loan notes and other forms of short-term, tax-exempt loans. Such instruments are issued with a short-term maturity in anticipation of the receipt of fax funds, the proceeds of bond placements or other revenues. Project notes are issued by a state or local housing agency and are sold by the Department of Housing and Urban Development. While the issuing agency has the primary obligation with respect to its project notes, they are also secured by the full faith and credit of the United States through agreements with the issuing authority which provide that, if required, the federal government will end the issuer an amount equal to the principal of and interest on the project notes. The quality of municipal securities, both within a particular classification and between classifications, will vary, and the yields on municipal securities depend upon a variety of factors, including general money market conditions, the financial condition of the issuer (or other entity whose financial resources are supporting the securities), general conditions of the municipal bond market, the size of a particular offering, the maturity of the obligation and the rating(s) of the issue. In this regard, it should be emphasized that the ratings of any NRSRO are general and are not absolute standards of quality. Municipal securities with the same maturity, interest rate and rating(s) may have different yields, while municipal securities of the same maturity and interest rate with different rating(s) may have the same yield. An issuer's obligations under its municipal securities are subject to the provisions of bankruptcy, insolvency, and other laws affecting the rights and remedies of creditors, such as the Federal Bankruptcy B-3 Code, and laws, if any, which may be enacted by Congress or state legislatures extending the time for payment of principal or interest, or both, or imposing other constraints upon the enforcement of such obligations or upon the ability of municipalities to levy taxes. The power or ability of an issuer to meet its obligations for the payment of interest on and principal of its municipal securities may be materially adversely affected by litigation or other conditions. MUNICIPAL NOTE RATINGS: Moody's highest rating for state and municipal and other short-term notes is MIG-1 and VMIG-1. Short-term municipal securities rated MIG-1 or VMIG-1 are of the best quality. They have strong protection from established cash flows of funds for their servicing or from established and broad-based access to the market for refinancing or both. Short-term municipal securities rated MIG-2 and VMIG-2 are of high quality. Margins of protection are ample although not so large as in the preceding group. An S&P note rating reflects the liquidity concerns and market access risks unique to notes. Notes due in 3 years or less will likely receive a long-term debt rating. The following criteria will be used in making that assessment. - Amortization schedule (the larger the final maturity relative to other maturities the more likely it will be treated as a note). - Source of payment (the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note). Note rate symbols are as follows: SP-1. Very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. SP-2. Satisfactory capacity to pay principal and interest. SUPRANATIONAL AGENCY OBLIGATIONS The Institutional Cash Management Money Market Fund may purchase obligations of supranational agencies. Currently the Fund intends to invest only in obligations issued or guaranteed by the Asian Development Bank, Inter-American Development Bank, International Bank for Reconstruction and Development (World Bank), African Development Bank, European Coal and Steel Community, European Economic Community, European Investment Bank and the Nordic Investment Bank. OTHER INVESTMENTS The Trust is not prohibited from investing in obligations of banks which are clients of SEI Investments Company ("SEI Investments"), the parent company of the Administrator and the Distributor. The purchase of shares of the Trust by such banks or by their customers will not be a consideration in B-4 determining which bank obligations the Trust will purchase. However, the Trust will not purchase obligations issued by the Advisor. REPURCHASE AGREEMENTS Each Fund may enter into repurchase agreements. Repurchase agreements are agreements by which a person (E.G., a Fund) obtains a security and simultaneously commits to return the security to the seller (a primary securities dealer as recognized by the Federal Reserve Bank of New York or a national member bank as defined in Section 3(d)(1) of the Federal Deposit Insurance Act, as amended) at an agreed-upon price (including principal and interest) on an agreed-upon date within a number of days (usually not more than seven) from the date of purchase. The resale price reflects the purchase price plus an agreed upon market rate of interest which is unrelated to the coupon rate or maturity of the underlying security. A repurchase agreement involves the obligation of the seller to pay the agreed upon price, which obligation is, in effect, secured by the value of the underlying security. Repurchase agreements are considered to be loans by a Fund for purposes of its investment limitations. The repurchase agreements entered into by a Fund will provide that the underlying security at all times shall have a value at least equal to 102% of the resale price stated in the agreement (the Advisor monitors compliance with this requirement). Under all repurchase agreements entered into by a Fund, the Custodian or its agent must take possession of the underlying collateral. However, if the seller defaults, a Fund could realize a loss on the sale of the underlying security to the extent that the proceeds of the sale including accrued interest are less than the resale price provided in the agreement including interest. In addition, even though the Bankruptcy Code provides protection for most repurchase agreements, if the seller should be involved in bankruptcy or insolvency proceedings, a Fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if a Fund is treated as an unsecured creditor and required to return the underlying security to the seller's estate. RESTRICTED AND ILLIQUID SECURITIES Restricted securities are securities that may not be sold to the public without registration under the Securities Act of 1933 (the "1933 Act") absent an exemption from registration. Permitted investments for the Funds include restricted securities. Each Fund may invest up to 10% of its net assets in illiquid securities. Restricted securities, including securities eligible for re-sale under 1933 Act Rule 144A, that are determined to be liquid are not subject to this limitation. This determination is to be made by the Fund's Advisor pursuant to guidelines adopted by the Board of Trustees. Under these guidelines, the Advisor will consider the frequency of trades and quotes for the security, the number of dealers in, and potential purchasers for, the securities, dealer undertakings to make a market in the security, and the nature of the security and of the marketplace trades. In purchasing such Restricted Securities, the Advisor intends to purchase securities that are exempt from registration under Rule 144A under the 1933 Act. B-5 SECURITIES LENDING The Funds may lend securities pursuant to agreements which require that the loans be continuously secured by collateral at all times equal to 100% of the market value of the loaned securities which consists of cash, securities of the U.S. Government or its agencies, or any combination of cash and such securities. Such loans will not be made if, as a result, the aggregate amount of all outstanding securities loans for a Fund exceed one-third of the value of the Fund's total assets taken at fair market value. A Fund will continue to receive interest on the securities lent while simultaneously earning interest on the investment of the cash collateral in U.S. Government securities. However, a Fund will normally pay lending fees to such broker-dealers and related expenses from the interest earned on invested collateral. There may be risks of delay in receiving additional collateral or risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the securities fail financially. However, loans are made only to borrowers deemed by the Advisor to be of good standing and when, in the judgment of the Advisor, the consideration which can be earned currently from such securities loans justifies the attendant risk. Any loan may be terminated by either party upon reasonable notice to the other party. The Funds may use the Distributor or a broker-dealer affiliate of the Advisor as a broker in these transactions. STANDBY COMMITMENTS AND PUTS The Institutional Cash Management Money Market Fund may purchase securities at a price which would result in a yield-to-maturity lower than that generally offered by the seller at the time of purchase when it can simultaneously acquire the right to sell the securities back to the seller, the issuer, or a third party (the "writer") at an agreed-upon price at any time during a stated period or on a certain date. Such a right is generally denoted as a "standby commitment" or a "put." The purpose of engaging in transactions involving puts is to maintain flexibility and liquidity to permit the Fund to meet redemptions and remain as fully invested as possible in municipal securities. The Fund reserves the right to engage in put transactions. The right to put the securities depends on the writer's ability to pay for the securities at the time the put is exercised. The Institutional Cash Management Money Market Fund would limit its put transactions to institutions which the Advisor believes present minimal credit risks, and the Advisor would use its best efforts to initially determine and continue to monitor the financial strength of the sellers of the options by evaluating their financial statements and such other information as is available in the marketplace. It may, however be difficult to monitor the financial strength of the writers because adequate current financial information may not be available. In the event that any writer is unable to honor a put for financial reasons, the Fund would be a general creditor (I.E., on a parity with all other unsecured creditors) of the writer. Furthermore, particular provisions of the contract between the Fund and the writer may excuse the writer from repurchasing the securities; for example, a change in the published rating of the underlying securities or any similar event that has an adverse effect on the issuer's credit or a provision in the contract that the put will not be exercised except in certain special cases, for example, to maintain portfolio liquidity. The Fund could, however, at any time sell the underlying portfolio security in the open market or wait until the portfolio security matures, at which time it should realize the full par value of the security. B-6 The securities purchased subject to a put may be sold to third persons at any time, even though the put is outstanding, but the put itself, unless it is an integral part of the security as originally issued, may not be marketable or otherwise assignable. Therefore, the put would have value only to the Fund. Sale of the securities to third parties or lapse of time with the put unexercised may terminate the right to put the securities. Prior to the expiration of any put option, the Fund could seek to negotiate terms for the extension of such an option. If such a renewal cannot be negotiated on terms satisfactory to the Fund, the Fund could, of course, sell the portfolio security. The maturity of the underlying security will generally be different from that of the put. There will be no limit to the percentage of portfolio securities that the Fund may purchase subject to a standby commitment or put, but the amount paid directly or indirectly for all standby commitments or puts which are not integral parts of the security as originally issued held in the Fund will not exceed 1/2 of 1% of the value of its total assets of such Fund calculated immediately after any such put is acquired. STRIPS Each Fund may invest in Separately Traded Interest and Principal Securities ("STRIPS"), which are component parts of U.S. Treasury Securities traded through the Federal Book-Entry System. The Advisor will only purchase STRIPS that it determines are liquid or, if illiquid, do not violate each Fund's investment policy concerning investments in illiquid securities. Consistent with Rule 2a-7 under the Investment Company Act of 1940, as amended, (the "1940 Act"), the Advisor will only purchase STRIPS for the Funds that have a remaining maturity of 397 days or less; therefore, the Funds currently may only purchase interest component parts of U.S. Treasury Securities. While there is no limitation on the percentage of a Fund's assets that may be comprised of STRIPS, the Advisor will monitor the level of such holdings to avoid the risk of impairing Shareholders' redemption rights and of deviations in the value of shares of the Funds. U.S. GOVERNMENT AGENCY SECURITIES Certain investments of the Institutional Cash Management Money Market Fund may include U.S. Government Agency Securities. Agencies of the United States Government which issue obligations consist of, among others, the Export Import Bank of the United States, Farmers Home Administration, Federal Farm Credit Bank, Federal Housing Administration, Government National Mortgage Association ("GNMA"), Maritime Administration, Small Business Administration, and The Tennessee Valley Authority. Obligations of instrumentalities of the United States Government include securities issued by, among others, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land Banks, Fannie Mae, and the United States Postal Service as well as government trust certificates. Some of these securities are supported by the full faith and credit of the United States Treasury, others are supported by the right of the issuer to borrow from the Treasury and still others are supported only by the credit of the instrumentality. Guarantees of principal by agencies or instrumentalities of the U.S. Government may be a guarantee of payment at the maturity of the obligation so that in the event of a default prior to maturity there might not be a market and thus no means of realizing the value of the obligation prior to maturity. B-7 VARIABLE RATE MASTER DEMAND NOTES The Institutional Cash Management Money Market Fund may invest in variable rate master demand notes which may or may not be backed by bank letters of credit. These notes permit the investment of fluctuating amounts at varying market rates of interest pursuant to direct arrangements between the Fund, as lender, and the borrower. Such notes provide that the interest rate on the amount outstanding varies on a daily, weekly or monthly basis depending upon a stated short-term interest rate index. Both the lender and the borrower have the right to reduce the amount of outstanding indebtedness at any time. There is no secondary market for the notes and it is not generally contemplated that such instruments will be traded. The quality of the note or the underlying credit must, in the opinion of the Advisor, be equivalent to the ratings applicable to permitted investments for the Fund. The Advisor will monitor on an ongoing basis the earning power, cash flow and liquidity ratios of the issuers of such instruments and will similarly monitor the ability of an issuer of a demand instrument to pay principal and interest on demand. INVESTMENT LIMITATIONS The following are fundamental policies of each Fund and cannot be changed with respect to a Fund without the consent of the holders of a majority of a Fund's outstanding shares. The term "a majority of the outstanding shares" of a Fund means the vote of the lesser of (i) 67% or more of the shares of such Fund present at a meeting, if the holders of more than 50% of the outstanding shares of such Fund are present or represented by proxy or (ii) more than 50% of the outstanding shares of such Fund. A Fund may not: 1. Acquire more than 10% of the voting securities of any one issuer. 2. Invest in companies for the purpose of exercising control. 3. Borrow money except for temporary or emergency purposes and then only in an amount not exceeding one-third of the value of total assets. Any borrowing will be done from a bank and, to the extent that such borrowing exceeds 5% of the value of the Fund's assets, asset coverage of at least 300% is required. In the event that such asset coverage shall at any time fall below 300%, the Fund shall, within three days thereafter or such longer period as the Securities and Exchange Commission may prescribe by rules and regulations, reduce the amount of its borrowings to such an extent that the asset coverage of such borrowings shall be at least 300%. This borrowing provision is included solely to facilitate the orderly sale of portfolio securities to accommodate heavy redemption requests if they should occur and is not for investment purposes. All borrowings in excess of 5% of the value of a Fund's total assets will be repaid before making additional investments and any interest paid on such borrowings will reduce income. B-8 4. Make loans, except that (a) a Fund may purchase or hold debt instruments in accordance with its investment objective and policies; (b) a Fund may enter into repurchase agreements, and (c) a Fund may engage in securities lending as described in the Prospectus and in this Statement of Additional Information. 5. Pledge, mortgage or hypothecate assets except to secure temporary borrowings permitted by (3) above in aggregate amounts not to exceed 10% of the Fund's total assets, taken at current value at the time of the incurrence of such loan, except as permitted with respect to securities lending. 6. Purchase or sell real estate, real estate limited partnership interests, commodities or commodities contracts and interests in a pool of securities that are secured by interests in real estate. However, subject to their permitted investment spectrum, any Fund may invest in companies which invest in real estate commodities or commodities contracts. 7. Make short sales of securities, maintain a short position or purchase securities on margin, except that the Trust may obtain short-term credits as necessary for the clearance of security transactions. 8. Act as an underwriter of securities of other issuers except as it may be deemed an underwriter in selling a security. 9. Purchase securities of other investment companies except for money market funds and CMOs and REMICs deemed to be investment companies and then only as permitted by the 1940 Act and the rules and regulations thereunder. Under these rules and regulations, a Fund is prohibited from acquiring the securities of other investment companies if, as a result of such acquisition, the Fund owns more than 3% of the total voting stock of the company; securities issued by any one investment company represent more than 5% of the total assets of a Fund; or securities (other than treasury stock) issued by all investment companies represent more than 10% of the total assets of the Fund. 10. Issue senior securities (as defined in the 1940 Act) except in connection with permitted borrowings as described above or as permitted by rule, regulation or order of the SEC. NON-FUNDAMENTAL POLICIES No Fund may purchase or hold illiquid securities, I.E., securities that cannot be disposed of for their approximate carrying value in seven days or less (which term includes repurchase agreements and time deposits maturing in more than seven days) if, in the aggregate, more than 10% of its net assets would be invested in illiquid securities. The foregoing percentages, except with respect to holding illiquid securities, will apply at the time of the purchase of a security and shall not be considered violated unless an excess occurs or exists immediately after and as a result of a purchase of such security. B-9 INVESTMENT ADVISOR The Trust and Trusco Capital Management, Inc. (the "Advisor") have entered into an advisory agreement (the "Advisory Agreement"). The Advisor is an indirect wholly-owned subsidiary of SunTrust Banks, Inc. ("SunTrust"). SunTrust is a southeastern regional bank holding company with assets of $ 76 billion as of June 30, 1998. The Advisory Agreement provides that the Advisor shall not be protected against any liability to the Trust or its Shareholders by reason of willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard of its obligations or duties thereunder. The Advisory Agreement provides that if, for any fiscal year, the ratio of expenses of a Fund (including amounts payable to the Advisor but excluding interest, taxes, brokerage, litigation, and other extraordinary expenses) exceeds limitations established by certain states, the Advisor and/or the Administrator will bear the amount of such excess. The Advisor will not be required to bear expenses of the Trust to an extent which would result in a Fund's inability to qualify as a regulated investment company under provisions of the Internal Revenue Code. The continuance of the Advisory Agreement, after the first two years, must be specifically approved at least annually (i) by the vote of the Trustees, and (ii) by the vote of a majority of the Trustees who are not parties to each Agreement or "interested persons" of any party thereto, cast in person at a meeting called for the purpose of voting on such approval. The Advisory Agreement will terminate automatically in the event of its assignment, and is terminable at any time without penalty by the Trustees of the Trust or, with respect to the Funds, by a majority of the outstanding shares of the Funds, on not less than 30 days' nor more than 60 days' written notice to the Advisor, or by the Advisor on 90 days' written notice to the Trust. For the fiscal years ended May 31, 1998 and 1997, the Funds paid the following advisory fees:
- -------------------------------------------------------------------------------- FEES PAID FEES WAIVED OR FUND REIMBURSED 1998 1997 1998 1997 - -------------------------------------------------------------------------------- Classic Institutional Cash $204,194 $0 $403,936 $100,270 Management Money Market Fund - -------------------------------------------------------------------------------- Classic Institutional U.S. Treasury Securities Money Market Fund $ 11,328 $0 $197,908 $ 18,255 - --------------------------------------------------------------------------------
BANKING LAWS Current interpretations of federal banking laws and regulations: B-10 - - prohibit SunTrust and the Advisor from sponsoring, organizing, controlling, or distributing the Funds' shares; but - - do not prohibit SunTrust or the Advisor generally from acting as an investment advisor, transfer agent, or custodian to the Funds or from purchasing Fund shares as agent for and upon the order of a customer. The Advisor believes that it may perform advisory and related services for the Trust without violating applicable banking laws or regulations. However, the legal requirements and interpretations about the permissible activities of banks and their affiliates may change in the future. These changes could prevent the Advisor from continuing to perform services for the Trust. If this happens, the Board of Trustees would consider selecting other qualified firms. Shareholders would approve any new investment advisory agreements would be subject to Shareholder approval. If current restrictions on bank activities with mutual funds were relaxed, the Advisor, or its affiliates, would consider performing additional services for the Trust. We cannot predict whether these changes will be enacted. We also cannot predict the terms that the Advisor, or its affiliates, might offer to provide additional services. THE ADMINISTRATOR The Trust and SEI Investment Mutual Funds Services (the "Administrator"), are parties to an administration agreement (the "Administration Agreement") dated May 29, 1992. The Administration Agreement provides that the Administrator shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the matters to which the Administration Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Administrator in the performance of its duties or from reckless disregard by it of its duties and obligations thereunder. The Administrator, a Delaware business trust, has its principal business offices at Oaks, Pennsylvania 19456. SEI Investments Management Corporation ("SIMC"), a wholly-owned subsidiary of SEI Investments Company ("SEI Investments"), is the owner of all beneficial interest in the Administrator. SEI and its subsidiaries and affiliates, including the Administrator, are leading providers of funds evaluation services, trust accounting systems, and brokerage and information services to financial institutions, institutional investors and money managers. The Administrator and its affiliates also serve as administrator or sub- administrator to the following other mutual funds: The Achievement Funds Trust, The Advisors' Inner Circle Fund, The Arbor Fund, ARK Funds, Armada Funds, Bishop Street Funds, Boston 1784 Funds-Registered Trademark-, CrestFunds, Inc., CUFUND, The Expedition Funds, First American Funds, Inc., First American Investment Funds, Inc., First American Strategy Funds, Inc., HighMark Funds, Monitor Funds, Morgan Grenfell Investment Trust, The Nevis Funds,Inc., Oak Associates Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds, B-11 SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Variable Trust, TIP Funds and TIP Institutional Funds. For the fiscal years ended May 31, 1998 and 1997, the Funds paid the following administration fees:
- ----------------------------------------------------------------------------- FEES PAID FEES WAIVED FUND 1998 1997 1998 1997 - ----------------------------------------------------------------------------- Classic Institutional Cash $186,749 $32,389 $ 32,097 $0 Management Money Market Fund - ----------------------------------------------------------------------------- Classic Institutional U.S. Treasury Securities Money Market $ 61,988 $ 6,047 $ 13,823 $0 Fund - -----------------------------------------------------------------------------
THE DISTRIBUTOR SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary of SEI Investments, and the Trust have entered into a distribution agreement (the "Distribution Agreement") dated May 29, 1992. The Distributor will receive no compensation for distribution of Shares. The Distribution Agreement is renewable annually and may be terminated by the Distributor, the Qualified Trustees (as defined in the Distribution Agreement), or by a majority vote of the outstanding securities of the Trust upon not more than 60 days' written notice by either party. B-12 TRUSTEES AND OFFICERS OF THE TRUST The Trustees supervise the management and affairs of the Trust. The Trustees have approved contracts with certain companies that provide the Trust with essential management services. The Trustees and Executive Officers of the Trust, their respective dates of birth, and their principal occupations for the last five years are set forth below. Each may have held other positions with the named companies during that period. The business address of each Trustee and each Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain officers of the Trust also serve as officers of some or all of the following: The Achievement Funds Trust, The Advisors' Inner Circle Fund, The Arbor Fund, ARK Funds, Armada Funds, Bishop Street Funds, Boston 1784 Funds-Registered Trademark-, CrestFunds, Inc., CUFUND, The Expedition Funds, First American Funds, Inc., First American Investment Funds, Inc., First American Strategy Funds, Inc., HighMark Funds, Monitor Funds, Morgan Grenfell Investment Trust, The Nevis Funds, Inc., Oak Associates Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Variable Trust, TIP Funds and TIP Institutional Funds, each of which is an open-end management investment company managed by SEI Investments Mutual Funds Services or its affiliates and, except for PBHG Advisor Funds, Inc., distributed by SEI Investments Distribution Co. DANIEL S. GOODRUM (7/11/26) - Trustee* - Chairman & CEO, SunBank/South Florida, N.A., 1985-1991; Chairman Audit Committee and Director, Holy Cross Hospital; Executive Committee Member and Director, Honda Classic Foundation; Director, Broward Community College Foundation. WILTON LOONEY (4/18/19) - Trustee* - President of Genuine Parts Company, 1961-1964; Chairman of the Board, 1964-1990; Honorary Chairman of the Board, 1990 to present. Director, Rollins, Inc.; Director, RPC Energy Services, Inc. CHAMPNEY A. MCNAIR (10/30/24) - Trustee* - Director and Chairman of Investment Committee and member of Executive Committee, Cotton States Life and Health Insurance Company; Director and Chairman of Investment Committee and member of Executive Committee, Cotton States Mutual Insurance Company; Chairman, Trust Company of Georgia Advisory Council. F. WENDELL GOOCH (12/3/32) - Trustee - Retired. President, Orange County Publishing Co., Inc., 1981 - 1997, Publisher of the Paoli News and the Paoli Republican and Editor of the Paoli Republican, 1981 - 1997, President, H & W Distribution, Inc., 1984 - 1997. Current Trustee on the Board of Trustees for the SEI Family of Funds and The Capitol Mutual Funds. Executive Vice President, Trust Department, Harris Trust and Savings Bank and Chairman of the Board of Directors of The Harris Trust Company of Arizona before January 1981. B-13 T. GORDY GERMANY (11/28/25) -Trustee - Retired President, Chairman, and CEO of Crawford & Company; held these positions, 1973-1987. Member of the Board of Directors, 1970-1990, joined company in 1948; spent entire career at Crawford, currently serves on Boards of Norrell Corporation and Mercy Health Services, the latter being the holding company of St. Joseph's Hospitals. DR. BERNARD F. SLIGER (9/30/24) - Trustee - Director, Stavros Center for Economic Education, Florida State University, 1991-present. President of Florida State University, 1976-91; previous four years EVP and Chief Academic Officer. During educational career, taught at Florida State, Michigan State, Louisiana State and Southern University. Spent 19 years as faculty member and administrator at Louisiana State University and served as Head of Economics Department, member and Chairman of the Graduate Council, Dean of Academic Affairs and Vice Chancellor. Member of Board of Directors of Federal Reserve Bank of Atlanta, 1983-1988. JESSE HALL (9/26/29) - Trustee* - Executive Vice President, SunTrust Banks, Inc., 1985-1994; Director of Crawford & Company since 1979; Member, Atlanta Estate Planning Council, 1988-1993. JONATHAN T. WALTON (3/28/30) - Trustee - Retired. Executive Vice President, NBD Bank, N.A. and NBD Bancorp, October 1956 to March 1995. Trustee, W.K. Kellogg Trust. WILLIAM H. CAMMACK (11/24/29) - Trustee* - Chairman & Director, SunTrust Equitable Securities Corporation, January 1998-present. Chairman and CEO, Equitable Asset Management, Inc., December 1993-present. Chairman and CEO, Equitable Trust Company, June 1991-present. Chairman, Equitable Securities Corporation, July 1972-January 1998. MARK NAGLE (10/20/59) - President and Chief Executive Officer - Vice President and Controller, Funds Accounting since 1996. Vice President of the Administrator and Distributor since 1996. Vice President of Fund Accounting - BISYS Fund Services 1995-1996. Senior Vice President - Fidelity Investments 1981-1995. TODD CIPPERMAN (2/14/66) - Vice President, Assistant Secretary - Vice President and Assistant Secretary of the Administrator and the Distributor since 1995. Associate, Dewey Ballantine (law firm), 1994-1995. Associate, Winston & Strawn (law firm), 1991-1994. LYDIA A. GAVALIS (6/5/64) - Vice President and Assistant Secretary - Vice President and Assistant Secretary of the Administrator and the Distributor since 1998. Assistant General Counsel and Director of Arbitration, Philadelphia Stock Exchange, 1989-1998. B-14 KATHY HEILIG (12/21/58) - Vice President and Assistant Secretary - Treasurer of SEI Investments Company since 1997. Assistant Controller of SEI Investments Company since 1995. Vice President of SEI Investments Company since 1991. Director of Taxes of SEI Investments Company, 1987-1991. Tax Manager - Arthur Anderson LLP prior to 1987. JOSEPH M. O'DONNELL (11/13/54) - Vice President and Assistant Secretary - Vice President and Assistant Secretary of the Administrator and the Distributor since 1998. Vice President and General Counsel, FPS Services, Inc., 1993-1997. Staff Counsel and Secretary, Provident Mutual Family of Funds, 1990-1993. SANDRA K. ORLOW (10/18/53) - Vice President, Assistant Secretary - Vice President and Assistant Secretary of the Administrator and Distributor since 1983. LYNDA J. STRIEGEL (10/30/48) - Vice President and Assistant Secretary - Vice President and Assistant Secretary of the Administrator and the Distributor since 1998. Senior Asset Management Counsel, Barnett Banks, Inc., 1997-1998. Partner, Groom and Nordberg, Chartered, 1996-1997. Associate General Counsel, Riggs Bank, N.A., 1991-1995. KEVIN P. ROBINS (4/15/61) - Vice President, Assistant Secretary - Senior Vice President & General Counsel of SEI Investments, the Administrator and the Distributor since 1994. Vice President of SEI, the Administrator and the Distributor, 1992-1994. Associate, Morgan, Lewis & Bockius LLP (law firm) prior to 1992. KATHRYN L. STANTON (11/19/58) - Vice President, Assistant Secretary - Vice President, Assistant Secretary of SEI Investments, the Administrator and Distributor since 1994. Associate, Morgan, Lewis & Bockius LLP (law firm), 1989-1994. CAROL ROONEY (5/8/64) - Controller, Chief Financial Officer - A Director of SEI Investments Mutual Funds Services since 1992. RICHARD W. GRANT (10/25/45) - Secretary - 2000 One Logan Square, Philadelphia, Pennsylvania 19103. B-15 Partner, Morgan, Lewis & Bockius LLP (law firm), counsel to the Trust, Administrator and Distributor, since 1989. JOHN H. GRADY, JR. (6/1/61) - Assistant Secretary - 2000 One Logan Square, Philadelphia, Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP (law firm) since 1995, counsel to the Trust, Administrator and Distributor. Associate, Morgan, Lewis & Bockius LLP, 1993-1995. Associate, Ropes & Gray (law firm), 1988-1993. - ------------------------------------------ * Messrs. Looney, Goodrum, McNair, Hall and Cammack may be deemed to be an "interested person" of the Trust as defined in the 1940 Act. The Trustees and Officers of the Trust own, in the aggregate, less than 1% of the outstanding shares of the Trust. For the fiscal year end May 31, 1998, the Trust paid the following amounts to Trustees and Officers of the Trust:
- -------------------------------------------------------------------------------- PENSION OR RETIREMENT ESTIMATED TOTAL AGGREGATE BENEFITS ANNUAL COMPENSATION FROM COMPENSATION ACCRUED AS BENEFITS FUND AND FUND NAME OF PERSON, FROM PART OF FUND UPON COMPLEX PAID TO POSITION FUND EXPENSES RETIREMENT TRUSTEES - -------------------------------------------------------------------------------- Daniel S. Goodrum, $15,000 N/A N/A $15,000 for Trustee service on two boards - -------------------------------------------------------------------------------- Wilton Looney, $14,000 N/A N/A $14,000 for Trustee service on two boards - -------------------------------------------------------------------------------- Champney A. McNair, $17,000 N/A N/A $17,000 for Trustee service on two boards - -------------------------------------------------------------------------------- F. Wendell Gooch, $13,000 N/A N/A $13,000 for Trustee service on two boards - -------------------------------------------------------------------------------- T. Gordy Germany, $15,000 N/A N/A $15,000 for Trustee service on two boards - -------------------------------------------------------------------------------- Dr. Bernard F. $15,000 N/A N/A $15,000 for Sliger, Trustee service on two boards - -------------------------------------------------------------------------------- Jesse S. Hall, $14,000 N/A N/A $14,000 for Trustee service on two boards - -------------------------------------------------------------------------------- Jonathan T. Walton, $3,500 N/A N/A $ 3,500 for Trustee* service on two boards - --------------------------------------------------------------------------------
B-16
- -------------------------------------------------------------------------------- Pension or Retirement Estimated Total Aggregate Benefits Annual Compensation from Compensation Accrued as Benefits Fund and Fund Name of Person, From Part of Fund Upon Complex Paid to Position Fund Expenses Retirement Trustees - -------------------------------------------------------------------------------- William H. Cammack, N/A N/A N/A $ 0 for service Trustee on two boards - --------------------------------------------------------------------------------
*Messr. Walton's compensation reflects a starting date of June 19, 1998. PERFORMANCE INFORMATION From time to time a Fund may advertise its performance. Performance figures are based on historical earnings and are not intended to indicate future performance. PERFORMANCE COMPARISONS Each Fund may periodically compare its performance to other mutual funds tracked by mutual fund rating services, to broad groups of comparable mutual funds, or to unmanaged indices. These comparisons may assume reinvestment of dividends but generally do not reflect deductions for administrative and management costs. COMPUTATION OF YIELD The current yield of the Funds will be calculated daily based upon the seven days ending on the date of calculation (the "base period"). The yield is computed by determining the net change (exclusive of capital changes) in the value of a hypothetical pre-existing shareholder account having a balance of one share at the beginning of the period, subtracting a hypothetical charge reflecting deductions from shareholder accounts, and dividing such net change by the value of the account at the beginning of the same period to obtain the base period return and multiplying the result by (365/7). Realized and unrealized gains and losses are not included in the calculation of the yield. The effective compound yield of the Funds is determined by computing the net change, exclusive of capital changes, in the value of a hypothetical pre-existing account having a balance of one share at the beginning of the period, subtracting a hypothetical charge reflecting deductions from shareholder accounts, and dividing the difference by the value of the account at the beginning of the base period to obtain the base period return, and then compounding the base period return by adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the result, according to the following formula: Effective Yield = [Base Period Return + 1) TO THE POWER OF 365/7] - 1. The current and the effective yields reflect the reinvestment of net income earned daily on portfolio assets. B-17
- ---------------------------------------------------------------------------------------- FUND 7-DAY YIELD 7-DAY EFFECTIVE YIELD - ---------------------------------------------------------------------------------------- Classic Institutional Cash Management Money Market Fund 5.26% 5.63% - ---------------------------------------------------------------------------------------- Classic Institutional U.S. Treasury Securities Fund 5.52% 5.46% - ----------------------------------------------------------------------------------------
The yield of these Funds fluctuates, and the annualization of a week's dividend is not a representation by the Trust as to what an investment in the Fund will actually yield in the future. Actual yields will depend on such variables as asset quality, average asset maturity, the type of instruments the Fund invests in, changes in interest rates on money market instruments, changes in the expenses of the Fund and other factors. Yields are one basis upon which investors may compare the Funds with other money market funds; however, yields of other money market funds and other investment vehicles may not be comparable because of the factors set forth above and differences in the methods used in valuing portfolio instruments. CALCULATION OF TOTAL RETURN From time to time, the Equity Funds may advertise total return. In particular, total return will be calculated according to the following formula: P (1 + T) TO THE POWER OF n = ERV, where P = a hypothetical initial payment of $1,000; T = average annual total return; n = number of years; and ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the designated time period as of the end of such period. From time to time, the Trust may include the names of clients of the Advisor in advertisements and/or sales literature for the Trust. The SEI Funds Evaluation database tracks the total return of numerous tax-exempt pension accounts. The range of returns in these accounts determines the percentile rankings. SunTrust Bank's investment advisory affiliate, Trusco Capital Management, has been in the top 1% of the SEI Funds Evaluation database for equity managers over the past ten years. SEI Investment's database includes research data on over 1,000 investment managers responsible for over $450 billion in assets. Based on the foregoing, the average annual total returns for the Funds from inception through May 31, 1998 and for one-year periods ended May 31, 1998 were as follows: B-18
- -------------------------------------------------------------------------------- FUND AVERAGE ANNUAL TOTAL RETURN - -------------------------------------------------------------------------------- ONE-YEAR SINCE INCEPTION - -------------------------------------------------------------------------------- Classic Institutional Cash Management Money Market Fund* 5.56% 5.47% - -------------------------------------------------------------------------------- Classic Institutional U.S. Treasury Securities Money Market Fund* 5.44% 5.36% - --------------------------------------------------------------------------------
* Commenced operations December 12, 1996 ADVERTISING From time to time, the Trust may include the names of clients of the Advisor in advertisements and/or sales literature for the Trust. PURCHASE AND REDEMPTION OF SHARES Purchases and redemptions of shares of the Funds may be made on any day the New York Stock Exchange ("NYSE") is open for business. Currently, the NYSE is closed on the days following holidays are observed: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. It is currently the Trust's policy to pay for all redemptions in cash. The Trust retains the right, however, to alter this policy to provide for redemptions in whole or in part by a distribution in-kind of readily marketable securities held by the Funds in lieu of cash. Shareholders may incur brokerage charges on the sale of any such securities so received in payment of redemptions. A Shareholder will at all times be entitled to aggregate cash redemptions from all Funds of the Trust during any 90-day period of up to the lesser of $250,000 or 1% of the Trust's net assets. The Trust reserves the right to suspend the right of redemption and/or to postpone the date of payment upon redemption for any period on which trading on the NYSE is restricted, or during the existence of an emergency (as determined by the Securities and Exchange Commission by rule or regulation) as a result of disposal or valuation of a Fund's securities is not reasonably practicable, or for such other periods as the Securities and Exchange Commission has by order permitted. The Trust also reserves the right to suspend sales of shares of a Fund for any period during which the NYSE, an Advisor, the Administrator and/or the Custodian are not open for business. Investors will receive written notification at least thirty days prior to any change in a Fund's investment objective. Certain state securities laws may require those financial institutions providing certain distribution services to the Trust to register as dealers pursuant to state law. B-19 DETERMINATION OF NET ASSET VALUE The net asset value per share of the Funds is calculated daily by the Administrator by adding the value of securities and other assets, subtracting liabilities and dividing by the number of outstanding shares. Securities will be valued by the amortized cost method which involves valuing a security at its cost on the date of purchase and thereafter (absent unusual circumstances) assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuations in general market rates of interest on the value of the instrument. While this method provides certainty in valuation, it may result in periods during which a security's value, as determined by this method, is higher or lower than the price a Fund would receive if it sold the instrument. During periods of declining interest rates, the daily yield of a Fund may tend to be higher than a like computation made by a company with identical investments utilizing a method of valuation based upon market prices and estimates of market prices for all of its portfolio securities. Thus, if the use of amortized cost by a Fund resulted in a lower aggregate portfolio value on a particular day, a prospective investor in a Fund would be able to obtain a somewhat higher yield than would result from investment in a company utilizing solely market values, and existing investors in a Fund would experience a lower yield. The converse would apply in a period of rising interest rates. A Fund's use of amortized cost and the maintenance of a Fund's net asset value at $1.00 are permitted by regulations promulgated by Rule 2a-7 under the 1940 Act, provided that certain conditions are met. The regulations also require the Trustees to establish procedures which are reasonably designed to stabilize the net asset value per share at $1.00 for the Funds. Such procedures include the determination of the extent of deviation, if any, of the Funds current net asset value per share calculated using available market quotations from the Funds amortized cost price per share at such intervals as the Trustees deem appropriate and reasonable in light of market conditions and periodic reviews of the amount of the deviation and the methods used to calculate such deviation. In the event that such deviation exceeds 1/2 of 1%, the Trustees are required to consider promptly what action, if any, should be initiated, and, if the Trustees believe that the extent of any deviation may result in material dilution or other unfair results to Shareholders, the Trustees are required to take such corrective action as they deem appropriate to eliminate or reduce such dilution or unfair results to the extent reasonably practicable. Such actions may include the sale of portfolio instruments prior to maturity to realize capital gains or losses or to shorten average portfolio maturity; withholding dividends; redeeming shares in kind; or establishing a net asset value per share by using available market quotations. In addition, if the Funds incur a significant loss or liability, the Trustees have the authority to reduce pro rata the number of shares of the Funds in each Shareholder's account and to offset each Shareholder's pro rata portion of such loss or liability from the Shareholder's accrued but unpaid dividends or from future dividends while each other Fund must annually distribute at least 90% of its investment company taxable income. TAXES The following is a summary of certain Federal income tax considerations generally affecting the Funds and their shareholders that are not described in the Funds' prospectus. No attempt is made to B-20 present a detailed explanation of the Federal tax treatment of the Funds or their Shareholders, and the discussion here and in the Funds' prospectus is not intended as a substitute for careful tax planning. This discussion of Federal income tax consequences is based on the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations issued thereunder, in effect on the date of this Statement of Additional Information. New legislation, as well as administrative changes or court decisions, may change the conclusions expressed herein, and may have a retroactive effect with respect to the transactions contemplated herein. FEDERAL INCOME TAX In order to qualify for treatment as a regulated investment company ("RIC") under the Internal Revenue Code of 1986, as amended ("Code"), each Fund must distribute annually to its Shareholders at least the sum of 90% of its net interest income excludable from gross income plus 90% of its investment company taxable income (generally, net investment income plus net short-term capital gain) ("Distribution Requirement") and also must meet several additional requirements. Among these requirements are the following: (i) at least 90% of a Fund's gross income each taxable year must be derived from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of stock or securities, or certain other income; (ii) at the close of each quarter of a Fund's taxable year, at least 50% of the value of its total assets must be represented by cash and cash items, U.S. Government securities, securities of other RIC's and other securities, with such other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of a Fund's assets and that does not represent more than 10% of the outstanding voting securities of such issuer; and (iii) at the close of each quarter of a Fund's taxable year, not more than 25% of the value of its assets may be invested in securities (other than U.S. Government securities or the securities of other RIC's) of any one issuer, or of two or more issuers engaged in same or similar businesses if the Fund owns at least 20% of the voting power of such issuers. Requirement (ii) no longer applies for tax years beginning after August 5, 1997. In addition, each Fund will distribute by the end of any calendar year 98% of its ordinary income for that year and 98% of its capital gain net income for the one-year period ending on October 31 of that calendar year, plus certain other amounts. Each Fund intends to make sufficient distributions prior to the end of each calendar year to avoid liability for the federal excise tax applicable to regulated investment companies. B-21 If, at the close of each quarter of its taxable year, at least 50% of the value of a Fund's total assets consists of obligations the interest on which is excludable from gross income, a Fund may pay "exempt-interest dividends," as defined in Section 852(b)(5) of the Code, to its Shareholders. Any gain or loss recognized on a sale or redemption of Shares of a Fund by a Shareholder who is not a dealer in securities will generally be treated as a long-term capital gain or loss if the shares have been held for more than eighteen months, mid-term if the shares have been held for over one year but not for over eighteen months, and short-term if for a year or less. If shares held for six months or less are sold or redeemed for a loss, two special rules apply: First, if shares on which a net capital gain distribution has been received are subsequently sold or redeemed, and such shares have been held for six months or less, any loss recognized will be treated as long-term capital loss to the extent of the long-term capital gain distributions. Second, any loss recognized by a Shareholder upon the sale or redemption of shares of a tax-exempt fund held for six months or less will be disallowed to the extent of any exempt-interest dividends received by the Shareholder with respect to such shares. The Funds will make annual reports to Shareholders of the Federal income tax status of all distributions. FUND TRANSACTIONS The Trust has no obligation to deal with any dealer or group of dealers in the execution of transactions in portfolio securities. Subject to policies established by the Trustees, the Advisor is responsible for placing the orders to execute transactions for a Fund. In placing orders, it is the policy of the Trust to seek to obtain the best net results taking into account such factors as price (including the applicable dealer spread), the size, type and difficulty of the transaction involved, the firm's general execution and operational facilities, and the firm's risk in positioning the securities involved. While the Advisor generally seeks reasonably competitive spreads or commissions, the Trust will not necessarily be paying the lowest spread or commission available. The money market securities in which the Funds invest are traded primarily in the over-the-counter market. Bonds and debentures are usually traded over-the-counter, but may be traded on an exchange. Where possible, the Advisor will deal directly with the dealers who make a market in the securities involved except in those circumstances where better prices and execution are available elsewhere. Such dealers usually are acting as principal for their own account. On occasion, securities may be purchased directly from the issuer. Money market securities are generally traded on a net basis and do not normally involve either brokerage commissions or transfer taxes. The cost of executing portfolio securities transactions of the Trust will primarily consist of dealer spreads and underwriting commissions. TRADING PRACTICES AND BROKERAGE The Trust selects brokers or dealers to execute transactions for the purchase or sale of portfolio securities on the basis of its judgment of their professional capability to provide the service. The primary B-22 consideration is to have brokers or dealers provide transactions at best price and execution for the Trust. Best price and execution includes many factors, including the price paid or received for a security, the commission charged, the promptness and reliability of execution, the confidentiality and placement accorded the order and other factors affecting the overall benefit obtained by the account on the transaction. The Trust's determination of what are reasonably competitive rates is based upon the professional knowledge of its trading department as to rates paid and charged for similar transactions throughout the securities industry. In some instances, the Trust pays a minimal share transaction cost when the transaction presents no difficulty. Some trades are made on a net basis where the Trust either buys securities directly from the dealer or sells them to the dealer. In these instances, there is no direct commission charged but there is a spread (the difference between the buy and sell price) which is the equivalent of a commission. The Trust may allocate out of all commission business generated by all of the funds and accounts under management by an Advisor, brokerage business to brokers or dealers who provide brokerage and research services. These research services include advice, either directly or through publications or writings, as to the value of securities, the advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities; furnishing of analyses and reports concerning issuers, securities or industries; providing information on economic factors and trends, assisting in determining portfolio strategy, providing computer software used in security analyses, and providing portfolio performance evaluation and technical market analyses. Such services are used by an Advisor in connection with its investment decision-making process with respect to one or more funds and accounts managed by it, and may not be used exclusively with respect to the fund or account generating the brokerage. As provided in the Securities Exchange Act of 1934 (the "1934 Act") higher commissions may be paid to broker-dealers who provide brokerage and research services than to broker-dealers who do not provide such services if such higher commissions are deemed reasonable in relation to the value of the brokerage and research services provided. Although transactions are directed to broker-dealers who provide such brokerage and research services, the Trust believes that the commissions paid to such broker-dealers are not, in general, higher than commissions that would be paid to broker-dealers not providing such services and that such commissions are reasonable in relation to the value of the brokerage and research services provided. In addition, portfolio transactions which generate commissions or their equivalent are directed to broker-dealers who provide daily portfolio pricing services to the Trust. Subject to best price and execution, commissions used for pricing may or may not be generated by the funds receiving the pricing service. An Advisor may place a combined order for two or more accounts or funds engaged in the purchase or sale of the same security if, in its judgment, joint execution is in the best interest of each participant and will result in best price and execution. Transactions involving commingled orders are allocated in a manner deemed equitable to each account or fund. It is believed that the ability of the accounts to participate in volume transactions will generally be beneficial to the accounts and funds. Although it is recognized that, in some cases, the joint execution of orders could adversely affect the price or volume of the security that a particular account or Fund may obtain, it is the opinion of each Advisor and the B-23 Trust's Board of Trustees that the advantages of combined orders outweigh the possible disadvantages of separate transactions. Consistent with the Conduct Rules of the National Association of Securities Dealers, Inc., and subject to seeking best price and execution, the Funds, at the request of the Distributor, give consideration to sales of shares of the Trust as a factor in the selection of brokers and dealers to execute Trust portfolio transactions. It is expected that the Trust may execute brokerage or other agency transactions through the Distributor or an affiliate of an Advisor, both of which are registered broker-dealers, for a commission in conformity with the 1940 Act, the 1934 Act and rules promulgated by the SEC. Under these provisions, the Distributor or an affiliate of an Advisor is permitted to receive and retain compensation for effecting portfolio transactions for the Trust on an exchange if a written contract is in effect between the Distributor and the Trust expressly permitting the Distributor or an affiliate of an Advisor to receive and retain such compensation. These rules further require that commissions paid to the Distributor by the Trust for exchange transactions not exceed "usual and customary" brokerage commissions. The rules define "usual and customary" commissions to include amounts which are "reasonable and fair compared to the commission, fee or other renumeration received or to be received by other brokers in connection with comparable transactions involving similar securities being purchased or sold on a securities exchange during a comparable period of time." In addition, the Trust may direct commission business to one or more designated broker-dealers in connection with such broker/dealer's provision of services to the Trust or payment of certain Trust expenses (e.g., custody, pricing and professional fees). The Trustees, including those who are not "interested persons" of the Trust, have adopted procedures for evaluating the reasonableness of commissions paid to the Distributor, and will review these procedures periodically. For the fiscal year ended May 31, 1998, the Funds paid the following brokerage commissions with respect to portfolio transactions: B-24
- -------------------------------------------------------------------------------- Portfolio Total $ Total $ % of Total Amount of Amount of Brokerage Brokerage Brokerage Commissions Commissions Commissions Paid to Paid in FYE Paid to Affiliated 5/31/98 Affiliates in Brokers in FYE 5/31/98 FYE 5/31/98 - -------------------------------------------------------------------------------- Classic $ 59,346 $ 59,346 100% Institutional Cash Management Money Market Fund - -------------------------------------------------------------------------------- Classic $ 51,553 $ 51,553 100% Institutional U.S. Treasury Securities Money Market Fund - --------------------------------------------------------------------------------
DESCRIPTION OF SHARES The Declaration of Trust authorizes the issuance of an unlimited number of shares and classes of shares of the Funds each of which represents an equal proportionate interest in that Fund with each other share. B-25 Shares are entitled upon liquidation to a PRO RATA share in the net assets of the Funds. Shareholders have no preemptive rights. The Declaration of Trust provides that the Trustees of the Trust may create additional series of shares or classes of series. All consideration received by the Trust for shares of any additional series and all assets in which such consideration is invested would belong to that series and would be subject to the liabilities related thereto. Share certificates representing shares will not be issued. SHAREHOLDER LIABILITY The Trust is an entity of the type commonly known as a "Massachusetts business trust." Under Massachusetts law, shareholders of such a trust could, under certain circumstances, be held personally liable as partners for the obligations of the trust. Even if, however, the Trust were held to be a partnership, the possibility of the Shareholders' incurring financial loss for that reason appears remote because the Trust's Declaration of Trust contains an express disclaimer of Shareholder liability for obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by or on behalf of the Trust or the Trustees, and because the Declaration of Trust provides for indemnification out of the Trust property for any Shareholder held personally liable for the obligations of the Trust. LIMITATION OF TRUSTEES' LIABILITY The Declaration of Trust provides that a Trustee shall be liable only for his own willful defaults and, if reasonable care has been exercised in the selection of officers, agents, employees or investment advisors, shall not be liable for any neglect or wrongdoing of any such person. The Declaration of Trust also provides that the Trust will indemnify its Trustees and officers against liabilities and expenses incurred in connection with actual or threatened litigation in which they may be involved because of their offices with the Trust unless it is determined in the manner provided in the Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the Trust. However, nothing in the Declaration of Trust shall protect or indemnify a Trustee against any liability for his willful misfeasance, bad faith, gross negligence or reckless disregard of his duties. YEAR 2000 The Trust depends on the smooth functioning of computer systems in almost every aspect of its business. Like other mutual funds, businesses and individuals around the world, the Trust could be adversely affected if the computer systems used by its service providers do not properly process dates on and after January 1, 2000 and distinguish between the year 2000 and the year 1900. The Trust has asked its service providers whether they expect to have their computer systems adjusted for the year 2000 transition, and received assurances from each from each that its system is expected to accommodate the year 2000 without material adverse consequences to the Trust. The Trust and its shareholders may experience losses if these assurances prove to be incorrect or as a result of year 2000 computer difficulties experienced by issuers of portfolio securities or third parties, such as custodians, banks, broker-dealers or others with which the Trust does business. B-26 5% AND 25% SHAREHOLDERS As of September __, 1998, the following persons were the only persons who were record owners (or to the knowledge of the Trust, beneficial owners) of 5% and 25% or more of the shares of the Funds. Persons who owned of record or beneficially more than 25% of a Fund's outstanding shares may be deemed to control the Fund within the meaning of the Act. The Trust believes that most of the shares of the Trust Class of the Funds were held for the record owner's fiduciary, agency or custodial customers. SunTrust Capital Markets ACH Attn: Anita Woods Center 3910 303 Peachtree Street, 24th Floor Atlanta, GA 30308-3201 SunTrust Banks Attn: Susan Grider Mail Center 3133 P.O Box 105504 Atlanta, GA 30308 EXPERTS The financial statements as of May 31, 1998 have been audited by Arthur Andersen LLP, Independent Public Accountants, as indicated in their report dated July 24, 1998 with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report. B-27 - -------------COMPARISON OF FOOTERS------------- B-28 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 To the Shareholders and Board of Trustees of STI Classic Funds: We have audited the accompanying statements of net assets of the Classic Institutional Cash Management Money Market Fund and the statement of assets and liabilities, including the schedule of investments, of the Classic Institutional U.S. Treasury Securities Money Market Fund of STI Classic Funds (the "Trust") as of May 31, 1998, and the related statements of operations, changes in net assets, and financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 1998, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Classic Institutional Cash Management Money Market and Classic Institutional U.S. Treasury Securities Money Market Funds of STI Classic Funds as of May 31, 1998, the results of their operations, changes in their net assets, and financial highlights for the periods presented, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Philadelphia, PA July 24, 1998 STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND
- ------------------------------------------------------------ FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------ COMMERCIAL PAPER (25.4%) FINANCE (5.5%) Banc One 5.570%, 06/09/98 $1,729 $ 1,727 Banc One Funding 5.520%, 06/01/98 1,078 1,078 5.570%, 06/12/98 1,000 998 Caterpiller Finance 5.470%, 07/21/98 1,300 1,290 Credit Suisse First Boston 5.500%, 06/09/98 5,000 4,994 General Electric Capital 5.450%, 06/01/98 500 500 5.520%, 08/17/98 500 494 GMAC 5.550%, 07/10/98 2,250 2,237 John Hancock 5.530%, 07/02/98 3,706 3,688 Xerox Credit 5.650%, 06/01/98 3,512 3,512 ---------- 20,518 ---------- INDUSTRIAL (19.2%) British Petroleum America 5.650%, 06/01/98 10,844 10,844 Dominion Semiconductor 5.560%, 07/20/98 4,000 3,970 5.570%, 07/23/98 7,000 6,944 Eaton 5.500%, 06/03/98 937 937 5.480%, 07/31/98 6,575 6,515 Fortune Brands 5.520%, 07/28/98 6,500 6,443 General Re 5.510%, 06/26/98 11,000 10,957 J.C. Penney 5.500%, 06/10/98 1,300 1,298 5.500%, 06/25/98 10,000 9,963 INDUSTRIAL--CONTINUED Procter & Gamble 5.580%, 06/19/98 $1,350 $ 1,346 RTZ America 5.500%, 06/18/98 4,200 4,189 Sherwin Williams 5.500%, 06/01/98 2,000 2,000 5.500%, 06/09/98 3,625 3,621 Wal-Mart Stores 5.782%, 06/01/98 1,400 1,400 Walt Disney 5.550%, 12/04/98 515 500 Xerox 5.650%, 06/01/98 932 932 ---------- 71,859 ---------- UTILITIES (0.7%) South Carolina Fuel 5.520%, 06/25/98 2,580 2,571 ---------- Total Commercial Paper (Cost $94,950) 94,948 ---------- CORPORATE OBLIGATIONS (12.4%) FINANCE (8.4%) Associates Corporation of North America, MTN 8.780%, 06/10/98 1,000 1,001 Associates Corporation of North America 6.375%, 08/15/98 100 100 Bankers Trust, New York (A) (B) 5.679%, 02/19/99 7,000 7,000 Beneficial, MTN 8.270%, 11/30/98 1,000 1,012 British Telecom Finance 9.375%, 02/15/99 1,000 1,024 Caterpillar Financial Service, MTN (A) 5.755%, 05/09/99 5,000 5,000 1
STATEMENT OF NET ASSETS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND--CONTINUED
- ----------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------- FINANCE--CONTINUED Ford Motor Credit 8.000%, 01/15/99 $ 1,000 $ 1,013 General Electric Capital (A) 5.596%, 11/27/98 10,000 10,000 GMAC, MTN 7.150%, 04/30/99 1,000 1,011 International Lease 5.750%, 01/15/99 752 752 Nationsbank 8.500%, 03/01/99 1,000 1,020 Norwest 6.230%, 09/01/98 150 150 Transamerica, MTN (A) 5.719%, 02/18/99 1,500 1,501 Xerox Credit 10.000%, 04/01/99 780 806 ---------- 31,390 ---------- INDUSTRIAL (0.7%) Fortune Brands 7.500%, 05/15/99 1,025 1,041 Fortune Brands, MTN 8.750%, 08/10/98 1,000 1,006 J.C. Penney 5.375%, 11/15/98 500 499 ---------- 2,546 ---------- UTILITIES (3.3%) Baltimore Gas & Electric, MTN 8.930%, 07/16/98 1,750 1,756 Bell Atlantic, MTN 5.440%, 07/15/98 250 250 Carolina Power & Light, MTN 5.375%, 07/01/98 250 250 Duke Energy, MTN 5.170%, 09/01/98 500 499 GTE Northwest 6.125%, 02/15/99 650 651 UTILITIES--CONTINUED Pacific Gas & Electric, Callable on 07/09/98 @ 100.00 5.750%, 12/01/98 $ 1,000 $ 1,000 Southern California Edison 5.450%, 06/15/98 1,000 1,000 7.500%, 04/15/99 505 512 Virginia Electric Power 9.375%, 06/01/98 4,980 4,980 Virginia Electric Power, MTN 6.250%, 08/01/98 500 500 9.650%, 01/25/99 990 1,013 ---------- 12,411 ---------- Total Corporate Obligations (Cost $46,347) 46,347 ---------- BANK NOTES (11.7%) American Express Centurion (A) 5.606%, 03/24/99 5,000 5,000 Comerica Bank (A) 5.695%, 10/21/98 4,000 3,999 Deutsche Bank NY (A) 5.715%, 04/14/99 5,000 4,998 FCC National Bank (A) 5.715%, 04/09/99 5,000 4,998 First National Bank, Chicago (A) 5.722%, 04/19/99 10,000 9,996 Northern Trust (A) 5.715%, 04/09/99 10,000 9,997 PNC Bank N.A. (A) 5.660%, 07/01/98 5,000 5,000 ---------- Total Bank Notes (Cost $43,988) 43,988 ---------- U.S. GOVERNMENT AGENCY OBLIGATION (4.0%) Federal Farm Credit, MTN (A) 5.443%, 03/02/99 10,000 9,996
2
- ------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------- U.S. GOVERNMENT AGENCY OBLIGATION--CONTINUED SLMA, MTN (A) 5.628%, 04/01/99 $ 5,000 $ 4,998 ---------- Total U.S. Government Agency Obligation (Cost $14,994) 14,994 ---------- CERTIFICATES OF DEPOSIT (18.1%) Commerzbank (A) 5.725%, 04/14/99 10,000 9,997 Bank America, Canada 5.570%, 07/28/98 10,000 10,000 Bayerische Landesbank, New York (A) 5.666%, 04/21/99 10,000 9,995 Credit Suisse First Boston, New York (A) 5.725%, 10/27/98 5,000 5,000 Deutsche Bank, New York 5.640%, 03/23/99 4,000 3,997 Rabobank 5.750%, 04/27/99 8,000 7,997 Societe Generale, New York 5.580%, 02/10/99 2,000 2,000 5.800%, 04/28/99 9,000 8,992 Swiss Bank Corporation, New York 5.650%, 03/24/99 5,000 4,996 5.810%, 04/29/99 5,000 4,997 ---------- Total Certificates Of Deposit (Cost $67,971) 67,971 ---------- ASSET-BACKED SECURITIES (5.6%) Americredit Auto Receivable Trust, Ser 1997-D, Cl A1 5.800%, 11/05/98 858 858 Americredit Auto Receivable Trust, Ser 1998-B, Cl A1 5.629%, 06/12/99 4,000 4,000 ASSET-BACKED SECURITIES--CONTINUED Arcadia Auto Receivable Trust, Ser 1998-A, Cl A1 5.628%, 03/15/99 $ 4,506 $ 4,507 Chase Manhattan Auto Owner Trust, Ser 1999-B, Cl A1 5.578%, 05/10/99 5,782 5,783 Key Auto Finance Trust, Ser 1997-2, Cl A1 5.835%, 01/05/99 1,264 1,264 WFS Financial Owner Trust, Ser 1997-D, Cl A1 5.910%, 12/20/98 4,652 4,652 ---------- Total Asset-Backed Securities (Cost $21,064) 21,064 ---------- REPURCHASE AGREEMENTS (22.8%) Barclays 5.58%, dated 05/29/98, matures 06/01/98, repurchase price $17,613,558 (collateralized by FNMA and FHLMC obligations: total market value $17,957,479) (C) 17,605 17,605 Deutsche Bank 5.58%, dated 05/29/98, matures 06/01/98 repurchase price $45,688,671 (collateralized by FNMA and FHLMC obligations: total market value $46,580,828) (C) 45,668 45,668 Salomon Brothers 5.58%, dated 05/29/98, matures 06/01/98, repurchase price $4,113,374 (collateralized by FNMA and FHLMC obligations: total market value $4,195,308) (C) 4,112 4,112
3 STATEMENT OF NET ASSETS/SCHEDULE OF INVESTMENTS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND--CONCLUDED
- ----------------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ----------------------------------------------------------------------- REPURCHASE AGREEMENTS--CONTINUED Union Bank of Switzerland 5.58%, dated 05/29/98, matures 06/01/98, repurchase price $18,026,805 (collateralized by FNMA obligation: market value $18,380,052) (C) $18,018 $ 18,018 ---------- Total Repurchase Agreements (Cost $85,403) 85,403 ---------- Total Investments (100.0%) (Cost $374,715) 374,715 ---------- OTHER ASSETS AND LIABILITIES, NET (0.0%) 87 ---------- NET ASSETS: Fund shares of the Institutional Shares (unlimited authorization -- no par value) based on 374,801,521 outstanding shares of beneficial interest 374,802 ---------- Total Net Assets (100.0%) $ 374,802 ========== Net Asset Value, Offering and Redemption Price Per Share -- Institutional Shares $ 1.00 ==========
Cl Class FHLMC Federal Home Loan Mortgage Corporation FNMA Federal National Mortgage Association MTN Medium Term Note Ser Series (A) Variable rate security. The rate reported on the Statement of Net Assets is the rate in effect on May 31, 1998. (B) Private Placement Security (C) Tri-Party Repurchase Agreement THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 4 ================================================================================ CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND
- ------------------------------------------------------------- FACE AMOUNT (000) VALUE (000) - ------------------------------------------------------------- TREASURY NOTES (9.2%) U.S. Treasury Notes 5.625%, 11/30/98 $ 600 $ 600 6.375%, 05/15/99 10,000 10,065 ---------- Total Treasury Notes (Cost $10,665) 10,665 ---------- REPURCHASE AGREEMENTS (90.8%) Barclays 5.51%, dated 05/29/98, matures 06/01/98, repurchase price $6,254,982 (collateralized by U.S. Treasury Note: market value $6,377,082) (A) 6,251 6,251 Deutsche Bank 5.51%, dated 05/29/98, matures 06/01/98, repurchase price $6,276,517 (collateralized by U.S. Treasury Bond: market value $6,399,356) (A) 6,274 6,274 Greenwich 5.51%, dated 05/29/98, matures 06/01/98, repurchase price $34,006,313 (collateralized by U.S. Treasury Notes: total market value $34,672,999) (A) 33,991 33,991 Merrill Lynch 5.51%, dated 05/29/98, matures 06/01/98, repurchase price $6,205,190 (collateralized by U.S. Government STRIPS: total market value $6,329,772) (A) 6,202 6,202 Morgan Stanley 5.51%, dated 05/29/98, matures 06/01/98, repurchase price $6,305,510 (collateralized by U.S. Treasury Bond: market value $6,452,812) (A) 6,303 6,303 Salomon Brothers 5.51%, dated 05/29/98, matures 06/01/98, repurchase price $6,205,541 (collateralized by U.S. Treasury Note: market value $6,331,636) (A) $ 6,203 $ 6,203 Swiss Bank 5.51%, dated 05/29/98, matures 06/01/98, repurchase price $6,263,560 (collateralized by U.S. Treasury Note and U.S. Treasury Bond: total market value $6,397,913) (A) 6,261 6,261 Union Bank of Switzerland 5.51%, dated 05/29/98, matures 06/01/98, repurchase price $34,006,826 (collateralized by U.S. Treasury Bills: total market value $34,675,013) (A) 33,990 33,990 ---------- Total Repurchase Agreements (Cost $105,475) 105,475 ---------- Total Investments (82.8% of Net Assets) (Cost $116,140) $ 116,140 ==========
STRIPS -- Separately Traded Registered Interest and Principal Security (A) Tri-Party Repurchase Agreement THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 5 STATEMENT OF ASSETS AND LIABILITIES (000) ================================================================================ STI CLASSIC FUNDS MAY 31, 1998
CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND ------------------------ Assets: Investments at market value (Cost $116,140) .............................................. $116,140 Accrued income ........................................................................... 615 Receivables for investment securities sold ............................................... 24,755 -------- Total Assets ............................................................................. 141,510 -------- Liabilities: Accrued expenses ......................................................................... (23) Distribution payable ..................................................................... (623) Other liabilities ........................................................................ (530) -------- Total Liabilities ........................................................................ (1,176) -------- Net Assets: Fund Shares of the Institutional Shares (unlimited authorization -- no par value) based on 140,331,464 outstanding shares of beneficial interest ......................... 140,331 Accumulated net realized gain on investments ............................................. 3 -------- Total Net Assets ......................................................................... $140,334 ======== Net Asset Value, Offering Price and Redemption Price Per Share -- Institutional Shares .... $ 1.00 ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 6 This page is left intentionally blank. STATEMENT OF OPERATIONS (000) ================================================================================ STI CLASSIC FUNDS FOR THE YEAR ENDED MAY 31, 1998
CLASSIC CLASSIC INSTITUTIONAL INSTITUTIONAL CASH MANAGEMENT U.S. TREASURY MONEY MARKET SECURITIES MONEY FUND MARKET FUND --------------- ---------------- 06/01/97- 06/01/97- 05/31/98 05/31/98 ---------- --------- Income: Interest Income .............................................................. $17,193 $5,786 ------- ------ Expenses: Investment Advisory Fees ..................................................... 608 209 Investment Advisory Fees Waived .............................................. (403) (198) Administrator Fees ........................................................... 219 76 Administrator Fees Waived .................................................... (32) (13) Transfer Agent Fees .......................................................... 16 16 Transfer Agent Out of Pocket ................................................. 23 11 Printing Fees ................................................................ 24 14 Custody Fees ................................................................. 13 6 Professional Fees ............................................................ -- 8 Trustee Fees ................................................................. -- 2 Registration Fees ............................................................ 14 28 Other Fees ................................................................... -- 20 Amortization of Deferred Organizational Costs ................................ 11 11 ------- ------ Total Expenses ............................................................. 493 190 ------- ------ Net Investment Income ...................................................... 16,700 5,596 ------- ------ Net Realized Gain on Securities Sold ............................................ -- 4 ------- ------ Increase in Net Assets Resulting from Operations ................................ $16,700 $5,600 ======= ====== Amounts designated as "--" are either $0 or round to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 8 STATEMENT OF CHANGES IN NET ASSETS (000) ================================================================================ STI CLASSIC FUNDS FOR THE YEAR ENDED MAY 31, 1998
CLASSIC CLASSIC INSTITUTIONAL INSTITUTIONAL CASH MANAGEMENT U.S. TREASURY MONEY MARKET SECURITIES MONEY FUND MARKET FUND ---------------------- --------------------- 06/01/97- 12/12/96*- 06/01/97- 12/12/96*- 05/31/98 05/31/97 05/31/98 05/31/97 ---------- ---------- --------- ---------- Operations: Net Investment Income ............................................ $ 16,700 $ 2,755 $ 5,596 $ 483 Net Realized Gain (Loss) on Investments .......................... -- -- 4 (1) --------- --------- --------- -------- Increase in Net Assets Resulting from Operations ............... 16,700 2,755 5,600 482 --------- --------- --------- -------- Distributions to Shareholders: Net Investment Income ............................................ (16,700) (2,755) (5,596) (483) --------- --------- --------- -------- Total Distributions ........................................... (16,700) (2,755) (5,596) (483) --------- --------- --------- -------- Share Transactions: Proceeds from Shares Issued .................................... 1,549,940 578,520 991,131 143,133 Reinvestments of Cash Distributions ............................ 11,287 -- 4,231 -- Cost of Shares Redeemed ........................................ (1,582,098) (182,847) (875,270) (122,894) --------- --------- --------- -------- Increase (Decrease) in Net Assets from Share Transactions .... (20,871) 395,673 120,092 20,239 --------- --------- --------- -------- Total Increase (Decrease) in Net Assets ..................... (20,871) 395,673 120,096 20,238 --------- --------- --------- -------- Net Assets: Beginning of Period .............................................. 395,673 -- 20,238 -- --------- --------- --------- -------- End of Period .................................................... $ 374,802 $ 395,673 $ 140,334 $ 20,238 ========= ========= ========= ======== Shares Issued and Redeemed: Shares Issued .................................................. 1,549,940 578,520 991,131 143,133 Shares Issued in Lieu of Cash Distributions .................... 11,287 -- 4,231 -- Shares Redeemed ................................................ (1,582,098) (182,847) (875,270) (122,894) --------- --------- --------- -------- Net Share Transactions ........................................... (20,871) 395,673 120,092 20,239 ========= ========= ========= ========
*Commencement of Operations. Amounts designated as "--" are either $0 or round to $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 9 FINANCIAL HIGHLIGHTS ================================================================================ STI CLASSIC FUNDS FOR THE PERIOD ENDED MAY 31. FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
NET NET REALIZED NET ASSET VALUE INVESTMENT GAINS (LOSSES) DISTRIBUTIONS FROM DISTRIBUTIONS FROM BEGINNING OF PERIOD INCOME ON INVESTMENTS NET INVESTMENT INCOME REALIZED CAPITAL GAINS ------------------- ---------- -------------- --------------------- ---------------------- CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND Institutional Shares 1998 $ 1.00 $ 0.05 $ -- $(0.05) $ -- 1997(A) 1.00 0.02 -- (0.02) -- CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND Institutional Shares 1998 $ 1.00 $ 0.05 $ -- $(0.05) $ -- 1997(A) 1.00 0.02 -- (0.02) --
(A) Commenced operations on December 12, 1996. * Total return is for the period indicated and has not been annualized. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 10
RATIO OF NET ASSET NET ASSETS RATIO OF NET INVESTMENT VALUE END TOTAL END OF EXPENSES TO INCOME TO OF PERIOD RETURN PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS --------- ------ ------------ ------------------ ------------------ CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND Institutional Shares 1998 $ 1.00 5.63% $ 374,802 0.16% 5.49% 1997(A) 1.00 2.51* 395,673 0.06 5.49 CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND Institutional Shares 1998 $ 1.00 5.50% $ 140,334 0.18% 5.34% 1997(A) 1.00 2.46* 20,238 0.09 5.27 RATIO OF RATIO OF NET INVESTMENT EXPENSES TO INCOME TO AVERAGE NET ASSETS AVERAGE NET ASSETS (EXCLUDING WAIVERS (EXCLUDING WAIVERS AND REIMBURSEMENTS) AND REIMBURSEMENTS) ------------------ ------------------ CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND Institutional Shares 1998 0.30% 5.35% 1997(A) 0.52 5.03 CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET FUND Institutional Shares 1998 0.38% 5.14% 1997(A) 0.51 4.85
(A) Commenced operations on December 12, 1996. * Total return is for the period indicated and has not been annualized. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 11 NOTES TO FINANCIAL STATEMENTS ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 1. Organization: The STI Classic Funds (the "Trust") was organized as a Massachusetts Business Trust under a Declaration of Trust dated January 15, 1992. The Trust is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company with twenty-two portfolios: the Value Income Stock Fund, the Mid-Cap Equity Fund, the Small Cap Equity Fund, the Capital Growth Fund, the Balanced Fund, the Emerging Markets Equity Fund, the International Equity Index Fund, the International Equity Fund the Sunbelt Equity Fund, the Investment Grade Tax-Exempt Bond Fund, the Florida Tax-Exempt Bond Fund, the Georgia Tax-Exempt Bond Fund, the Investment Grade Bond Fund, the Short-Term Bond Fund, the Short-Term U.S. Treasury Securities Fund, the Limited-Term Federal Mortgage Securities Fund, and the U.S. Government Securities Fund, (collectively the "Non-Dollar Funds"), the Prime Quality Money Market Fund, the U.S. Government Securities Money Market Fund, the Tax-Exempt Money Market Fund, the Classic Institutional Cash Management Money Market Fund and the Classic Institutional U.S. Treasury Securities Money Market Fund, (collectively the "Money Market Funds"). The assets of each portfolio are segregated, and a shareholder's interest is limited to the Fund in which shares are held. Each Fund's prospectus provides a description of the Fund's investment objectives, policies and strategies. The financial statements of the Classic Institutional Cash Management Money Market Fund and the Classic Institutional U.S. Treasury Securities Fund (collectively the "Funds") are included herein. The financial statements of the remaining Funds are presented separately. 2. Significant Accounting Policies: The following is a summary of significant accounting policies followed by the Trust: SECURITY VALUATION -- Investment securities held by the Funds are stated at amortized cost, which approximates market value. FEDERAL INCOME TAXES -- It is each Fund's intention to qualify as a regulated investment company for Federal income tax purposes and distribute all of its taxable income and net capital gains. Accordingly, no provisions for Federal income taxes are required. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are accounted for on the date the security is purchased or sold (trade date). Interest income is recognized on an accrual basis. Costs used in determining net realized gains and losses on the sales of investment securities are those of the specific securities sold adjusted for the accretion and amortization of purchase discounts and premiums during the respective holding period. Purchase discounts and premiums on securities held by the Funds are accreted and amortized ratably to maturity and are included in interest income. REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase agreements are held by the custodian bank until the respective agreements mature. Provisions of the repurchase agreements ensure that the market value of the collateral, including accrued interest thereon, is sufficient in the event of default of the counterparty. If the counterparty defaults and the value of the collateral declines or if the counterparty enters into an insolvency proceeding, realization of the collateral by the Funds may be delayed or limited. 12 ================================================================================ NET ASSET VALUE PER SHARE -- The net asset value per share of each Fund is calculated each business day, by dividing the total value of each Fund's assets, less liabilities, by the number of shares outstanding. OTHER -- Expenses that are directly related to a specific Fund are charged to that Fund. Class specific expenses are borne by that class. Other operating expenses of the Trust are pro-rated to the Funds on the basis of relative net assets. Fund expenses are pro-rated to the respective classes on the basis of relative net assets. Distributions from net investment income of each of the Funds are declared on each business day and paid to shareholders on a monthly basis. Any net realized capital gains on sales of securities are distributed to shareholders at least annually. USE OF ESTIMATES -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates. 3. Organization Costs and Transactions with Affiliates: The Trust incurred organization costs of approximately $808,836 including approximately $395,594 relating to state registration fees. These costs have been deferred in the accounts of the Funds and are being amortized on a straight line basis over a period of sixty months commencing with operations with the exception of state registration fees, which are being amortized over a period of twelve months. The costs include legal fees of approximately $60,383 for organizational work performed by a law firm of which two officers of the Trust are partners. On March 18, 1992, the Trust sold initial shares of beneficial interest to SEI Fund Resources (the "Administrator"). In the event any of the initial shares of the Trust are redeemed by any holder thereof during the period that the Trust is amortizing its organizational costs, the redemption proceeds payable to the holder thereof will be reduced by the unamortized organizational costs in the same ratio as the number of initial shares being redeemed bears to the number of initial shares outstanding at the time of redemption. In April 1998, the AICPA issued Statement of Position (SOP) No. 98-5, "Reporting on the Costs of Start-Up Activities." This SOP provides guidance on the financial reporting of start-up costs and organization costs and requires costs of start-up activities and organization costs to be expensed as incurred. Investment companies that began operations prior to June 30, 1998 can adopt the SOP prospectively. Therefore, previously capitalized organization costs will continue to be amortized as discussed above. Any future start-up or organization costs will be expensed as incurred. Certain officers of the Trust are also officers of the Administrator and/or SEI Investments Distribution Co. (the "Distributor"). Such officers are paid no fees by the Trust for serving as officers of the Trust. 4. Administration and Transfer Agency Servicing Agreements: The Trust and the Administrator are parties to an Administration Agreement dated May 29, 1995, as amended November 19, 1997, under which the Administrator provides administrative services for an annual fee (expressed as a percentage of the combined average daily net assets of the Trust and 13 NOTES TO FINANCIAL STATEMENTS (concluded) ================================================================================ STI CLASSIC FUNDS MAY 31, 1998 STI Classic Variable Annuity Trust) of: .12% up to $1 billion, .09% on the next $4 billion, .07% on the next $3 billion, .065% on the next $2 billion and .06% for over $10 billion. The Trust and Federated Services Company are parties to a Transfer Agency servicing agreement dated May 14, 1994 under which Federated Services Company provides transfer agency services to the Trust. 5. Investment Advisory and Custodian Agreements: The Trust and Trusco Capital Management have entered into an advisory agreement dated July 15, 1993. Under terms of the respective agreements, the Funds are charged the following annual fees based upon average daily net assets:
MAXIMUM INSTITUTIONAL ANNUAL SHARE ADVISORY MAXIMUM FEE EXPENSE ---------- ------------- Classic Institutional Cash Management Money Market Fund .20% .20% Classic Institutional U.S. Treasury Money Market Fund .20% .20%
The Investment Advisor and the Administrator have voluntarily agreed to waive all or a portion of their fees (and to reimburse Funds' expenses) in order to limit operating expenses to an amount as outlined in the table above. Fee waivers and expense reimbursements are voluntary and may be terminated at any time. SunTrust Bank, Atlanta, formerly Trust Company Bank, acts as custodian for the Funds. Fees of the Custodian are paid on the basis of the net assets of the Funds. The Custodian plays no role in determining the investment policies of the Trust or which securities are to be purchased or sold in the Funds. 6. Concentration of Credit Risk: The Classic Institutional Cash Management Money Market Fund invests in high quality money market instruments issued by corporations and the U.S. Government and rated by one or more nationally recognized statistical rating organizations, or, if not rated determined by the Advisor to be of comparable quality. The Classic U.S. Treasury Securities Money Market Fund invests in U.S. Treasury Obligations, which are backed by the full faith and credit of the U.S. Government and repurchase agreements with approved dealers collateralized by U.S. Treasury securities. 14 STI CLASSIC FUNDS PART C: OTHER INFORMATION Post-Effective Amendment No. 25 Item 23. Exhibits: (a) Declaration of Trust--originally filed with Registrant's Registration Statement on Form N-1A filed February 12, 1992 and incorporated by reference to Exhibit 1 of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (b)(1) By-Laws--originally filed with Registrant's Pre-Effective Amendment No. 1 filed April 23, 1992 and incorporated by reference to Exhibit 2 of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (b)(2) Amended By-Laws--incorporated by reference to Exhibit (b)(2) of Post-Effective Amendment No. 23 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0001047469-98-027407 on July 15, 1998. (c) Not applicable. (d)(1) Revised Investment Advisory Agreement with Trusco Capital Management, Inc.--as originally filed with Registrant's Post-Effective Amendment No. 5 filed August 2, 1993 and incorporated by reference to Exhibit 5(c) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (d)(2) Investment Advisory Agreement with American National Bank and Trust Company--as originally filed with Registrant's Post-Effective Amendment No. 6 filed October 22, 1993 and as Exhibit 5(d) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (d)(3) Investment Advisory Agreement with Sun Bank Capital Management, National Association (now STI Capital Management, N.A.--as originally filed with Registrant's Post-Effective Amendment No. 6 filed October 22, 1993 and incorporated by reference to Exhibit 5(e) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (d)(4) Investment Advisory Agreement with Trust Company Bank (now SunTrust Bank, Atlanta)--as originally filed with Registrant's Post-Effective Amendment No. 6 filed October 22, 1993 and incorporated by reference to Exhibit D(4) of Post-Effective Amendment No. 24 to the Registrant's Statement filed with the SEC via EDGAR Accession No. 0001047469-98-028802 on July 30, 1998. (e) Distribution Agreement--incorporated by reference to Exhibit 6 of Post-Effective Amendment No. 16 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-021336 on September 27, 1996. (f) Not applicable. (g)(1) Custodian Agreement with Trust Company Bank dated February 1, 1994--originally filed with Registrant's Post-Effective Amendment No. 13 filed September 28, 1995 and incorporated by reference to Exhibit 8(b) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (g)(2) Custodian Agreement with the Bank of California--incorporated by reference to Exhibit 8(a) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (g)(3) Fourth Amendment to Custodian Agreement by and between STI Trust & Investment Operations, Inc. and The Bank of New York dated May 6, 1997--incorporated by reference to Exhibit 8(d) of Post-Effective Amendment No. 21 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-97-032207 on September 30, 1997. (h)(1) Transfer Agent Agreement with Federated Services Company dated May 14, 1994--originally filed with Post-Effective Amendment No. 9 filed September 22, 1994 and incorporated by reference to Exhibit 8(c) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. C-1 (h)(2) Administration Agreement with SEI Financial Management Corporation dated May 29, 1995--originally filed with Post-Effective Amendment No. 12 filed August 17, 1995 and incorporated by reference to Exhibit 9(a) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (h)(3) Consent to Assignment and Assumption of the Administration Agreement between STI Classic Funds and SEI Financial Management Corporation--incorporated by reference to Exhibit 9(b) of Post-Effective Amendment No. 21 to the Registrant's Registration Statement filed with the SEC via EDGAR Assession No. 0000912057-97-032207 on September 30, 1997. (i) Opinion and Consent of Counsel--originally filed with Pre-Effective Amendment No. 2 to the Registrant's Registration Statement on May 22, 1992 and incorporated by reference to Exhibit (i) of Post-Effective Amendment No. 23 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0001047469-98-027407 on July 15, 1998. (j) Consent of Arthur Andersen, LLP is filed herewith. (k) Not applicable. (l) Not applicable. (m)(1) Distribution Plan - Investor Class--incorporated by reference to Exhibit 15 of Post-Effective Amendment No. 16 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-021336 on September 27, 1996. (m)(2) Distribution and Service Agreement relating to Flex Shares dated May 29, 1995--originally filed with Post-Effective Amendment No. 12 filed August 17, 1995 and incorporated by reference to Exhibit 15(a) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. (n) Financial Data Schedules are filed herewith. (o) Rule 18f-3 Plan--incorporated by reference to Exhibit (o) of Post-Effective Amendment No. 23 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0001047469-98-027407 on July 15, 1998. (p) Powers of Attorney filed with the SEC via EDGAR Accession No. 0001047469-98-028802 on July 30, 1998. Item 24. Persons Controlled by or under Common Control with Registrant: See the Prospectuses and Statement of Additional Information regarding the Trust's control relationships. The Administrator is a subsidiary of SEI Investments which also controls the distributor of the Registrant, SEI Investments Distribution Co., and other corporations engaged in providing various financial and record keeping services, primarily to bank trust departments, pension plan sponsors, and investment managers. Item 25. Indemnification: Article VIII of the Agreement of Declaration of Trust filed as Exhibit (a) to the Registration Statement is incorporated by reference. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to trustees, directors, officers and controlling persons of the Registrant by the Registrant pursuant to the Declaration of Trust or otherwise, the Registrant is aware that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and, therefore, is unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by trustees, directors, officers or controlling persons of the Registrant in connection with the successful defense of any act, suit or proceeding) is asserted by such trustees, directors, officers or controlling persons in connection with the shares being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate C-2 jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issues. Item 26. Business and Other Connections of Investment Advisors: Other business, profession, vocation, or employment of a substantial nature in which each director or principal officer of each Advisor is or has been, at any time during the last two fiscal years, engaged for his own account or in the capacity of director, officer, employee, partner or trustee are as follows:
Name of Connection with Name Other Company Other Company ---- ------------- --------------- STI Capital Management, N.A. E. Jenner Wood III SunTrust Banks, Inc. -- Director Hunting F. Deutsch SunTrust Banks, Orlando -- Director Anthony R. Gray -- -- Chairman & Chief Investment Officer James R. Wood -- -- President Elliott A. Perny -- -- Executive Vice President Stuart F. Van Arsdale -- -- Senior Vice President Jonathan D. Rich -- -- Director Larry M. Cole -- -- Senior Vice President L. Earl Denney -- -- Executive Vice President Ronald Schwartz -- -- Senior Vice President
C-3
Name of Connection with Name Other Company Other Company ---- ------------- --------------- Andre B. Prawato -- -- Senior Vice President Edward J. Dau -- -- Senior Vice President James K. Wood -- -- Senior Vice President Mills A. Riddick -- -- Senior Vice President Christopher A. Jones -- -- Senior Vice President David E. West -- -- Vice President Brett L. Barner Senior Vice President -- --
Trusco Capital Management, Inc. The list required by this Item 28 of officers and directors of Trusco Capital Management, Inc., together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by such officers and directors during the past two years, is incorporated by reference to Schedules A and D of Form ADV, filed by Trusco Capital Management, Inc. pursuant to the Investment Advisers Act of 1940 (SEC File No. 801-23163).
SunTrust Bank, Atlanta Robert R. Long SunTrust Banks of Chairman of the Board Chairman of the Board and Georgia, Inc. President Ronald S. Crowding -- Executive Vice President Executive Vice President Charles B. Ginden -- -- Executive Vice President William H. Rogers, Jr. -- -- Executive Vice President Donald Wayne Thurmond -- -- Executive Vice President
C-4
Name of Connection with Name Other Company Other Company ---- ------------- --------------- Dr. William M. Chase Emory University President Director Gaylord O. Coan Gold Kist, Inc. CEO Director A.P. Correll Georgia-Pacific Chairman & CEO Director Corporation R.W. Courts, II Atlanta Realty Company President Director A.W. Dahlberg The Southern Company President, Chairman & CEO Director L. Phillip Humann SunTrust Banks, Inc. President, Chairman & CEO Services Resources Corporation William B. Johnson The Ritz Carlton Hotel Chairman of the Board Director Hicks J. Lanier Oxford Industries, Inc. Chairman of the Board, Pinehill Development Co. Director & President 30% owner Joseph L. Lanier, Jr. Dan River, Inc. Chairman of the Director Board Braelan Group Chairman Larry L. Prince Genuine Parts Company Chairman of the Director Board R. Randall Rollins Rollins, Inc. Chairman of the Director Board Lor, Inc. Director Maran, Inc. Director Gutterworld, Inc. Director Dabora, Inc. Director & Secretary Simpson, Nance & Graham Director Auto Parts Wholesale, Inc. Director Global Expanded Metal, Inc. Director Rollins Holding Co. Director Rol, Ltd. Partner
C-5
Name of Connection with Name Other Company Other Company ---- ------------- --------------- Rollins Investment Fund Partner Energy Partners Partner Petro Partnership Partner The Piedmont Investment Group Director WRG, Ltd. Partner Rollins, Inc. Chairman RPC Energy Services, Inc. Chairman The Mul Company Partner Bugvac, Inc. Director Omnitron Int'l, Inc. Director MRG, Ltd. Partner Gerald T. Adams -- -- Senior Vice President James R. Albach -- -- Group Vice President Gay Cash -- -- Vice President
C-6
Name of Connection with Name Other Company Other Company ---- ------------- --------------- Joseph B. Foley, Jr. -- -- Group Vice President Thomas R. Frisbie -- -- Group Vice President Mark Stancil -- -- Group Vice President David E. Thompson -- -- Vice President Charles C. Watson -- -- Group Vice President Dr. Mary B. Bullock Agnes Scott College President Director Larry L. Gellerstedt, III Beers Construction Company President Director John T. Glover Post Properties, Inc. President Director M. Douglas Ivester The Coca-Cola Company Chairman of the Board & CEO Director Dennis M. Love Printpack, Inc. President & CEO Director Charles H. McTier Robert Woodruff Foundation President Director
C-7 C-8 Item 27. Principal Underwriters: (a) Furnish the name of each investment company (other than the Registrant) for which each principal underwriter currently distributing the securities of the Registrant also acts as a principal underwriter, distributor or investment adviser. Registrant's distributor, SEI Investments Distribution Co. (the "Distributor"), acts as distributor for: SEI Daily Income Trust July 15, 1982 SEI Liquid Asset Trust November 29, 1982 SEI Tax Exempt Trust December 3, 1982 SEI Index Funds July 10, 1985 SEI Institutional Managed Trust January 22, 1987 SEI Institutional International Trust August 30, 1988 The Advisors' Inner Circle Fund November 14, 1991 The Pillar Funds February 28, 1992 CUFUND May 1, 1992 First American Funds, Inc. November 1, 1992 First American Investment Funds, Inc. November 1, 1992 The Arbor Fund January 28, 1993 Boston 1784 Funds-Registered Trademark- June 1, 1993 The PBHG Funds, Inc. July 16, 1993 Morgan Grenfell Investment Trust January 3, 1994 The Achievement Funds Trust December 27, 1994 Bishop Street Funds January 27, 1995 CrestFunds, Inc. March 1, 1995 STI Classic Variable Trust August 18, 1995 ARK Funds November 1, 1995 Monitor Funds January 11, 1996 SEI Asset Allocation Trust April 1, 1996
C-9 TIP Funds April 28, 1996 SEI Institutional Investments Trust June 14, 1996 First American Strategy Funds, Inc. October 1, 1996 HighMark Funds February 15, 1997 Armada Funds March 8, 1997 PBHG Insurance Series Fund, Inc. April 1, 1997 The Expedition Funds June 9, 1997 TIP Institutional Funds January 1, 1998 Oak Associates Funds February 27, 1998 The Nevis Funds, Inc. June 29, 1998 The Parkstone Group of Funds September 14, 1998
The Distributor provides numerous financial services to investment managers, pension plan sponsors, and bank trust departments. These services include portfolio evaluation, performance measurement and consulting services ("Funds Evaluation") and automated execution, clearing and settlement of securities transactions ("MarketLink"). (b) Furnish the Information required by the following table with respect to each director, officer or partner of each principal underwriter named in the answer to Item 21 of Part B. Unless otherwise noted, the business address of each director or officer is Oaks, PA 19456.
Position and Office Positions and Offices Name with Underwriter with Registrant - ---- ------------------- --------------------- Alfred P. West, Jr. Director, Chairman of the Board of Directors -- Henry H. Greer Director -- Carmen V. Romeo Director -- Mark J. Held President & Chief Operating Officer -- Gilbert L. Beebower Executive Vice President -- Richard B. Lieb Executive Vice President -- Dennis J. McGonigle Executive Vice President -- Robert M. Silvestri Chief Financial Officer & Treasurer -- Leo J. Dolan, Jr. Senior Vice President -- Carl A. Guarino Senior Vice President -- Larry Hutchison Senior Vice President -- Jack May Senior Vice President -- Hartland J. McKeown Senior Vice President -- Barbara J. Moore Senior Vice President -- Kevin P. Robins Senior Vice President & General Vice President & Counsel Assistant Secretary Patrick K. Walsh Senior Vice President -- Robert Aller Vice President -- Gordon W. Carpenter Vice President -- Todd Cipperman Vice President & Assistant Vice President & Secretary Assistant Secretary S. Courtney E. Collier Vice President & Assistant -- Secretary Robert Crudup Vice President & Managing Director -- Barbara Doyne Vice President -- Jeff Drennen Vice President -- Vic Galef Vice President & Managing -- Director Lydia A. Gavalis Vice President & Assistant Vice President & Secretary Assistant Secretary Greg Gettinger Vice President & Assistant Secretary --
C-10
Position and Office Positions and Offices Name with Underwriter with Registrant - ---- ------------------- --------------------- Kathy Heilig Vice President Vice President & Assistant Secretary Jeff Jacobs Vice President -- Samuel King Vice President -- Kim Kirk Vice President & Managing -- Director John Krzeminski Vice President & Managing -- Director Carolyn McLaurin Vice President & Managing -- Director W. Kelso Morrill Vice President -- Mark Nagle Vice President President & Chief Executive Officer Joanne Nelson Vice President -- Joseph M. O'Donnell Vice President & Assistant Vice President & Secretary Assistant Secretary Sandra K. Orlow Vice President & Secretary Vice President & Assistant Secretary Cynthia M. Parrish Vice President & Assistant Secretary -- Kim Rainey Vice President -- Rob Redican Vice President -- Maria Rinehart Vice President -- Mark Samuels Vice President & Managing -- Director Steve Smith Vice President -- Daniel Spaventa Vice President -- Kathryn L. Stanton Vice President & Assistant Vice President & Secretary Assistant Secretary Lynda J. Striegel Vice President & Assistant Vice President & Secretary Assistant Secretary Lori L. White Vice President & Assistant Secretary -- Wayne M. Withrow Vice President & Managing Director --
Item 28. Location of Accounts and Records: Books or other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940, and the rules promulgated thereunder, are maintained as follows: (a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3); (6); (8); (12); and 31a-1(d), the required books and records are maintained at the offices of Registrant's Custodians: Trust Company Bank Park Place P.O. Box 105504 Atlanta, Georgia 30348 Bank of New York One Wall Street New York, New York (International Equity Index Fund, International Equity Fund, Emerging Markets Equity Fund) C-11 (b)/(c) With respect to Rules 31a-1(a); 31a-1(b)(1),(4); (2)(C) and (D); (4); (5); (6); (8); (9); (10); (11); and 31a-1(f), the required books and records are maintained at the offices of Registrant's Administrator: SEI Investments Mutual Funds Services One Freedom Valley Road Oaks, Pennsylvania 19456 (c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f), the required books and records are maintained at the principal offices of the Registrant's Advisors: STI Capital Management, N.A. P.O. Box 3808 Orlando, Florida 32802 Trusco Capital Management 50 Hurt Plaza, Suite 1400 Atlanta, Georgia 30303 SunTrust Bank, Atlanta 25 Park Place Atlanta, Georgia 30303 Item 29. Management Services: None. Item 30. Undertakings: None. NOTICE A copy of the Agreement and Declaration of Trust for STI Classic Funds is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this Registration Statement has been executed on behalf of the Trust by an officer of the Trust as an officer and by its Trustees as trustees and not individually and the obligations of or arising out of this Registration Statement are not binding upon any of the Trustees, officers, or Shareholders individually but are binding only upon the assets and property of the Trust. C-12 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 (the "Securities Act") and the Investment Company Act of 1940, as amended, the Registrant certifies that it meets all of the requirements of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-Effective Amendment No. 25 to Registration Statement No. 33-45671 to be signed on its behalf by the undersigned, duly authorized, in the City of Oaks, Commonwealth of Pennsylvania on the 25th day of September, 1998. By: /s/ Mark Nagle -------------------------------------------- Mark Nagle, President and Chief Executive Officer Pursuant to the requirements of the Securities Act, this Registration Statement has been signed below by the following persons in the capacity on the dates indicated. * Trustee September 25, 1998 - ------------------------------ F. Wendell Gooch * Trustee September 25, 1998 - ------------------------------ Daniel S. Goodrum * Trustee September 25, 1998 - ------------------------------ Jesse S. Hall * Trustee September 25, 1998 - ------------------------------ Wilton Looney * Trustee September 25, 1998 - ------------------------------ Champney A. McNair * Trustee September 25, 1998 - ------------------------------ T. Gordy Germany * Trustee September 25, 1998 - ------------------------------ Bernard F. Sliger * Trustee September 25, 1998 - ------------------------------ Jonathan T. Walton * Trustee September 25, 1998 - ------------------------------ William H. Cammack /s/ Carol Rooney Controller, Treasurer & September 25, 1998 - ------------------------------ Chief Financial Officer Carol Rooney /s/ Mark Nagle President & Chief September 25, 1998 - ------------------------------ Executive Officer Mark Nagle * By: /s/ Kevin P. Robins ------------------------------------- Kevin P. Robins, As Power of Attorney EXHIBIT INDEX Number Exhibit EX-99.A Declaration of Trust originally filed with Registrant's Registration Statement on Form N-1A filed February 12, 1992 and incorporated by reference to Exhibit 1 of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. EX-99.B1 By-Laws originally filed with Registrant's Pre-Effective Amendment No. 1 filed April 23, 1992 and incorporated by reference to Exhibit 2 of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. EX-99.B2 Amended By-Laws - incorporated by reference to Exhibit (b)(2) of Post-Effective Amendment No. 23 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0001047469-98-027407 on July 15, 1998. EX-99.C Not applicable. EX-99.D1 Revised Investment Advisory Agreement with Trusco Capital Management, Inc. as originally filed with Registrant's Post-Effective Amendment No. 5 filed August 2, 1993 and incorporated by reference to Exhibit 5(c) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. EX-99.D2 Investment Advisory Agreement with American National Bank and Trust Company as originally filed with Registrant's Post-Effective Amendment No. 6 filed October 22, 1993 and as Exhibit 5(d) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. EX-99.D3 Investment Advisory Agreement with Sun Bank Capital Management, National Association (now STI Capital Management, N.A. as originally filed with Registrant's Post-Effective Amendment No. 6 filed October 22, 1993 and incorporated by reference to Exhibit 5(e) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. EX-99.D4 Investment Advisory Agreement with Trust Company Bank (now SunTrust Bank, Atlanta) as originally filed with Registrant's Post-Effective Amendment No. 6 filed October 22, 1993 and incorporated by reference to Exhibit D(4) of the Post-Effective Amendment No. 24 to the Registrant's Statement filed with the SEC via EDGAR Accession No. 0001047469-98-028802 on July 30, 1998. EX-99.E Distribution Agreement incorporated by reference to Exhibit 6 of Post-Effective Amendment No. 16 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-021336 on September 27, 1996. EX-99.F Not applicable. EX-99.G1 Custodian Agreement with Trust Company Bank dated February 1, 1994 originally filed with Registrant's Post-Effective Amendment No. 13 filed September 28, 1995 and incorporated by reference to Exhibit 8(b) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. EX-99.G2 Custodian Agreement with the Bank of California incorporated by reference to Exhibit 8(a) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. EX-99.G3 Fourth Amendment to Custodian Agreement by and between STI Trust & Investment Operations, Inc. and The Bank of New York dated May 6, 1997 incorporated by reference to Exhibit 8(d) of Post-Effective Amendment No. 21 to the Registrant's Registration C-14 Statement filed with the SEC via EDGAR Accession No. 0000912057-97-032207 on September 30, 1997. EX-99.H1 Transfer Agent Agreement with Federated Services Company dated May 14, 1994 originally filed with Post-Effective Amendment No. 9 filed September 22, 1994 and incorporated by reference to Exhibit 8(c) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. EX-99.H2 Administration Agreement with SEI Financial Management Corporation dated May 29, 1995 originally filed with Post-Effective Amendment No. 12 filed August 17, 1995 and incorporated by reference to Exhibit 9(a) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. EX-99.H3 Consent to Assignment and Assumption of the Administration Agreement between STI Classic Funds and SEI Financial Management Corporation incorporated by reference to Exhibit 9(b) of Post-Effective Amendment No. 21 to the Registrant's Registration Statement filed with the SEC via EDGAR Assession No. 0000912057-97-032207 on September 30, 1997. EX-99.I Opinion and Consent of Counsel originally filed with Pre-Effective Amendment No. 2 to the Registrant's Registration Statement on May 22, 1992 and incorporated by reference to Exhibit (i) of Post-Effective Amendment No. 23 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0001047469-98-027407 on July 15, 1998. EX-99.J Consent of Arthur Andersen, LLP is filed herewith. EX-99.K Not applicable. EX-99.L Not applicable. EX-99.M1 Distribution Plan - Investor Class incorporated by reference to Exhibit 15 of Post-Effective Amendment No. 16 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-021336 on September 27, 1996. EX-99.M2 Distribution and Service Agreement relating to Flex Shares dated May 29, 1995 originally filed with Post-Effective Amendment No. 12 filed August 17, 1995 and incorporated by reference to Exhibit 15(a) of Post-Effective Amendment No. 15 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996. EX-99.N EX-27.1 Financial Data Schedule for the Prime Quality Money Market Fund Trust Class is filed herewith. EX-27.2 Financial Data Schedule for the Prime Quality Money Market Fund Investor Class is filed herewith. EX-27.3 Financial Data Schedule for the U.S. Government Securities Money Market Fund Trust Class is filed herewith. EX-27.4 Financial Data Schedule for the U.S. Government Securities Money Market Fund is filed herewith. EX-27.5 Financial Data Schedule for the Tax Exempt Money Market Fund Trust Class is filed herewith. EX-27.33 Financial Data Schedule for the Balanced Fund Flex Class is filed herewith. EX-27.34 Financial Data Schedule for the Florida Tax Exempt Bond Fund Trust Class is filed herewith. EX-27.35 Financial Data Schedule for the Florida Tax Exempt Bond Fund Investor Class is filed herewith. EX-27.36 Financial Data Schedule for the Florida Tax Exempt Bond Fund Flex Class is filed herewith. EX-27.37 Financial Data Schedule for the Georgia Tax Exempt Bond Fund Trust Class is filed herewith. EX-27.38 Financial Data Schedule for the Georgia Tax Exempt Bond Fund Investor Class is filed herewith. EX-27.39 Financial Data Schedule for the Georgia Tax Exempt Bond Fund Flex Class is filed herewith. EX-27.40 Financial Data Schedule for the Tennessee Tax Exempt Bond Fund Trust Class is filed herewith. EX-27.41 Financial Data Schedule for the Tennessee Tax Exempt Bond Fund Investor Class is filed herewith. EX-27.42 Financial Data Schedule for the Tennessee Tax Exempt Bond Fund Flex Class is filed herewith. EX-27.43 Financial Data Schedule for the U.S. Government Securities Fund Trust Class is filed herewith. EX-27.44 Financial Data Schedule for the U.S. Government Securities Fund Investor Class is filed herewith. EX-27.45 Financial Data Schedule for the U.S. Government Securities Fund Flex Class is filed herewith. EX-27.46 Financial Data Schedule for the Limited Term Federal Mortgage Securities Fund Trust Class is filed herewith. EX-27.47 Financial Data Schedule for the Limited Term Federal Mortgage Securities Fund Investor Class is filed herewith. EX-27.48 Financial Data Schedule for the Limited Term Federal Mortgage Securities Fund Flex Class is filed herewith. EX-27.49 Financial Data Schedule for the International Equity Index Fund Trust Class is filed herewith. EX-27.50 Financial Data Schedule for the International Equity Index Fund Investor Class is filed herewith. EX-27.51 Financial Data Schedule for the International Equity Index Fund Flex Class is filed herewith. EX-27.52 Financial Data Schedule for the International Equity Fund Class 1 is filed herewith. EX-27.53 Financial Data Schedule for the International Equity Fund Class 2 is filed herewith. EX-27.54 Financial Data Schedule for the International Equity Fund Class 3 is filed herewith. EX-27.55 Financial Data Schedule for the Classic Institutional Cash Management Money Market Fund is filed herewith. EX-27.56 Financial Data Schedule for the Classic Institutional U.S. Treasury Securities Money Market Fund is filed herewith. EX-27.57 Financial Data Schedule for the Small Cap Fund Trust Class is filed herewith. EX-27.58 Financial Data Schedule for the Small Cap Fund Investor Class is filed herewith. EX-27.59 Financial Data Schedule for the Emerging Markets Equity Fund is filed herewith. EX-99.O Rule 18f-3 Plan incorporated by reference to Exhibit (i) of Post-Effective Amendment No. 23 to the Registrant's Registration Statement filed with the SEC via EDGAR Accession No. 0001047469-98-027407 on July 15, 1998. EX-99.P Powers of Attorney incorporated by reference to Exhibit(p) of Post-Effective Amendment No. 24 to the Registrant's Statement filed with the SEC via EDGAR Accession No. 000104769-98-028802 on July 30, 1998. C-15 EX-99.J 2 EXHIBIT 99.J ARTHUR ANDERSEN LLP CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- As independent public accountants, we hereby consent to the use in this Registration Statement of our report dated July 24, 1998, on the May 31, 1998 financial statements of STI Classic Funds, included in Post-Effective Amendment No. 25 to the Registration Statement on Form N1-A, and to all references to our Firm included in or made part of this Registration Statement File No. 33-45671. /s/ Arthur Andersen LLP Philadelphia, PA September 25, 1998 EX-27.1 3 EXHIBIT 27.1
6 0000883939 STI CLASSIC 011 PRIME QUALITY MONEY MARKET 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 2290245 2290245 14500 364 0 2305109 0 0 13059 13059 0 1880536 1880536 1086903 0 (27) (329) 0 0 2292050 0 106833 0 (11701) 95132 50 0 95182 0 77500 0 0 3915486 (3125552) 3699 921951 0 (406) 0 0 14910 0 15222 1878620 1.00 .05 0 (.05) 0 0 1.00 .59 0 0
EX-27.2 4 EXHIBIT 27.2
6 0000883939 STI CLASSIC 012 PRIME QUALITY MONEY MARKET 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 2290245 2290245 14500 364 0 2305109 0 0 13059 13059 0 411870 411870 283602 0 (27) (329) 0 0 2292050 0 106833 0 11701 95132 50 0 95182 0 (17632) 0 0 806517 (694228) 15979 921951 0 (406) 0 0 14910 0 15222 1878620 1.00 .05 0 (.05) 0 0 1.00 .76 0 0
EX-27.3 5 EXHIBIT 27.3
6 0000883939 STI CLASSIC 021 U.S. GOVERNMENT SECURITIES MONEY MARKET FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 388375 388375 51540 67 0 439982 0 0 3739 3739 0 377408 377408 344391 0 0 84 0 0 436243 0 21869 0 (2527) 19342 146 0 19488 0 (16621) 0 0 776773 (744136) 380 28715 0 60 0 0 3144 0 3181 349421 1.00 .05 0 (.05) 0 0 1.00 .62 0 0
EX-27.4 6 EXHIBIT 27.4
6 0000883939 STI CLASSIC 022 U.S. GOVERNMENT SECURITIES MONEY MARKET FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 388375 388375 51540 67 0 439982 0 0 3739 3739 0 58752 58752 63197 0 0 84 0 0 436243 0 21869 0 (2527) 19342 146 0 19488 0 (2723) 0 0 178312 (185358) 2600 28715 0 60 0 0 3144 0 3181 349421 1.00 .05 0 (.05) 0 0 1.00 .76 0 0
EX-27.5 7 EXHIBIT 27.5
6 0000883939 STI CLASSIC 031 TAX-EXEMPT MONEY MARKET 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 581207 581207 5285 112 0 584604 0 0 2043 2043 0 448022 448022 333004 0 (1) (4) 0 0 582561 0 20595 0 (3027) 17568 0 0 17568 0 (13717) 0 0 1039352 (924334) 0 147542 0 (4) 0 0 3982 0 3982 563739 1.00 .03 0 (.03) 0 0 1.00 .51 0 0
EX-27.6 8 EXHIBIT 27.6
6 0000883939 STI CLASSIC 032 TAX-EXEMPT MONEY MARKET 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 581207 581207 5285 112 0 584604 0 0 2043 2043 0 134544 134544 102019 0 (1) (4) 0 0 582561 0 20595 0 (3027) 17568 0 0 17568 0 (3852) 0 0 346323 (317112) 3314 147542 0 (4) 0 0 3982 0 3982 563739 1.00 .03 0 (.03) 0 0 1.00 .62 0 0
EX-27.7 9 EXHIBIT 27.7
6 0000883939 STI CLASSIC 041 INVESTMENT GRADE BOND FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 809612 833922 10986 88 31 845027 0 0 5159 5159 0 771578 74494 68793 0 (188) (1517) 0 24310 839868 0 49084 0 (6002) 43082 10888 24005 77975 0 (40937) 0 0 258775 (162448) 30522 167294 0 (12593) 0 0 6441 0 6871 763100 10.16 .60 .49 (.60) 0 0 10.65 .76 0 0
EX-27.8 10 EXHIBIT 27.8
6 0000883939 STI CLASSIC 042 INVESTMENT GRADE BOND FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 809612 833922 10986 88 31 845027 0 0 5159 5159 0 32828 3124 3085 0 (180) (1517) 0 24310 839868 0 49084 0 (6002) 43082 10888 24005 77975 0 (1729) 0 0 5860 (8920) 1609 167294 0 (12593) 0 0 6441 0 6871 763100 10.16 .55 .49 (.55) 0 0 10.65 1.14 0 0
EX-27.9 11 EXHIBIT 27.9
6 0000883939 STI CLASSIC 043 INVESTMENT GRADE BOND FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 809612 833922 10986 88 31 845027 0 0 5159 5159 0 12857 1230 776 0 (188) (1517) 0 24310 839868 0 49084 0 (6002) 43082 10888 24005 77975 0 (416) 0 0 9584 (2932) 351 167294 0 (12593) 0 0 6441 0 6871 763100 10.17 .51 .49 (.51) 0 0 10.66 1.65 0 0
EX-27.10 12 EXHIBIT 27.10
6 0000883939 STI CLASSIC 051 INVESTMENT GRADE TAX-EXEMPT BOND FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 202083 204781 7566 80 0 212431 27904 0 1363 29267 0 142338 12865 12522 4 0 3502 0 2698 183164 0 8234 0 1535 6699 6478 1225 14402 0 (5523) (3989) 0 39596 (38924) 4599 7482 0 1967 0 0 1535 0 1604 179307 11.22 .44 .50 (.44) (.32) 0 11.40 .76 0 0
EX-27.11 13 EXHIBIT 27.11
6 0000883939 STI CLASSIC 052 INVESTMENT GRADE TAX-EXEMPT BOND FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 202083 204781 7566 80 0 212431 27904 0 1363 29267 0 26273 2468 2509 4 0 3502 0 2698 183164 0 8234 0 1535 6699 6478 1225 14402 0 (1002) (799) 0 2484 (8284) 1614 7482 0 1967 0 0 1535 0 1604 179307 11.24 .39 .49 (.39) (.32) 0 11.41 1.16 0 0
EX-27.12 14 EXHIBIT 27.12
6 0000883939 STI CLASSIC 053 INVESTMENT GRADE TAX-EXEMPT BOND FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 202083 24781 7566 80 0 212431 27904 0 1363 29267 0 8349 737 473 4 0 3502 0 2698 183164 0 8234 0 1535 6699 6478 1225 14402 0 (173) (152) 0 6179 (2842) 296 7482 0 1967 0 0 1535 0 1604 179307 11.23 .33 .49 (.33) (.32) 0 11.40 1.64 0 0
EX-27.13 15 EXHIBIT 27.13
6 0000883939 STI CLASSIC 061 CAPITAL GROWTH FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 1584565 1922773 25126 257 0 1672658 27751 0 2193 29944 0 1112047 93021 79144 3728 0 162710 0 338208 1910301 19143 10774 0 (21934) 7983 261636 157396 427015 0 (7798) (200074) 0 29548 (22177) 13725 569760 3569 147010 0 0 19426 0 23988 1689231 15.09 .09 3.96 (.09) (2.57) 0 16.48 1.16 0 0
EX-27.14 16 EXHIBIT 27.14
6 0000883939 STI CLASSIC 062 CAPITAL GROWTH FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 1584565 1922773 25126 257 0 1672658 27751 0 2193 29944 0 194911 16497 14169 3728 0 162710 0 338208 1910301 10774 19143 0 (21934) 7983 261636 157396 427015 0 (28) (36216) 0 1812 (2349) 2518 569760 3569 147010 0 0 19426 0 23988 1689231 15.06 (.01) 3.95 0 (2.57) 0 16.43 1.81 0 0
EX-27.15 17 EXHIBIT 27.15
6 0000883939 STI CLASSIC 063 CAPITAL GROWTH FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 1584565 1922773 25126 257 0 1672658 27751 0 2193 29944 0 98697 6578 3755 3728 0 162710 0 338208 1910301 10774 19143 0 (21934) 7983 261636 157396 427015 0 0 (9643) 0 4242 (795) 674 569760 3569 147010 0 0 19426 0 23988 1689231 14.96 (.04) 3.87 0 (2.57) 0 16.22 2.26 0 0
EX-27.16 18 EXHIBIT 27.16
6 0000883939 STI CLASSIC 071 VALUE INCOME STOCK FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 1925610 2124545 10937 50 0 2135532 13885 0 5408 18993 0 1362503 124117 109481 6050 0 201720 0 198935 2116539 47287 7447 0 (20179) 34555 319982 44518 399055 0 (30991) (262191) 0 381039 (459701) 269446 389012 6428 192817 0 0 15826 0 20186 1975259 13.71 .26 2.62 (.27) (2.42) 0 13.90 .92 0 0
EX-27.17 19 EXHIBIT 27.17
6 0000883939 STI CLASSIC 072 VALUE INCOME STOCK FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 1925610 2124545 10937 50 0 2135532 13885 0 5108 18993 0 173234 15186 12323 6050 0 201720 0 198935 2116539 47287 7447 0 (20179) 34555 319982 44518 399055 0 (2838) (29671) 0 35483 (28503) 32233 389012 6428 192817 0 0 15826 0 20186 1978259 13.68 .20 2.62 (.21) (2.42) 0 13.87 1.27 0 0
EX-27.18 20 EXHIBIT 27.18
6 0000883939 STI CLASSIC 073 VALUE INCOME STOCK FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 1925610 2124545 10937 50 0 2135532 13885 0 5108 18993 0 174097 13126 7882 6050 0 201720 0 198935 2116539 47287 7447 0 (20179) 34555 319982 44518 399055 0 (1104) (19217) 0 106762 (20844) 20054 389012 6428 192817 0 0 15826 0 20186 1978259 13.61 .12 2.57 (.13) (2.42) 0 13.75 2.01 0 0
EX-27.19 21 EXHIBIT 27.19
6 0000883939 STI CLASSIC 081 SHORT-TERM TREASURY FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 50630 50811 592 10 478 51891 0 0 281 281 0 46966 4708 1951 0 (53) (211) 0 181 51610 0 2059 0 (243) 1816 47 211 2074 0 (1575) 0 0 33653 (9594) 661 24610 0 (257) 0 0 307 0 340 35157 9.88 .51 .10 (.52) 0 0 9.97 .66 0 0
EX-27.20 22 EXHIBIT 27.20
6 0000883939 STI CLASSIC 082 SHORT-TERM TREASURY FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 50630 50811 592 10 478 51891 0 0 281 281 0 3311 329 351 0 (53) (211) 0 181 51610 0 2059 0 (243) 1816 47 211 2074 0 (178) 0 0 479 (1338) 180 24610 0 (257) 0 0 307 0 340 35157 9.88 .49 .09 (.50) 0 0 9.96 .81 0 0
EX-27.21 23 EXHIBIT 27.21
6 0000883939 STI CLASSIC 083 SHORT-TERM TREASURY FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 50630 50811 592 10 478 51891 0 0 281 281 0 1416 142 132 0 (53) (211) 0 181 51610 0 2059 0 (243) 1816 47 211 2074 0 (63) 0 0 1012 (757) 56 24610 0 (257) 0 0 307 0 340 35157 9.85 .47 .10 (.48) 0 0 9.94 1.06 0 0
EX-27.22 24 EXHIBIT 27.22
6 0000883939 STI CLASSIC 091 SHORT-TERM BOND FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 122992 123854 1827 19 0 125700 500 0 719 1219 0 119361 11978 10989 143 0 77 0 862 124481 0 6779 0 (743) 6036 502 1163 7701 0 (5864) (100) 0 59682 (33705) 3238 31525 141 (319) 0 0 884 0 926 110664 9.90 .55 .16 (.55) (.01) 0 10.05 .66 0 0
EX-27.23 25 EXHIBIT 27.23
6 0000883939 STI CLASSIC 092 SHORT-TERM BOND FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 122992 123854 1827 19 0 125700 500 0 719 1219 0 1935 194 194 143 0 77 0 862 124481 0 6779 0 (743) 6036 502 1163 7701 0 (106) (2) 0 190 (560) 103 31525 141 (319) 0 0 884 0 926 110664 9.91 .53 .17 (.53) (.01) 0 10.07 .86 0 0
EX-27.24 26 EXHIBIT 27.24
6 0000883939 STI CLASSIC 093 SHORT-TERM BOND FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 122992 123854 1827 19 0 125700 500 0 719 1219 0 2103 210 135 143 0 77 0 862 124481 0 0 0 (743) 6036 502 1163 7701 0 (67) (1) 0 1392 (441) 65 31525 141 (319) 0 0 884 0 926 110664 9.91 .50 .17 (.50) (.01) 0 10.07 1.21 0 0
EX-27.25 27 EXHIBIT 27.25
6 0000883939 STI CLASSIC 101 SUNBELT EQUITY FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 347251 475127 5118 55 4912 480300 5660 0 3789 9449 0 291256 28568 27336 40 0 24324 0 127876 470851 854 326 0 (5544) (4364) 49778 46313 91727 0 0 (32274) 0 207154 (238878) 30202 55696 39 14034 0 0 5804 0 6117 459822 13.28 .01 3.03 0 (1.20) 0 15.12 1.16 0 0
EX-27.26 28 EXHIBIT 27.26
6 0000883939 STI CLASSIC 102 SUNBELT EQUITY FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 347251 475127 5118 55 4912 480300 5660 0 3789 9449 0 20090 2089 1968 40 0 24324 0 127876 470851 854 326 0 (5544) (4364) 49778 46313 91727 0 0 (2333) 0 5150 (8619) 2323 55696 39 14034 0 0 5804 0 6117 459822 13.06 (.07) 2.98 0 (1.20) 0 14.77 1.61 0 0
EX-27.27 29 EXHIBIT 27.27
6 0000883939 STI CLASSIC 103 SUNBELT EQUITY FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 347251 475127 5118 55 4912 480300 5660 0 378 9449 0 7265 553 446 40 0 24324 0 127876 470851 854 326 0 (5544) (4364) 49778 46313 91727 0 0 (516) 0 3848 (2603) 515 55696 39 14034 0 0 5804 0 6117 459822 13.00 (.09) 2.89 0 (1.20) 0 14.60 2.21 0 0
EX-27.28 30 EXHIBIT 27.28
6 0000883939 STI CLASSIC 111 MID CAP EQUITY FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 348394 380263 1792 51 0 390106 5640 0 2669 8309 0 273201 24498 23086 0 (1) 29962 0 39869 381797 1990 1222 0 (4564) (1352) 54941 14034 67623 0 0 (44446) 0 10517 (11149) 3378 64062 (10) 25752 0 0 4269 0 5035 371243 13.21 0 2.54 0 (1.96) 0 13.79 1.16 0 0
EX-27.29 31 EXHIBIT 27.29
6 0000883939 STI CLASSIC 112 MID CAP EQUITY FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 348394 388263 1792 51 0 390106 5640 0 2669 8309 0 20703 1824 1555 0 (1) 29962 0 39869 381797 1990 1222 0 (4564) (1352) 54941 14034 67623 0 0 (3025) 0 445 (407) 248 64062 (10) 25752 0 0 4269 0 5035 371243 13.17 (.03) 2.49 0 (1.96) 0 13.67 1.61 0 0
EX-27.30 32 EXHIBIT 27.30
6 0000883939 STI CLASSIC 113 MID CAP EQUITY FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 348394 388263 17926 51 0 390106 5640 0 2669 8309 0 18063 1419 966 0 (1) 29962 0 39869 381797 1990 1222 0 (4564) (1352) 54941 14034 67623 0 0 (1899) 0 777 (292) 158 64062 (10) 25752 0 0 4269 0 5035 371243 13.04 (.04) 2.38 0 (1.96) 0 13.42 2.21 0 0
EX-27.31 33 EXHIBIT 27.31
6 0000883939 STI CLASSIC 121 BALANCED FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 197921 224421 4508 31 0 228978 4283 0 292 4575 0 152733 14400 12487 784 0 11480 0 26500 224403 1350 5176 0 (1968) 4558 17885 14594 37037 0 (4197) (12908) 0 4245 (3922) 1402 60966 781 8010 0 0 1787 0 2219 188120 11.94 .31 2.19 (.32) (1.03) 0 13.09 .96 0 0
EX-27.32 34 EXHIBIT 27.32
6 0000883939 STI CLASSIC 122 BALANCED FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 197921 224421 4508 31 0 228978 4283 0 292 4575 0 6807 632 516 784 0 11480 0 26500 224403 1350 5176 0 (1968) 4558 17885 14594 37037 0 (154) (536) 0 167 (92) 56 60966 781 8010 0 0 1787 0 2219 188120 11.99 .28 2.19 (.29) (1.03) 0 13.14 1.26 0 0
EX-27.33 35 EXHIBIT 27.33
6 0000883939 STI CLASSIC 123 BALANCED FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 197921 224421 4508 31 0 228978 4283 0 292 4575 0 26099 2121 897 784 0 11480 0 26500 224403 1350 5176 0 (1968) 4558 17885 14594 37037 0 (204) (972) 0 1688 (173) 97 60966 781 8010 0 0 1787 0 2219 188120 11.90 .20 2.16 (.21) (1.03) 0 13.02 2.02 0 0
EX-27.34 36 EXHIBIT 27.34
6 0000883939 STI CLASSIC 131 FLORIDA TAX-EXEMPT BOND FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 104243 107377 1538 33 0 108948 2914 0 554 3468 0 90819 8765 6889 1 0 463 0 3134 105480 0 4010 0 (600) 3410 720 2334 6464 0 (3070) (42) 0 5591 (1777) 40 48767 0 (210) 0 0 540 0 758 83115 10.28 .44 .45 (.44) (.01) 0 10.72 .66 0 0
EX-27.35 37 EXHIBIT 27.35
6 0000883939 STI CLASSIC 132 FLORIDA TAX-EXEMPT BOND FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 104243 107377 1538 33 0 108948 2914 0 554 3468 0 3119 315 300 1 0 463 0 3134 105480 0 4010 0 (600) 3410 720 2334 6464 0 (128) (2) 0 82 (90) 10 48767 0 (210) 0 0 540 0 758 83115 10.29 .42 .44 (.42) (.01) 0 10.72 .86 0 0
EX-27.36 38 EXHIBIT 27.36
6 0000883939 STI CLASSIC 133 FLORIDA TAX-EXEMPT BOND FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 104243 107377 1538 33 0 108948 2914 0 554 3468 0 7944 760 555 1 0 463 0 3134 105480 0 4010 0 (600) 3410 720 2334 6464 0 (211) (3) 0 658 (205) 16 48767 0 (210) 0 0 540 0 758 83115 10.30 .37 .45 (.37) (.01) 0 10.74 1.36 0 0
EX-27.37 39 EXHIBIT 27.37
6 0000883939 STI CLASSIC 141 GEORGIA TAX-EXEMPT BOND FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 71202 73466 1516 12 0 74994 0 0 392 392 0 60321 6166 5021 1 0 130 0 2264 74602 0 2881 0 (451) 2430 195 1962 4587 0 (2075) (61) 0 3445 (1456) 92 26697 0 7 0 0 394 0 582 60601 9.73 .41 .39 (.41) (.01) 0 10.11 .66 0 0
EX-27.38 40 EXHIBIT 27.38
6 0000883939 STI CLASSIC 142 GEORGIA TAX-EXEMPT BOND FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 71202 73466 1516 12 0 74994 0 0 392 392 0 3836 392 381 1 0 130 0 2264 74602 0 2881 0 (451) 2430 195 1962 4587 0 (147) (4) 0 149 (131) 13 26697 0 7 0 0 394 0 582 60601 9.74 .39 .40 (.39) (.01) 0 10.13 .86 0 0
EX-27.39 41 EXHIBIT 27.39
6 0000883939 STI CLASSIC 143 GEORGIA TAX-EXEMPT BOND FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 71202 73466 1516 12 0 74994 0 0 392 392 0 8050 817 607 1 0 130 0 2264 74602 0 2881 0 (451) 2430 195 1962 4587 0 (207) (7) 0 495 (176) 19 26697 0 7 0 0 394 0 582 60601 9.73 .34 .40 (.34) (.01) 0 10.12 1.36 0 0
EX-27.40 42 EXHIBIT 27.40
6 0000883939 STI CLASSIC 151 TENNESSEE TAX-EXEMPT BOND FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 260 0 (54) 206 34 (120) 120 0 (66) 0 0 158 (364) 1 (6080) 0 (12) 0 0 34 0 108 5983 9.63 .36 .25 (.36) (.07) 0 9.81 .66 0 0
EX-27.41 43 EXHIBIT 27.41
6 0000883939 STI CLASSIC 152 TENNESSEE TAX-EXEMPT BOND FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 260 0 (54) 206 34 (120) 120 0 (46) (6) 0 11 (181) 4 (6080) 0 (12) 0 0 34 0 108 5983 9.65 .35 .23 (.35) (.07) 0 9.81 .86 0 0
EX-27.42 44 EXHIBIT 27.42
6 0000883939 STI CLASSIC 153 TENNESSEE TAX-EXEMPT BOND FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 260 0 (54) 206 34 (120) 120 0 (94) (16) 0 100 (368) 8 (6080) 0 (12) 0 0 34 0 108 5983 9.64 .31 .24 (.31) (.07) 0 9.81 1.36 0 0
EX-27.43 45 EXHIBIT 27.43
6 0000883939 STI CLASSIC 161 U.S. GOVERNMENT SECURITIES FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 41080 42073 328 12 0 42421 0 0 275 275 0 34056 3337 2515 0 0 (6) 0 993 42146 0 2183 0 (289) 1894 55 1207 3156 0 (1585) 0 0 1949 (592) 37 17631 0 (61) 0 0 241 0 369 32623 10.02 .61 .44 (.61) 0 0 10.46 .76 0 0
EX-27.44 46 EXHIBIT 27.44
6 0000883939 STI CLASSIC 162 U.S. GOVERNMENT SECURITIES FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 41080 42073 328 12 0 42421 0 0 275 275 0 3145 308 231 0 0 (6) 0 993 42146 0 2183 0 (289) 1894 55 1207 3156 0 (141) 0 0 157 (85) 13 17631 0 (61) 0 0 241 0 369 32623 10.02 .57 .43 (.57) 0 0 10.45 1.16 0 0
EX-27.45 47 EXHIBIT 27.45
6 0000883939 STI CLASSIC 163 U.S. GOVERNMENT SECURITIES FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 41080 42073 328 12 0 42421 0 0 275 275 0 3958 385 352 0 0 (6) 0 993 42146 0 2183 0 (289) 1894 55 1207 3156 0 (168) 0 0 260 (169) 14 17631 0 (61) 0 0 241 0 369 32623 10.02 .52 .44 (.52) 0 0 10.46 1.67 0 0
EX-27.46 48 EXHIBIT 27.46
6 0000883939 STI CLASSIC 171 LIMITED TERM FEDERAL MORTGAGE SECURITIES 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 150603 151489 1430 75 0 152994 10355 0 903 11258 0 136353 13586 13217 0 (2) 262 0 886 141736 0 8865 0 (929) 7936 502 1031 9469 0 (7721) (194) 0 4313 (3626) 413 13998 0 (43) (2) 0 899 0 1108 138240 10.02 .58 .11 (.58) (.01) 0 10.12 .66 0 0
EX-27.47 49 EXHIBIT 27.47
6 0000883939 STI CLASSIC 172 LIMITED TERM FEDERAL MORTGAGE SECURITIES 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 150603 151489 1430 75 0 152994 10355 0 903 11258 0 2694 268 233 0 (2) 262 0 886 141736 0 8865 0 (929) 7936 502 1031 9469 0 (135) (3) 0 138 (161) 14 13998 0 (43) (2) 0 899 0 1108 138240 10.00 .56 .12 (.56) (.01) 0 10.11 .91 0 0
EX-27.48 50 EXHIBIT 27.48
6 0000883939 STI CLASSIC 173 LIMITED TERM FEDERAL MORTGAGE SECURITIES 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 150603 151489 1430 75 0 152994 10355 0 903 11258 0 1543 152 158 0 (2) 262 0 886 141736 0 8865 0 (929) 7936 502 1031 9469 0 (78) (2) 0 50 (51) 7 13998 0 (43) (2) 0 899 0 1108 138240 10.02 .52 .11 (.52) (.01) 0 10.12 1.26 0 0
EX-27.49 51 EXHIBIT 27.49
6 0000883939 STI CLASSIC FUNDS 180 INTERNATIONAL EQUITY INDEX FUND - TRUST SHARES 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 43564 61932 357 2618 0 64907 14 0 110 124 0 43927 4222 4718 259 0 2261 0 18363 64810 1138 34 0 674 498 3303 9885 13686 0 (489) (2914) 0 700 (1473) 277 4802 220 2335 0 0 543 0 775 53081 11.34 .11 2.65 (.11) (.68) 0 13.31 1.06 0 0
EX-27.50 52 EXHIBIT 27.50
6 0000883939 STI CLASSIC FUNDS 181 INTERNATIONAL EQUITY INDEX FUND - INVESTOR SHARES 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 43564 61932 357 2618 0 64907 14 0 110 124 0 43927 541 497 259 0 2261 0 18363 64810 1138 34 0 674 498 3303 9885 13686 0 (34) (343) 0 210 (201) 34 4802 220 2335 0 0 5463 0 775 6206 11.26 .16 2.53 (.07) (.68) 0 13.20 1.46 0 0
EX-27.51 53 EXHIBIT 27.51
6 0000883939 STI CLASSIC FUNDS 182 INTERNATIONAL EQUITY INDEX - FLEX SHARES 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 43564 61932 357 2168 0 64907 14 0 110 124 0 43927 112 80 259 0 2261 0 18363 64810 1138 34 0 674 498 3303 9885 13686 0 0 (54) 0 63 (36) 5 4802 220 2335 0 0 543 0 775 1009 11.24 .17 2.44 0 (.68) 0 13.17 2.11 0 0
EX-27.52 54 EXHIBIT 27.52
6 0000883939 STI CLASSIC FUNDS 190 INTERNATIONAL EQUITY FUND CLASS 1 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 548433 664154 0 3263 0 667417 0 0 0 0 0 481962 41927 35898 2500 0 33758 0 115634 667417 10655 1352 0 8687 3320 59763 50798 113881 82229 1649 49334 0 20687 18402 3744 159043 834 26202 0 0 7201 0 8778 546289 13.63 .04 2.69 .04 1.32 0 15.00 1.47 0 0
EX-27.53 55 EXHIBIT 27.53
6 0000883939 STI CLASSIC FUNDS 191 INTERNATIONAL EQUITY FUND CLASS 2 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 548433 664154 0 3263 0 667417 0 0 0 0 0 14451 1165 786 2500 0 33758 0 115634 667417 10655 1352 0 8687 3320 59763 50798 113881 5289 5 1347 0 526 254 107 159043 834 26202 0 0 7201 0 8778 14531 13.58 .02 2.64 0 1.32 0 14.92 1.82 0 0
EX-27.54 56 EXHIBIT 27.54
6 0000883939 STI CLASSIC FUNDS 192 INTERNATIONAL EQUITY FUND CLASS 3 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 548433 664154 0 3263 0 667417 0 0 0 0 0 19112 1442 622 2500 0 33758 0 115634 667417 10655 1352 0 8687 3320 59763 50798 113881 11505 0 1526 0 1021 322 121 159043 834 26202 0 0 7201 0 8778 15695 13.47 .07 2.46 0 1.32 0 14.68 2.52 0 0
EX-27.55 57 EXHIBIT 27.55
6 0000883939 STI CLASSIC 200 CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 374715 374715 2407 72 0 377194 0 0 2392 0 0 374802 374802 395673 0 0 0 0 0 374802 0 17193 0 (493) 16700 0 0 16700 0 (16700) 0 0 1549940 (1582098) 11287 (20871) 0 0 0 0 1011 0 928 304066 1.00 .05 0 (.05) 0 0 1.00 .16 0 0
EX-27.56 58 EXHIBIT 27.56
6 0000883939 STI CLASSIC 210 CLASSIC INSTITUTIONAL U.S. TREASURY SECURITIES MONEY MARKET 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 116140 116140 25365 0 0 141504 0 0 1170 1170 0 140331 140331 0 0 0 3 0 0 140334 0 5786 0 (190) 5596 4 0 5600 0 (5596) 0 0 991131 (875270) 4231 120096 0 0 0 0 407 0 401 104670 1.00 .05 0 (.05) 0 0 1.00 .18 0 0
EX-27.57 59 EXHIBIT 27.57
6 0000883939 STI CLASSIC 221 SMALL CAP EQUITY FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 411649 435338 1316 37 0 436691 4159 0 1078 5237 0 348236 30556 23347 669 0 19033 0 23689 431454 6459 639 0 (3971) 3127 32653 16045 51825 0 (2704) (14480) 0 22065 (4840) 1294 300405 316 16123 0 0 3579 0 4332 313375 11.07 .14 2.41 (.12) (.62) 0 12.88 1.21 0 0
EX-27.58 60 EXHIBIT 27.58
6 0000883939 STI CLASSIC 222 SMALL CAP EQUITY FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 411649 435338 1316 37 0 436691 4159 0 1078 5237 0 39827 3172 1366 669 0 19033 0 23689 431454 639 6459 0 (3971) 3127 32653 16045 51825 0 (70) (897) 0 3366 (273) 80 300405 316 16123 0 0 3579 0 4332 313375 11.28 .03 2.17 (.06) (.62) 0 12.80 2.06 0 0
EX-27.59 61 EXHIBIT 27.59
6 0000883939 STI CLASSIC 230 EMERGING MARKETS EQUITY FUND 1,000 YEAR MAY-31-1998 JUN-01-1997 MAY-31-1998 40066 34733 259 222 0 35214 640 0 103 743 0 41007 3897 3660 298 0 (1418) 0 (5333) 34554 940 167 0 639 468 (936) (7441) (7909) 3826 (314) (544) 0 2344 (2199) 92 (4941) 144 62 0 0 533 0 729 40988 10.79 .16 (1.86) (.08) (.14) 0 8.87 1.56 0 0
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