-----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, A2s3T4L4dC0oBJDUvjHRAU5h2Rt0WNm8N2fdMcN7uAyKgNaFOt6xzx7JMOvifNdP uYL+ztJk+SAQ0blZ+3aIvw== 0001047469-98-028802.txt : 19980803 0001047469-98-028802.hdr.sgml : 19980803 ACCESSION NUMBER: 0001047469-98-028802 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19980730 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: 485APOS SEC ACT: SEC FILE NUMBER: 033-45671 FILM NUMBER: 98674260 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 811-06557 FILM NUMBER: 98674261 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 485APOS 1 485APOS AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 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. 24 /X/ AND REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / / AMENDMENT NO. 26 /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 1800 M STREET, N.W. PHILADELPHIA, PA 19103 WASHINGTON, D.C. 20036 Title of Securities Being Registered...............Units of Beneficial Interest It is proposed that this filing will become effective (check appropriate box) ____ Immediately upon filing pursuant to paragraph (b), or ____ On [date] pursuant to paragraph (b), or __X_ 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-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 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. 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 00.0% 00.0% 00.0% IBC/DONOGHUE FIRST TIER AVERAGE 00.0% 00.0% 00.0%
[INSERT 7-DAY YIELD OR PHONE NUMBER TO OBTAIN YIELD] 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. It 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 [ %], [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Distribution and Service (12b-1) Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 00.0% 00.0% 00.0% IBC/DONOGHUE TAX-FREE STOCKBROKER & GENERAL PURPOSE AVERAGE 00.0% 00.0% 00.0%
[INSERT 7-DAY YIELD OR PHONE NUMBER TO OBTAIN YIELD] 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. It 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 [ %], [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Distribution and Service (12b-1) Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 00.0% 00.0% 00.0% IBC/DONOGHUE U.S. TREASURY & REPO AVERAGE 00.0% 00.0% 00.0%
[INSERT 7-DAY YIELD OR PHONE NUMBER TO OBTAIN YIELD] 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. It 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 [ %], [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page X. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Distribution and Service (12b-1) Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 8 PROSPECTUS EACH FUND'S PRINCIPAL INVESTMENT FUND INVESTMENT 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 U.S. GOVERNMENT SECURITIES TAX-EXEMPT MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND - ------------------------------------------------------------------------------------------------------------------------ Bank Obligations X - ------------------------------------------------------------------------------------------------------------------------ Commercial Paper X X - ------------------------------------------------------------------------------------------------------------------------ Corporate Obligations X - ------------------------------------------------------------------------------------------------------------------------ Foreign Securities 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 $[ ] billion in assets under management. For the fiscal year ended May 31, 1998, Trusco received advisory fees of: PRIME QUALITY MONEY MARKET FUND.............. % TAX-EXEMPT MONEY MARKET FUND................. % U.S. GOVERNMENT SECURITIES MONEY MARKET FUND....................................... %
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 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 , 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. Net Asset Value, Beginning of Period Income From Investment Operations Net Investment Income Net Gains or Losses on Securities (both realized and unrealized) Total From Investment Operations Less Distributions Dividends (from net investment income) Distributions (from capital gains) Returns of Capital Total Distributions Net Asset Value, End of Period Total Return Ratios/Supplemental Data Net Assets, End of Period Ratio of Expenses to Average Net Assets Ratio of Net Income to Average Net Assets Portfolio Turnover Rate 1 Commencement of operations. 2 Total return excludes the effect of sales charge. 3 Annualized.
SIMPLY SPEAKING . . . FINANCIAL HIGHLIGHTS Study these tables to see how each Fund performed since it began investment operations. 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. Distribution fees, as a percentage of average daily net assets, are as follows:
MAXIMUM FOR FISCAL YEAR ENDING MAY 31, 1998 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. [GRAPHIC] STI CLASSIC FUNDS FOR THE SUNTRUST 401(K) PLAN PROSPECTUS October 1, 1998 CAPITAL GROWTH FUND INVESTMENT GRADE BOND FUND PRIME QUALITY MONEY MARKET FUND SHORT-TERM BOND FUND SUNBELT EQUITY 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 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 CAPITAL GROWTH FUND 4 INVESTMENT GRADE BOND FUND 6 PRIME QUALITY MONEY MARKET FUND 8 SHORT-TERM BOND FUND 10 SUNBELT EQUITY FUND 12 VALUE INCOME STOCK FUND IF YOU WOULD LIKE MORE INFORMATION ABOUT THE FOLLOWING TOPICS, PLEASE SEE: 14 EACH FUND'S PRINCIPAL INVESTMENTS 15 THE ADVISORS AND THEIR PORTFOLIO MANAGERS 16 PURCHASING, SELLING AND EXCHANGING FUND SHARES 18 HISTORICAL FINANCIAL INFORMATION ABOUT EACH FUND 19 DISTRIBUTIONS OF DIVIDENDS AND CAPITAL GAINS 19 TAXES 22 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS
FOR INFORMATION ABOUT KEY TERMS AND CONCEPTS, LOOK FOR OUR "SIMPLY SPEAKING" EXPLANATIONS. - -------------------------------------------------------------------------------- [ICON] FUND SUMMARY INVESTMENT STRATEGY [ICON] WHAT ARE THE RISKS OF INVESTING? [ICON] PERFORMANCE INFORMATION [ICON] WHAT IS AN INDEX? [ICON] FUND FEES AND EXPENSES [ICON] FUND INVESTMENTS [ICON] INVESTMENT ADVISORS [ICON] PURCHASING FUND SHARES [ICON] - -------------------------------------------------------------------------------- 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 the Prime Quality 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. 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. The Prime Quality Money Market Fund seeks 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 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 volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. PROSPECTUS 3 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 AND THE LIPPER GROWTH FUNDS AVERAGE. THE LIPPER GROWTH FUNDS AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
SINCE FUND INCEPTION 1 YEAR 5 YEARS (6/8/92) CAPITAL GROWTH FUND 00.0% 00.0% 00.0% S&P 500 INDEX 00.0% 00.0% 00.0% LIPPER GROWTH FUNDS AVERAGE 00.0% 00.0% 00.0%
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 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page xx. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 4 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. 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. We anticipate that the Fund's average weighted maturity will range from four to ten years. 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. 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. PROSPECTUS 5 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 GOVERNMENT/CORPORATE BOND INDEX AND THE LIPPER INTERMEDIATE INVESTMENT GRADE DEBT AVERAGE. THE LIPPER INTERMEDIATE INVESTMENT GRADE DEBT AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
SINCE FUND INCEPTION 1 YEAR 5 YEARS (7/16/92) INVESTMENT GRADE BOND FUND 00.0% 00.0% 00.0% LEHMAN GOVERNMENT/ CORPORATE BOND INDEX 00.0% 00.0% 00.0% LIPPER INTERMEDIATE INVESTMENT GRADE DEBT AVERAGE 00.0% 00.0% 00.0%
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 Government/Corporate Bond Index is a widely recognized index of investment grade government and corporate debt 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page xx. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 6 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 volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. PROSPECTUS 7 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 00.0% 00.0% 00.0% IBC/DONOGHUE FIRST TIER AVERAGE 00.0% 00.0% 00.0%
[INSERT 7-DAY YIELD OR PHONE NUMBER TO OBTAIN YIELD] 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 8 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 three 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. 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. PROSPECTUS 9 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 FUND INCEPTION 1 YEAR 3 YEARS (3/15/93) SHORT-TERM BOND FUND 00.0% 00.0% 00.0% SALOMON 1-3 YEAR TREASURY/ GOVERNMENT SPONSORED/ CORPORATE INDEX 00.0% 00.0% 00.0% SALOMON ONE YEAR TREASURY BENCHMARK ON-THE-RUN INDEX 00.0% 00.0% 00.0%
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 securities with maturities greater than one and less than three years. The Salomon One Year Treasury Benchmark On-the-Run Index 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page xx. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 10 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. PROSPECTUS 11 SUNBELT EQUITY FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE RUSSELL 2000 INDEX AND THE S&P SMALLCAP 600 INDEX.
SINCE INCEPTION 1 YEAR 5 YEARS 12/1/80 SUNBELT EQUITY FUND 00.0% 00.0% 00.0% RUSSELL 2000 INDEX 00.0% 00.0% 00.0% S&P SMALLCAP 600 INDEX 00.0% 00.0% 00.0%
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 Russell 2000 Index is a widely recognized index of U.S. small-cap common stock prices. The S&P SmallCap 600 Index is a widely recognized index of U.S. small cap 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page xx. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 12 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. 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 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. PROSPECTUS 13 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 500 INDEX AND THE LIPPER GROWTH FUNDS AVERAGE. THE LIPPER EQUITY INCOME FUNDS AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
SINCE INCEPTION 1 YEAR 5 YEARS (10/31/89) VALUE INCOME STOCK FUND 00.0% 00.0% 00.0% S&P 500 INDEX 00.0% 00.0% 00.0% LIPPER EQUITY INCOME FUNDS AVERAGE 00.0% 00.0% 00.0%
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 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page xx. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 14 PROSPECTUS EACH FUND'S PRINCIPAL INVESTMENT FUND INVESTMENT 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.
CAPITAL VALUE INCOME SUNBELT INVESTMENT GRADE SHORT-TERM PRIME QUALITY MONEY GROWTH FUND STOCK FUND EQUITY FUND BOND FUND BOND FUND MARKET FUND - ------------------------------------------------------------------------------------------------------------------------ Asset-Backed Securities X - ------------------------------------------------------------------------------------------------------------------------ Bank Obligations X - ------------------------------------------------------------------------------------------------------------------------ Commercial Paper X - ------------------------------------------------------------------------------------------------------------------------ Convertible Securities X X X X - ------------------------------------------------------------------------------------------------------------------------ Corporate Debt Securities X X - ------------------------------------------------------------------------------------------------------------------------ Equity Securities X X X - ------------------------------------------------------------------------------------------------------------------------ Foreign Securities X - ------------------------------------------------------------------------------------------------------------------------ Mortgage-Backed Securities X X - ------------------------------------------------------------------------------------------------------------------------ U.S. Government Securities X X X - ------------------------------------------------------------------------------------------------------------------------
Although the investments above are those that we believe are most likely to help each Fund meet its investment goal, each Fund 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 (except the Prime Quality Money Market Fund) may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and short-term obligations. The Small Cap Equity Fund also may invest in investment grade fixed income securities and mid- to large-cap common stocks. In addition, the Investment Grade Bond and Short-Term Bond Funds 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. PROSPECTUS 15 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 day to day 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 and Investment Grade Bond Funds. As of May 31, 1998, STI had approximately $ billion in assets under management. For the fiscal year ended May 31, 1998, STI received advisory fees of: CAPITAL GROWTH FUND.......................... % VALUE INCOME STOCK FUND...................... % INVESTMENT GRADE BOND FUND................... %
Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Advisor to the Sunbelt Equity, Short-Term Bond and Prime Quality Money Market Funds. As of May 31, 1998, Trusco had approximately $ billion in assets under management. For the fiscal year ended May 31, 1998, Trusco received advisory fees of: SUNBELT EQUITY FUND.......................... % SHORT-TERM BOND FUND......................... % PRIME QUALITY MONEY MARKET FUND.............. %
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. Prior to joining STI, Mr. Gray served as . Mr. Mills Riddick, CFA, has served as Senior Vice President of STI since . 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. 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. David Yealy has served as a Vice President of Trusco since . He has managed the Short-Term Bond Fund since July 1996. He has more than years of investment experience. 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. 16 PROSPECTUS PURCHASING, SELLING AND EXCHANGING FUND SHARES 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 on any day that the New York Stock Exchange is open for business (a Business Day). But you may not do so for shares of the Prime Quality Money Market Fund on federal holidays. The price per share (the offering price) will be the net asset value per share (NAV) next determined after 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, to receive the current Business Day's NAV for all Funds except the Prime Quality Money Market Fund, generally we must receive your purchase order from your financial institution before 4:00 p.m. Eastern time. For the Prime Quality Money Market Fund, your purchase order will be effective on the Business Day we receive it if: - - we receive your order before 1:00 p.m. Eastern time; 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 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 for all Funds except for the Prime Quality Money Market Fund, we generally value a Fund's portfolio at market price. In calculating NAV for the Prime Quality Money Market Fund, we value the 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 price or amortized cost valuation method is unreliable, fair value prices may be determined in good faith using methods approved by the Board of Trustees. We expect the NAV of the Prime Quality Money Market Fund to remain constant at $1.00 per share, although we cannot guarantee this. PROSPECTUS 17 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. 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 all funds except the Prime Quality Money Market Fund, 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 Prime Quality Money Market Fund, your sale order will be effective that same Business Day if we receive your order before 1:00 p.m. Eastern time. 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. 18 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 , 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. Net Asset Value, Beginning of Period Income From Investment Operations Net Investment Income Net Gains or Losses on Securities (both realized and unrealized) Total From Investment Operations Less Distributions Dividends (from net investment income) Distributions (from capital gains) Returns of Capital Total Distributions Net Asset Value, End of Period Total Return Ratios/Supplemental Data Net Assets, End of Period Ratio of Expenses to Average Net Assets Ratio of Net Income to Average Net Assets Portfolio Turnover Rate 1 Commencement of operations. 2 Total return excludes the effect of sales charge. 3 Annualized.
SIMPLY SPEAKING . . . FINANCIAL HIGHLIGHTS Study these tables to see how each Fund performed since it began investment operations. PROSPECTUS 19 OTHER INFORMATION DIVIDENDS AND DISTRIBUTIONS The Capital Growth, Sunbelt Equity and Value Income Stock Funds each distribute its income quarterly. The Investment Grade Bond, Short-Term Bond and Prime Quality Money Market Funds declare dividends daily and distribute 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 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. 20 PROSPECTUS NOTES PROSPECTUS 21 NOTES 22 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-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. 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 26 HOW FUND SHARES ARE DISTRIBUTED 27 DISTRIBUTIONS OF DIVIDENDS AND CAPITAL GAINS 27 TAXES 30 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS
FOR INFORMATION ABOUT KEY TERMS AND CONCEPTS, LOOK FOR OUR "SIMPLY SPEAKING" EXPLANATIONS. - -------------------------------------------------------------------------------- [ICON] FUND SUMMARY INVESTMENT STRATEGY [ICON] WHAT ARE THE RISKS OF INVESTING? [ICON] PERFORMANCE INFORMATION [ICON] WHAT IS AN INDEX? [ICON] FUND FEES AND EXPENSES [ICON] SALES LOADS [ICON] FUND INVESTMENTS [ICON] INVESTMENT ADVISORS [ICON] PURCHASING FUND SHARES [ICON] - -------------------------------------------------------------------------------- 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 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 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. 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 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 10-YEAR MUNICIPAL BOND INDEX AND THE LIPPER FLORIDA MUNICIPAL DEBT AVERAGE. THE LIPPER FLORIDA MUNICIPAL DEBT AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
SINCE FUND INCEPTION 1 YEAR 3 YEARS (1/18/94) FLORIDA TAX-EXEMPT BOND FUND Investor Shares 00.0% 00.0% 00.0% Flex Shares 00.0% 00.0% 00.0% LEHMAN 10-YEAR MUNICIPAL BOND INDEX 00.0% 00.0% 00.0% LIPPER FLORIDA MUNICIPAL DEBT AVERAGE 00.0% 00.0% 00.0%
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 10-Year Municipal Bond Index is a widely recognized index of municipal bonds with maturities ranging from 9 to 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. 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 X and XX of this prospectus. This 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 [ %], [ %] AND [ %], 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." - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.00% 0.00% Distribution and Service (12b-1) Fees 0.00% 0.00% Other Expenses 0.00% 0.00% ------ ------ Total Annual Fund Operating Expenses 0.00% 0.00%
- -------------------------------------------------- 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 $ 0000 $ 0000 $ 0000 $ 0000 Flex Shares $ 0000 $ 0000 $ 0000 $ 0000 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $ 0000 $ 0000 $ 0000 $ 0000 Flex Shares $ 0000 $ 0000 $ 0000 $ 0000
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. 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 10-YEAR MUNICIPAL BOND INDEX AND THE LIPPER GEORGIA MUNICIPAL DEBT AVERAGE. THE LIPPER GEORGIA MUNICIPAL DEBT AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
SINCE FUND INCEPTION 1 YEAR 3 YEARS (1/19/94) GEORGIA TAX-EXEMPT BOND FUND Investor Shares 00.0% 00.0% 00.0% Flex Shares 00.0% 00.0% 00.0% LEHMAN 10-YEAR MUNICIPAL BOND INDEX 00.0% 00.0% 00.0% LIPPER GEORGIA MUNICIPAL DEBT AVERAGE 00.0% 00.0% 00.0%
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 10-Year Municipal Bond Index is a widely recognized index of municipal bonds with maturities ranging from 9 to 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. 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 X and XX of this prospectus. This 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 [ %], [ %] AND [ %], 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." - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.00% 0.00% Distribution and Service (12b-1) Fees 0.00% 0.00% Other Expenses 0.00% 0.00% ------ ------ Total Annual Fund Operating Expenses 0.00% 0.00%
- -------------------------------------------------- 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 $ 0000 $ 0000 $ 0000 $ 0000 Flex Shares $ 0000 $ 0000 $ 0000 $ 0000 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $ 0000 $ 0000 $ 0000 $ 0000 Flex Shares $ 0000 $ 0000 $ 0000 $ 0000
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. 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. 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. We anticipate that the Fund's average weighted maturity will range from four to ten years. 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. 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 GOVERNMENT/CORPORATE BOND INDEX AND THE LIPPER INTERMEDIATE INVESTMENT GRADE DEBT AVERAGE. THE LIPPER INTERMEDIATE INVESTMENT GRADE DEBT AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
SINCE FUND INCEPTION 1 YEAR 3 YEARS (6/11/92) INVESTMENT GRADE BOND FUND Investor Shares 00.0% 00.0% 00.0% Flex Shares 00.0% 00.0% 00.0% LEHMAN GOVERNMENT/ CORPORATE BOND INDEX 00.0% 00.0% 00.0% LIPPER INTERMEDIATE INVESTMENT GRADE DEBT AVERAGE 00.0% 00.0% 00.0%
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 Government/Corporate Bond Index is a widely recognized index of investment grade government and corporate debt 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. 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 X and XX of this prospectus. This 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 [ %], [ %] AND [ %], 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." - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.00% 0.00% Distribution and Service (12b-1) Fees 0.00% 0.00% Other Expenses 0.00% 0.00% ------ ------ Total Annual Fund Operating Expenses 0.00% 0.00%
- -------------------------------------------------- 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 $ 0000 $ 0000 $ 0000 $ 0000 Flex Shares $ 0000 $ 0000 $ 0000 $ 0000 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $ 0000 $ 0000 $ 0000 $ 0000 Flex Shares $ 0000 $ 0000 $ 0000 $ 0000
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. 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. 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. It is anticipated that the Fund's average weighted maturity will range from four to ten years. 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 5-YEAR MUNICIPAL BOND INDEX AND THE LIPPER INTERMEDIATE MUNICIPAL DEBT AVERAGE. THE LIPPER INTERMEDIATE MUNICIPAL DEBT AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
SINCE FUND INCEPTION 1 YEAR 3 YEARS (6/21/92) INVESTMENT GRADE TAX-EXEMPT BOND FUND Investor Shares 00.0% 00.0% 00.0% Flex Shares 00.0% 00.0% 00.0% LEHMAN 5-YEAR MUNICIPAL BOND FUND INDEX 00.0% 00.0% 00.0% LIPPER INTERMEDIATE MUNICIPAL DEBT AVERAGE 00.0% 00.0% 00.0%
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 5-Year Municipal Bond Index is a widely recognized index of municipal bonds with maturities ranging from 4 to 6 years. The Index represents various market sectors and geographic locations. 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 X and XX of this prospectus. This 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 [ %], [ %] AND [ %], 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." - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.00% 0.00% Distribution and Service (12b-1) Fees 0.00% 0.00% Other Expenses 0.00% 0.00% ------ ------ Total Annual Fund Operating Expenses 0.00% 0.00%
- -------------------------------------------------- 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 $ 0000 $ 0000 $ 0000 $ 0000 Flex Shares $ 0000 $ 0000 $ 0000 $ 0000 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $ 0000 $ 0000 $ 0000 $ 0000 Flex Shares $ 0000 $ 0000 $ 0000 $ 0000
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. 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 one to five 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. 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" below. 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 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. 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 AND THE LIPPER SHORT/INTERMEDIATE U.S. GOVERNMENT AVERAGE. THE LIPPER SHORT/INTERMEDIATE U.S. GOVERNMENT AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
SINCE FUND INCEPTION 1 YEAR 3 YEARS (7/17/94) LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND Investor Shares 00.0% 00.0% 00.0% Flex Shares 00.0% 00.0% 00.0% MERRILL LYNCH 1-5 YEAR SHORT INTERMEDIATE U.S TREASURY INDEX 00.0% 00.0% 00.0% LIPPER SHORT/INTERMEDIATE U.S. GOVERNMENT AVERAGE 00.0% 00.0% 00.0%
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 [ ]. 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 X and XX of this prospectus. This 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 [ %], [ %] AND [ %], 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." - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.00% 0.00% Distribution and Service (12b-1) Fees 0.00% 0.00% Other Expenses 0.00% 0.00% ------ ------ Total Annual Fund Operating Expenses 0.00% 0.00%
- -------------------------------------------------- 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 $ 0000 $ 0000 $ 0000 $ 0000 Flex Shares $ 0000 $ 0000 $ 0000 $ 0000 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $ 0000 $ 0000 $ 0000 $ 0000 Flex Shares $ 0000 $ 0000 $ 0000 $ 0000
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. 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 three 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. 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 FUND INCEPTION 1 YEAR 3 YEARS (3/22/93) SHORT-TERM BOND FUND Investor Shares 00.0% 00.0% 00.0% Flex Shares 00.0% 00.0% 00.0% SALOMON 1-3 YEAR TREASURY/ GOVERNMENT SPONSORED/ CORPORATE INDEX 00.0% 00.0% 00.0% SALOMON ONE YEAR TREASURY BENCHMARK ON-THE-RUN INDEX 00.0% 00.0% 00.0%
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 securities with maturities greater than one and less than three years. The Salomon One Year Treasury Benchmark On-the-Run Index 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. 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 X and XX of this prospectus. This 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 [ %], [ %] AND [ %], 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." - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.00% 0.00% Distribution and Service (12b-1) Fees 0.00% 0.00% Other Expenses 0.00% 0.00% ------ ------ Total Annual Fund Operating Expenses 0.00% 0.00%
- -------------------------------------------------- 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 $ 0000 $ 0000 $ 0000 $ 0000 Flex Shares $ 0000 $ 0000 $ 0000 $ 0000 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $ 0000 $ 0000 $ 0000 $ 0000 Flex Shares $ 0000 $ 0000 $ 0000 $ 0000
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. 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 one to two 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 FUND INCEPTION 1 YEAR 3 YEARS (3/18/93) SHORT-TERM U.S. TREASURY SECURITIES FUND Investor Shares 00.0% 00.0% 00.0% Flex Shares 00.0% 00.0% 00.0% SALOMON 1-3 YEAR TREASURY/ GOVERNMENT SPONSORED/ CORPORATE INDEX 00.0% 00.0% 00.0% SALOMON 6 MONTH TREASURY BILL INDEX 00.0% 00.0% 00.0%
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 securities with maturities greater than one and less than three years. The Salomon 6 Month Treasury Bill Index 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. 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 X and XX of this prospectus. This 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 [ %], [ %] AND [ %], 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." - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.00% 0.00% Distribution and Service (12b-1) Fees 0.00% 0.00% Other Expenses 0.00% 0.00% ------ ------ Total Annual Fund Operating Expenses 0.00% 0.00%
- -------------------------------------------------- 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 $ 0000 $ 0000 $ 0000 $ 0000 Flex Shares $ 0000 $ 0000 $ 0000 $ 0000 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $ 0000 $ 0000 $ 0000 $ 0000 Flex Shares $ 0000 $ 0000 $ 0000 $ 0000
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 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 seven to fourteen 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" below. 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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. 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 [INSERT INDEX] AND THE LIPPER INTERMEDIATE GOVERNMENT FUNDS AVERAGE. THE LIPPER INTERMEDIATE GOVERNMENT FUNDS AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
SINCE FUND INCEPTION 1 YEAR 3 YEARS (6/9/94) U.S. GOVERNMENT SECURITIES FUND Investor Shares 00.0% 00.0% 00.0% Flex Shares 00.0% 00.0% 00.0% [INSERT INDEX] 00.0% 00.0% 00.0% LIPPER INTERMEDIATE GOVERNMENT FUNDS AVERAGE 00.0% 00.0% 00.0%
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 [Insert Index] is a widely recognized index of [ ] 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. 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 X and XX of this prospectus. This 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 [ %], [ %] AND [ %], 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." - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.00% 0.00% Distribution and Service (12b-1) Fees 0.00% 0.00% Other Expenses 0.00% 0.00% ------ ------ Total Annual Fund Operating Expenses 0.00% 0.00%
- -------------------------------------------------- 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 $ 0000 $ 0000 $ 0000 $ 0000 Flex Shares $ 0000 $ 0000 $ 0000 $ 0000 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $ 0000 $ 0000 $ 0000 $ 0000 Flex Shares $ 0000 $ 0000 $ 0000 $ 0000
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 EACH FUND'S PRINCIPAL INVESTMENT FUND INVESTMENT 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.
INVESTMENT U.S. GOVERNMENT LIMITED-TERM SHORT-TERM SHORT-TERM U.S. INVESTMENT GRADE FLORIDA TAX- GRADE BOND SECURITIES FUND FEDERAL MORTGAGE BOND TREASURY TAX-EXEMPT EXEMPT BOND FUND SECURITIES FUND FUND SECURITIES FUND BOND FUND FUND - -------------------------------------------------------------------------------------------------------------------------------- Asset-Backed Securities X - -------------------------------------------------------------------------------------------------------------------------------- Corporate Debt Securities X X - -------------------------------------------------------------------------------------------------------------------------------- Mortgage- Backed Securities X X X X - -------------------------------------------------------------------------------------------------------------------------------- Municipal Securities X X - -------------------------------------------------------------------------------------------------------------------------------- U.S. Treasury Securities X X X X - -------------------------------------------------------------------------------------------------------------------------------- GEORGIA TAX-EXEMPT BOND FUND - ------------- Asset-Backed Securities - ------------- Corporate Debt Securities - ------------- Mortgage- Backed Securities - ------------- Municipal Securities X - ------------- U.S. Treasury Securities - -------------
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 Investment Grade Bond Fund, Investment Grade Tax-Exempt Bond Fund, Florida Tax-Exempt Bond Fund, U.S. Government Securities Fund, Georgia Tax-Exempt Bond Fund, Limited-Term Federal Mortgage Securities Fund, Short-Term Bond Fund and the Short-Term U.S. Treasury 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 $ billion in assets under management. For the fiscal year ended May 31, 1998, STI received advisory fees of: INVESTMENT GRADE BOND FUND................... % INVESTMENT GRADE TAX-EXEMPT BOND FUND........ % LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND....................................... % FLORIDA TAX-EXEMPT BOND FUND................. %
PROSPECTUS 19 THE ADVISORS AND THEIR PORTFOLIO MANAGERS 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 $ billion in assets under management. For the fiscal year ended May 31, 1998, Trusco received advisory fees of: U.S. GOVERNMENT SECURITIES FUND.............. % SHORT-TERM U.S. TREASURY SECURITIES FUND..... % SHORT-TERM BOND FUND......................... %
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 [ ]% 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 , 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 , 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 . He has managed the Short-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 . 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 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 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:
FUND IF YOUR INVESTMENT IS: YOUR SALES CHARGE YOUR SALES CHARGE AS A PERCENTAGE AS A PERCENTAGE OF OF YOUR NET INVESTMENT OFFERING PRICE - -------------------------------------------------------------------------------------------------------------------- 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 maximum deferred sales charge as a percentage of the net amount invested is [ ]%. 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 , 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. Net Asset Value, Beginning of Period Income From Investment Operations Net Investment Income Net Gains or Losses on Securities (both realized and unrealized) Total From Investment Operations Less Distributions Dividends (from net investment income) Distributions (from capital gains) Returns of Capital Total Distributions Net Asset Value, End of Period Total Return - ---------------------------------------- Ratios/Supplemental Data Net Assets, End of Period Ratio of Expenses to Average Net Assets Ratio of Net Income to Average Net Assets Portfolio Turnover Rate 1 Commencement of operations. 2 Total return excludes the effect of sales charge. 3 Annualized.
SIMPLY SPEAKING . . . FINANCIAL HIGHLIGHTS Study these tables to see how each Fund performed since it began investment operations. 26 PROSPECTUS 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, distribution fees, as a percentage of average daily net assets, are as follows:
MAXIMUM FOR FISCAL YEAR ENDING MAY 31, 1998 Investment Grade Bond Fund .43% U.S. Government Securities Fund .38% Limited-Term Federal Mortgage Securities Fund .23% Short-Term Bond Fund .23% Short-Term U.S. Treasury Securities Fund .18% Investment Grade Tax-Exempt Bond Fund .43% Florida Tax-Exempt Bond Fund .18% Georgia Tax-Exempt Bond Fund .18%
For Flex Shares, the maximum distribution fee is .75% of the average daily net assets of each Fund. For fiscal year ending May 31, 1998, distribution fees were:
Investment Grade Bond Fund .XX% U.S. Government Securities Fund .XX% Limited-Term Federal Mortgage Securities Fund .XX% Short-Term Bond Fund .XX% Short-Term U.S. Treasury Securities Fund .XX% Investment Grade Tax-Exempt Bond Fund .XX% Florida Tax-Exempt Bond Fund .XX% Georgia Tax-Exempt Bond Fund .XX%
PROSPECTUS 27 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 Investment Grade Tax-Exempt Bond, Florida Tax-Exempt Bond and Georgia 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. 28 PROSPECTUS NOTES PROSPECTUS 29 NOTES 30 PROSPECTUS 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--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 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 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. 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 29 DISTRIBUTIONS OF DIVIDENDS AND CAPITAL GAINS 29 TAXES 30 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS
FOR INFORMATION ABOUT KEY TERMS AND CONCEPTS, LOOK FOR OUR "SIMPLY SPEAKING" EXPLANATIONS. - -------------------------------------------------------------------------------- [ICON] FUND SUMMARY INVESTMENT STRATEGY [ICON] WHAT ARE THE RISKS OF INVESTING? [ICON] PERFORMANCE INFORMATION [ICON] WHAT IS AN INDEX? [ICON] FUND FEES AND EXPENSES [ICON] FUND INVESTMENTS [ICON] INVESTMENT ADVISORS [ICON] PURCHASING FUND SHARES [ICON] - -------------------------------------------------------------------------------- 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. It is anticipated that the Fund's average weighted maturity will range from 6 to 25 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 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 volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 10-YEAR MUNICIPAL BOND INDEX AND THE LIPPER FLORIDA MUNICIPAL DEBT AVERAGE. THE LIPPER FLORIDA MUNICIPAL DEBT AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
INCEPTION 1 YEAR 3 YEARS (1/25/94) FLORIDA TAX-EXEMPT BOND FUND 00.0% 00.0% 00.0% LEHMAN 10-YEAR MUNICIPAL BOND INDEX 00.0% 00.0% 00.0% LIPPER FLORIDA MUNICIPAL DEBT AVERAGE 00.0% 00.0% 00.0%
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 10-Year Municipal Bond Index is a widely recognized index of municipal bonds with maturities ranging from 9 to 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. 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 their fees. ACTUAL INVESTMENT ADVISORY FEES AND TOTAL OPERATING EXPENSES ARE [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 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 volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 10-YEAR MUNICIPAL BOND INDEX AND THE LIPPER GEORGIA MUNICIPAL DEBT AVERAGE. THE LIPPER GEORGIA MUNICIPAL DEBT AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
SINCE FUND INCEPTION 1 YEAR 3 YEARS (1/18/94) GEORGE TAX-EXEMPT BOND FUND 00.0% 00.0% 00.0% LEHMAN 10-YEAR MUNICIPAL BOND INDEX 00.0% 00.0% 00.0% LIPPER GEORGE MUNICIPAL DEBT AVERAGE 00.0% 00.0% 00.0%
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 10-Year Municipal Bond Index is a widely recognized index of municipal bonds with maturities ranging from 9 to 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 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. 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. We anticipate that the Fund's average weighted maturity will range from four to ten years. 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. 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 GOVERNMENT/CORPORATE BOND INDEX AND THE LIPPER INTERMEDIATE INVESTMENT GRADE DEBT AVERAGE. THE LIPPER INTERMEDIATE INVESTMENT GRADE DEBT AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
SINCE FUND INCEPTION 1 YEAR 5 YEARS (7/16/92) INVESTMENT GRADE BOND FUND 00.0% 00.0% 00.0% LEHMAN GOVERNMENT/ CORPORATE BOND INDEX 00.0% 00.0% 00.0% LIPPER INTERMEDIATE INVESTMENT GRADE DEBT AVERAGE 00.0% 00.0% 00.0%
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 Government/Corporate Bond Index is a widely recognized index of investment grade government and corporate debt 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 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. 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. It is anticipated that the Fund's average weighted maturity will range from four to ten years. 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 volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 5-YEAR MUNICIPAL BOND INDEX AND THE LIPPER INTERMEDIATE MUNICIPAL DEBT AVERAGE. THE LIPPER INTERMEDIATE MUNICIPAL DEBT AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
SINCE FUND INCEPTION 1 YEAR 3 YEARS (10/21/93) INVESTMENT GRADE TAX-EXEMPT BOND FUND 00.0% 00.0% 00.0% LEHMAN 5-YEAR MUNICIPAL BOND INDEX 00.0% 00.0% 00.0% LIPPER INTERMEDIATE MUNICIPAL DEBT AVERAGE 00.0% 00.0% 00.0%
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 5-Year Municipal Bond Index is a widely recognized index of municipal bonds with maturities ranging from 4 to 6 years. The Index represents various market sectors and geographic locations. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 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 one to five 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. 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 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 volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 AND THE LIPPER SHORT/INTERMEDIATE U.S. GOVERNMENT AVERAGE. THE LIPPER SHORT/INTERMEDIATE U.S. GOVERNMENT AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
SINCE FUND INCEPTION 1 YEAR 3 YEARS (6/7/94) LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND 00.0% 00.0% 00.0% MERRILL LYNCH 1-5 YEAR SHORT/INTERMEDIATE U.S. TREASURY INDEX 00.0% 00.0% 00.0% LIPPER SHORT/INTERMEDIATE U.S. GOVERNMENT AVERAGE 00.0% 00.0% 00.0%
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 [ ]. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 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 volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 FUND INCEPTION 1 YEAR 5 YEARS (6/8/92) PRIME QUALITY MONEY MARKET FUND 00.0% 00.0% 00.0% IBC/DONOGHUE FIRST TIER AVERAGE 00.0% 00.0% 00.0%
[INSERT 7-DAY YIELD OR PHONE NUMBER TO OBTAIN YIELD] 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 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 three 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. 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 FUND INCEPTION 1 YEAR 3 YEARS (3/15/93) SHORT-TERM BOND FUND 00.0% 00.0% 00.0% SALOMON 1-3 YEAR TREASURY/ GOVERNMENT SPONSORED/ CORPORATE INDEX 00.0% 00.0% 00.0% SALOMON ONE YEAR TREASURY BENCHMARK ON-THE-RUN INDEX 00.0% 00.0% 00.0%
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 securities with maturities greater than one and less than three years. The Salomon One Year Treasury Benchmark On-the-Run Index 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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 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 one to two 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 volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 00.0% 00.0% 00.0% SALOMON 1-3 YEAR TREASURY/ GOVERNMENT SPONSORED/ CORPORATE INDEX 00.0% 00.0% 00.0% SALOMON 6 MONTH TREASURY BILL INDEX 00.0% 00.0% 00.0%
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 securities with maturities greater than one and less than three years. The Salomon 6 Month Treasury Bill Index 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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 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. 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 volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 FUND INCEPTION 1 YEAR 5 YEARS (6/8/92) TAX-EXEMPT MONEY MARKET FUND 00.0% 00.0% 00.0% IBC/DONOGHUE TAX-FREE STOCKBROKER & GENERAL PURPOSE AVERAGE 00.0% 00.0% 00.0%
[INSERT 7-DAY YIELD OR PHONE NUMBER TO OBTAIN YIELD] 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 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 seven to fourteen 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" below. 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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. 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 [INSERT INDEX] AND THE LIPPER INTERMEDIATE GOVERNMENT FUNDS AVERAGE. THE LIPPER INTERMEDIATE GOVERNMENT FUNDS AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
SINCE FUND INCEPTION 1 YEAR 3 YEARS (7/31/94) U.S. GOVERNMENT SECURITIES FUND 00.0% 00.0% 00.0% [INSERT INDEX] 00.0% 00.0% 00.0% LIPPER INTERMEDIATE GOVERNMENT FUNDS AVERAGE 00.0% 00.0% 00.0%
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 [Insert Index] is a widely recognized index of [ ] 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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 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. 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 volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 FUND INCEPTION 1 YEAR 5 YEARS (6/8/92) U.S. GOVERNMENT SECURITIES MONEY MARKET FUND 00.0% 00.0% 00.0% IBC/DONOGHUE U.S. TREASURY & REPO AVERAGE 00.0% 00.0% 00.0%
[INSERT 7-DAY YIELD OR PHONE NUMBER TO OBTAIN YIELD] 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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 INVESTMENT FUND INVESTMENT 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
INVESTMENT U.S. LIMITED- SHORT- SHORT-TERM INVESTMENT FLORIDA GEORGIA GRADE BOND GOVERNMENT TERM FEDERAL TERM BOND U.S. GRADE TAX- TAX- TAX- FUND SECURITIES MORTGAGE FUND TREASURY EXEMPT EXEMPT EXEMPT FUND SECURITIES SECURITIES BOND BOND BOND 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 X - ----------------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUNDS
PRIME QUALITY MONEY U.S. GOVERNMENT SECURITIES TAX-EXEMPT MONEY MARKET FUND MONEY MARKET FUND MARKET FUND - ----------------------------------------------------------------------------------------------------------- Bank Obligations X - ----------------------------------------------------------------------------------------------------------- Commercial Paper X X - ----------------------------------------------------------------------------------------------------------- Corporate Obligations X - ----------------------------------------------------------------------------------------------------------- Foreign Securities X - ----------------------------------------------------------------------------------------------------------- Mortgage-Backed Securities X - ----------------------------------------------------------------------------------------------------------- Municipal Securities X - ----------------------------------------------------------------------------------------------------------- U.S.Treasury 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 Investment Grade Bond Fund, Investment Grade Tax-Exempt Bond Fund, Florida Tax-Exempt Bond Fund, U.S. Government Securities Fund, Limited-Term Federal Mortgage Securities Fund, Georgia Tax-Exempt Bond Fund, Short-Term Bond Fund and the Short-Term U.S. Treasury 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. 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 $ billion in assets under management. For the fiscal year ended May 31, 1998, STI received advisory fees of: INVESTMENT GRADE BOND FUND................... % INVESTMENT GRADE TAX-EXEMPT BOND FUND........ % LIMITED-TERM FEDERAL MORTGAGE SECURITIES FUND....................................... % FLORIDA TAX-EXEMPT BOND FUND................. %
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 $ billion in assets under management. For the fiscal year ended May 31, 1998, Trusco received advisory fees of: U.S. GOVERNMENT SECURITIES FUND.............. % PRIME QUALITY MONEY MARKET FUND.............. % SHORT-TERM BOND FUND......................... % U.S. GOVERNMENT SECURITIES MONEY MARKET FUND....................................... % SHORT-TERM U.S. TREASURY SECURITIES FUND..... % TAX-EXEMPT MONEY MARKET FUND................. %
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 [ ]% 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 , 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 , 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 . 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 . 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 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 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 , 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. Net Asset Value, Beginning of Period Income From Investment Operations Net Investment Income Net Gains or Losses on Securities (both realized and unrealized) Total From Investment Operations Less Distributions Dividends (from net investment income) Distributions (from capital gains) Returns of Capital Total Distributions Net Asset Value, End of Period Total Return Ratios/Supplemental Data Net Assets, End of Period Ratio of Expenses to Average Net Assets Ratio of Net Income to Average Net Assets Portfolio Turnover Rate 1 Commencement of operations. 2 Total return excludes the effect of sales charge. 3 Annualized.
SIMPLY SPEAKING . . . FINANCIAL HIGHLIGHTS Study these tables to see how each Fund performed since it began investment operations. PROSPECTUS 29 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. 30 PROSPECTUS 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 SUNBELT EQUITY 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 SUNBELT EQUITY FUND 18 VALUE INCOME STOCK FUND IF YOU WOULD LIKE MORE INFORMATION ABOUT THE FOLLOWING TOPICS, PLEASE SEE: 20 EACH FUND'S PRINCIPAL INVESTMENTS 20 THE ADVISORS AND THEIR PORTFOLIO MANAGERS 21 PURCHASING, SELLING AND EXCHANGING FUND SHARES 23 HISTORICAL FINANCIAL INFORMATION ABOUT EACH FUND 24 DISTRIBUTIONS OF DIVIDENDS AND CAPITAL GAINS 24 TAXES 26 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS
FOR INFORMATION ABOUT KEY TERMS AND CONCEPTS, LOOK FOR OUR "SIMPLY SPEAKING" EXPLANATIONS. - -------------------------------------------------------------------------------- [ICON] FUND SUMMARY INVESTMENT STRATEGY [ICON] WHAT ARE THE RISKS OF INVESTING? [ICON] PERFORMANCE INFORMATION [ICON] WHAT IS AN INDEX? [ICON] FUND FEES AND EXPENSES [ICON] FUND INVESTMENTS [ICON] INVESTMENT ADVISORS [ICON] PURCHASING FUND SHARES [ICON] - -------------------------------------------------------------------------------- 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 stocks of U.S. companies, convertible securities, and investment grade fixed income obligations (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. 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 volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. PROSPECTUS 3 BALANCED FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERFORMANCE OF THE FUND'S TRUST TO THOSE OF THE S&P 500 INDEX, LEHMAN GOVERNMENT/CORPORATE BOND INDEX AND THE LIPPER BALANCED FUNDS AVERAGE.THE LIPPER BALANCED FUNDS AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
SINCE FUND INCEPTION 1 YEAR 3 YEARS (1/3/94) BALANCED FUND 00.0% 00.0% 00.0% S&P 500 INDEX 00.0% 00.0% 00.0% LEHMAN GOVERNMENT/ CORPORATE BOND INDEX 00.0% 00.0% 00.0% LIPPER BALANCED FUNDS AVERAGE 00.0% 00.0% 00.0%
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 U.S. common stock prices. The Lehman Government/Corporate Bond Index is a widely recognized index of U.S. government and corporate bond 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 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 volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 AND THE LIPPER GROWTH FUNDS AVERAGE. THE LIPPER GROWTH FUNDS AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
SINCE FUND INCEPTION 1 YEAR 5 YEARS (6/8/92) CAPITAL GROWTH FUND 00.0% 00.0% 00.0% S&P 500 INDEX 00.0% 00.0% 00.0% LIPPER GROWTH FUNDS AVERAGE 00.0% 00.0% 00.0%
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 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 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. 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. 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 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 CHANGES IN THE FUND'S PERFORMANCE FROM YEAR TO YEAR.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. PROSPECTUS 7 EMERGING MARKETS EQUITY FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERFORMANCE OF THE TRUST SHARES FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE MSCI EMERGING MARKETS FREE INDEX.
SINCE INCEPTION 1 YEAR (3/29/96) EMERGING MARKETS EQUITY FUND 00.0% 00.0% MSCI EMERGING MARKETS FREE INDEX 00.0% 00.0%
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 Emerging Markets Free Index is a widely recognized index of equity securities of companies from 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 MSCI EAFE INDEX.
SINCE INCEPTION 1 YEAR (2/2/95) INTERNATIONAL EQUITY FUND 00.0% 00.0% MSCI EAFE INDEX 00.0% 00.0%
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 equity securities of companies located 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 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 in a 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 volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 MSCI EAFE-GDP INDEX.
SINCE FUND INCEPTION 1 YEAR 3 YEARS (9/1/94) INTERNATIONAL EQUITY INDEX FUND 00.0% 00.0% 00.0% MSCI EAFE-GDP INDEX 00.0% 00.0% 00.0%
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 equity securities of companies located 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 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 volatility of an investment in the Fund. Of course, the Fund's past performance does not necessarily indicate how the Fund will perform in the future. THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE FUND'S TRUST SHARES FROM YEAR TO YEAR.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 FUND INCEPTION 1 YEAR 3 YEARS (1/3/94) MID-CAP EQUITY FUND 00.0% 00.0% 00.0% S&P MIDCAP 400 INDEX 00.0% 00.0% 00.0%
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 U.S. mid-cap 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 RUSSELL 2000 INDEX.
SINCE INCEPTION 1 YEAR 3 YEARS (8/31/94) SMALL CAP EQUITY FUND 00.0% 00.0% 00.0% RUSSELL 2000 INDEX 00.0% 00.0% 00.0%
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 Russell 2000 Index is a widely recognized index of U.S. small-cap 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. 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 RUSSELL 2000 INDEX AND THE S&P SMALLCAP 600 INDEX.
SINCE INCEPTION 1 YEAR 5 YEARS (12/1/80) SUNBELT EQUITY FUND 00.0% 00.0% 00.0% RUSSELL 2000 INDEX 00.0% 00.0% 00.0% S&P SMALLCAP 600 INDEX 00.0% 00.0% 00.0%
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 Russell 2000 Index is a widely recognized index of U.S. small-cap common stock prices. The S&P SmallCap 600 Index is a widely recognized index of U.S. small cap 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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 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. 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 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
*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 XX.X%. PROSPECTUS 19 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 500 INDEX AND THE LIPPER EQUITY INCOME FUNDS AVERAGE. THE LIPPER EQUITY INCOME FUNDS AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
SINCE INCEPTION 1 YEAR 5 YEARS (10/31/89) VALUE INCOME STOCK FUND 00.0% 00.0% 00.0% S&P 500 INDEX 00.0% 00.0% 00.0% LIPPER EQUITY INCOME FUNDS AVERAGE 00.0% 00.0% 00.0%
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 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. 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 [ %] AND [ %], RESPECTIVELY. The Advisor could discontinue these voluntary waivers at any time. For more information about these fees, see "Investment Advisors" on page XX. - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - -------------------------------------------------------------------------------- Investment Advisory Fees 0.00% Other Expenses 0.00% --------- Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000
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. 20 PROSPECTUS EACH FUND'S PRINCIPAL INVESTMENT FUND INVESTMENT 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.
CAPITAL VALUE SMALL CAP MID-CAP BALANCED SUNBELT INTERNATIONAL INTERNATIONAL GROWTH INCOME EQUITY EQUITY FUND EQUITY EQUITY EQUITY FUND STOCK FUND FUND FUND FUND INDEX FUND - ------------------------------------------------------------------------------------------------------------------------------- Fixed Income Obligations X - ------------------------------------------------------------------------------------------------------------------------------- Equity Securities X X X X X X X X - ------------------------------------------------------------------------------------------------------------------------------- EMERGING MARKETS EQUITY FUND - ------------------------------- Fixed Income Obligations - ------------------------------- Equity Securities 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. 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, International Equity and Emerging Markets Equity Funds. As of May 31, 1998, STI Capital had approximately billion in assets under management. For the fiscal year ended May 31, 1998, STI Capital received advisory fees of: CAPITAL GROWTH FUND.......................... % VALUE INCOME STOCK FUND...................... % SMALL CAP EQUITY FUND........................ % MID-CAP EQUITY FUND.......................... % BALANCED FUND................................ % INTERNATIONAL EQUITY FUND.................... % EMERGING MARKETS EQUITY FUND................. %
Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Advisor to the Sunbelt Equity Fund. As of May 31, 1998, Trusco had approximately billion in assets under management. For the fiscal year ended May 31, 1998, Trusco received advisory fees of [ ]%. 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 %. 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. Prior to joining STI, Mr. Gray served as . Mr. Mills Riddick, CFA, has served as Senior Vice President of STI since . 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 21 PURCHASING, SELLING AND EXCHANGING FUND SHARES Mr. Brett Barner, CFA, has served as Vice President of STI since . 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 Vice President of STI since . 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. 22 PROSPECTUS PURCHASING, SELLING AND EXCHANGING FUND SHARES SIMPLY SPEAKING . . . FOR CUSTOMERS OF 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 23 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 , 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. Net Asset Value, Beginning of Period Income From Investment Operations Net Investment Income Net Gains or Losses on Securities (both realized and unrealized) Total From Investment Operations Less Distributions Dividends (from net investment income) Distributions (from capital gains) Returns of Capital Total Distributions Net Asset Value, End of Period Total Return Ratios/Supplemental Data Net Assets, End of Period Ratio of Expenses to Average Net Assets Ratio of Net Income to Average Net Assets Portfolio Turnover Rate 1 Commencement of operations. 2 Total return excludes the effect of sales charge. 3 Annualized.
SIMPLY SPEAKING . . . FINANCIAL HIGHLIGHTS Study these tables to see how each Fund performed since it began investment operations. 24 PROSPECTUS 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. PROSPECTUS 25 NOTES 26 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--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 SUNBELT EQUITY 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 SUNBELT EQUITY FUND 16 VALUE INCOME STOCK FUND IF YOU WOULD LIKE MORE INFORMATION ABOUT THE FOLLOWING TOPICS, PLEASE SEE: 18 EACH FUND'S PRINCIPAL INVESTMENTS 18 THE ADVISORS AND THEIR PORTFOLIO MANAGERS 19 PURCHASING, SELLING AND EXCHANGING FUND SHARES 24 HISTORICAL FINANCIAL INFORMATION ABOUT EACH FUND 25 HOW FUND SHARES ARE DISTRIBUTED 26 DISTRIBUTIONS OF DIVIDENDS AND CAPITAL GAINS 26 TAXES 30 HOW TO OBTAIN MORE INFORMATION ABOUT THE STI CLASSIC FUNDS
FOR INFORMATION ABOUT KEY TERMS AND CONCEPTS, LOOK FOR OUR "SIMPLY SPEAKING" EXPLANATIONS. - -------------------------------------------------------------------------------- [ICON] FUND SUMMARY INVESTMENT STRATEGY [ICON] WHAT ARE THE RISKS OF INVESTING? [ICON] PERFORMANCE INFORMATION [ICON] WHAT IS AN INDEX? [ICON] FUND FEES AND EXPENSES [ICON] SALES LOADS [ICON] FUND INVESTMENTS [ICON] INVESTMENT ADVISORS [ICON] PURCHASING FUND SHARES [ICON] - -------------------------------------------------------------------------------- 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 stocks of U.S. companies, convertible securities, and investment grade fixed income obligations (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. 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
* 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 XX.X%. 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, LEHMAN GOVERNMENT/CORPORATE BOND INDEX AND THE LIPPER GROWTH FUNDS AVERAGE. THE LIPPER BALANCED FUNDS AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
SINCE FUND INCEPTION 1 YEAR 5 YEARS (1/4/94) BALANCED FUND Investor Shares 00.0% 00.0% 00.0% Flex Shares 00.0% 00.0% 00.0% S&P 500 INDEX 00.0% 00.0% 00.0% LEHMAN GOVERNMENT/ CORPORATE BOND INDEX 00.0% 00.0% 00.0% LIPPER BALANCED FUNDS AVERAGE 00.0% 00.0% 00.0%
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 U.S. common stock prices. The Lehman Government/Corporate Bond Index is a widely recognized index of U.S. government and corporate bond 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. 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 X and XX of this prospectus. This 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 [ %], [ %] AND [ %], 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." - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.00% 0.00% Distribution and Service (12b-1) Fees 0.00% 0.00% Other Expenses 0.00% 0.00% ------ ------ Total Annual Fund Operating Expenses 0.00% 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000 Flex Shares $0000 $0000 $0000 $0000 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $0000 $0000 $0000 $0000 Flex Shares $0000 $0000 $0000 $0000
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. 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
* 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 XX.X%. 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 AND THE LIPPER GROWTH FUNDS AVERAGE. THE LIPPER GROWTH FUNDS AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
SINCE FUND INCEPTION 1 YEAR 5 YEARS (6/9/92) CAPITAL GROWTH FUND Investor Shares 00.0% 00.0% 00.0% Flex Shares 00.0% 00.0% 00.0% S&P 500 INDEX 00.0% 00.0% 00.0% LIPPER GROWTH FUNDS AVERAGE 00.0% 00.0% 00.0%
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 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. 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 X and XX of this prospectus. This 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 [ %], [ %] AND [ %], 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." - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.00% 0.00% Distribution and Service (12b-1) Fees 0.00% 0.00% Other Expenses 0.00% 0.00% ------ ------ Total Annual Fund Operating Expenses 0.00% 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000 Flex Shares $0000 $0000 $0000 $0000 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $0000 $0000 $0000 $0000 Flex Shares $0000 $0000 $0000 $0000
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. 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% (XX/XX/XX) XX.XX% (XX/XX/XX)
* 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 XX.X%. 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 MSCI EAFE INDEX.
SINCE INCEPTION 1 YEARS (2/2/95) INTERNATIONAL EQUITY FUND Investor Shares 00.0% 00.0% Flex Shares 00.0% 00.0% MSCI EAFE INDEX 00.0% 00.0%
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 equity securities of companies located 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. 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 X and XX of this prospectus. This 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 [ %], [ %] AND [ %], 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." - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.00% 0.00% Distribution and Service (12b-1) Fees 0.00% 0.00% Other Expenses 0.00% 0.00% ------ ------ Total Annual Fund Operating Expenses 0.00% 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000 Flex Shares $0000 $0000 $0000 $0000 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $0000 $0000 $0000 $0000 Flex Shares $0000 $0000 $0000 $0000
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. 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
* 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 XX.X%. 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 MSCI EAFE-GDP INDEX.
SINCE FUND INCEPTION 1 YEAR 5 YEARS (6/6/94) INTERNATIONAL EQUITY INDEX FUND Investor Shares 00.0% 00.0% 00.0% Flex Shares 00.0% 00.0% 00.0% MSCI EAFE-GDP INDEX 00.0% 00.0% 00.0%
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 equity securities of companies located 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. 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 X and XX of this prospectus. This 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 [ %], [ %] AND [ %], 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." - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.00% 0.00% Distribution and Service (12b-1) Fees 0.00% 0.00% Other Expenses 0.00% 0.00% ------ ------ Total Annual Fund Operating Expenses 0.00% 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000 Flex Shares $0000 $0000 $0000 $0000 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $0000 $0000 $0000 $0000 Flex Shares $0000 $0000 $0000 $0000
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. 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
* 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 XX.X%. 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 FUND INCEPTION 1 YEAR 5 YEARS (2/1/94) MID-CAP EQUITY FUND Investor Shares 00.0% 00.0% 00.0% Flex Shares 00.0% 00.0% 00.0% S&P MIDCAP 400 INDEX 00.0% 00.0% 00.0%
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 U.S. mid-cap 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. 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 X and XX of this prospectus. This 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 [ %], [ %] AND [ %], 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." - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.00% 0.00% Distribution and Service (12b-1) Fees 0.00% 0.00% Other Expenses 0.00% 0.00% ------ ------ Total Annual Fund Operating Expenses 0.00% 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000 Flex Shares $0000 $0000 $0000 $0000 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $0000 $0000 $0000 $0000 Flex Shares $0000 $0000 $0000 $0000
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. 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
* 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 XX.X%. 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 RUSSELL 2000 INDEX.
SINCE INCEPTION 1 YEAR 5 YEARS (8/31/94) SMALL CAP EQUITY FUND 00.0% 00.0% 00.0% RUSSELL 2000 INDEX 00.0% 00.0% 00.0%
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 Russell 2000 Index is a widely recognized index of U.S. small-cap 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. 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 X and XX of this prospectus. This 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 [ %], [ %] AND [ %], 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." - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
FLEX SHARES Investment Advisory Fees 0.00% Distribution and Service (12b-1) Fees 0.00% Other Expenses 0.00% ------------ Total Annual Fund Operating Expenses 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000 IF YOU DO NOT SELL YOUR SHARES: Flex Shares $0000 $0000 $0000 $0000
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. 14 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
* 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 XX.X%. PROSPECTUS 15 SUNBELT EQUITY FUND THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDING DECEMBER 31, 1997 TO THOSE OF THE RUSSELL 2000 INDEX AND THE S&P SMALLCAP 600 INDEX.
SINCE INCEPTION 1 YEAR 5 YEARS (12/1/80) SUNBELT EQUITY FUND Investor Shares 00.0% 00.0% 00.0% Flex Shares* 00.0% 00.0% 00.0% RUSSELL 2000 INDEX 00.0% 00.0% 00.0% S&P SMALLCAP 600 INDEX 00.0% 00.0% 00.0%
* 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 Russell 2000 Index is a widely recognized index of U.S. small-cap common stock prices. The S&P SmallCap 600 Index is a widely recognized index of U.S. small cap 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. 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 X and XX of this prospectus. This 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 [ %], [ %] AND [ %], 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." - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.00% 0.00% Distribution and Service (12b-1) Fees 0.00% 0.00% Other Expenses 0.00% 0.00% ------ ------ Total Annual Fund Operating Expenses 0.00% 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000 Flex Shares $0000 $0000 $0000 $0000 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $0000 $0000 $0000 $0000 Flex Shares $0000 $0000 $0000 $0000
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 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. 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 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 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.* [CHART] BEST QUARTER WORST QUARTER XX.XX% XX.XX% (XX/XX/XX) (XX/XX/XX)
* 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 XX.X%. PROSPECTUS 17 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 500 INDEX AND THE LIPPER GROWTH FUNDS AVERAGE. THE LIPPER EQUITY INCOME FUNDS AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH INVESTMENT GOALS SIMILAR TO THE FUND'S GOAL.
SINCE INCEPTION 1 YEAR 5 YEARS (10/31/80) VALUE INCOME STOCK FUND Investor Shares 00.0% 00.0% 00.0% Flex Shares* 00.0% 00.0% 00.0% S&P 500 INDEX 00.0% 00.0% 00.0% LIPPER EQUITY INCOME FUNDS AVERAGE 00.0% 00.0% 00.0%
* 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 500 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. 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 X and XX of this prospectus. This 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 [ %], [ %] AND [ %], 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." - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES - --------------------------------------------------------------------------------
INVESTOR SHARES FLEX SHARES Investment Advisory Fees 0.00% 0.00% Distribution and Service (12b-1) Fees 0.00% 0.00% Other Expenses 0.00% 0.00% ------ ------ Total Annual Fund Operating Expenses 0.00% 0.00%
- -------------------------------------------------- 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 $0000 $0000 $0000 $0000 Flex Shares $0000 $0000 $0000 $0000 IF YOU DO NOT SELL YOUR SHARES: Investor Shares $0000 $0000 $0000 $0000 Flex Shares $0000 $0000 $0000 $0000
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 EACH FUND'S PRINCIPAL INVESTMENT FUND INVESTMENT 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.
CAPITAL VALUE INCOME SMALL CAP MID-CAP BALANCED SUNBELT INTERNATIONAL INTERNATIONAL GROWTH STOCK FUND EQUITY EQUITY FUND EQUITY EQUITY FUND EQUITY INDEX FUND FUND FUND FUND - ------------------------------------------------------------------------------------------------------------------------- Fixed Income Obligations X - ------------------------------------------------------------------------------------------------------------------------- Equity Securities X X X X X X X X - -------------------------------------------------------------------------------------------------------------------------
Each Fund may 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 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 $ billion in assets under management. For the fiscal year ended May 31, 1998, STI Capital received advisory fees of: BALANCED FUND................................ % CAPITAL GROWTH FUND.......................... % INTERNATIONAL EQUITY FUND.................... % MID-CAP EQUITY FUND.......................... % SMALL CAP EQUITY FUND........................ % VALUE INCOME STOCK FUND...................... %
Trusco Capital Management, Inc. (Trusco), 50 Hurt Plaza, Suite 1400, Atlanta, Georgia 30303, serves as the Advisor to the Sunbelt Equity Fund. As of May 31, 1998, Trusco had approximately $ billion in assets under management. For the fiscal year ended May 31, 1998, Trusco received advisory fees of [ ]%. 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 %. 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. Prior to joining STI, Mr. Gray served as . Mr. Mills Riddick, CFA, has served as Senior Vice President of STI since . He has managed the Value Income Stock Fund since April 1995. PROSPECTUS 19 EACH FUND'S PRINCIPAL INVESTMENT 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 . 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 Vice President of STI since . 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. 20 PROSPECTUS PURCHASING, SELLING AND EXCHANGING FUND SHARES SIMPLY SPEAKING . . . FOR CUSTOMERS OF 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 21 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 22 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 maximum deferred sales charge as a percentage of the net amount invested is [ ]%. 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 23 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. 24 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 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 , 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. Net Asset Value, Beginning of Period Income From Investment Operations Net Investment Income Net Gains or Losses on Securities (both realized and unrealized) Total From Investment Operations Less Distributions Dividends (from net investment income) Distributions (from capital gains) Returns of Capital Total Distributions Net Asset Value, End of Period Total Return Ratios/Supplemental Data Net Assets, End of Period Ratio of Expenses to Average Net Assets Ratio of Net Income to Average Net Assets Portfolio Turnover Rate 1 Commencement of operations. 2 Total return excludes the effect of sales charge. 3 Annualized.
SIMPLY SPEAKING . . . FINANCIAL HIGHLIGHTS Study these tables to see how each Fund performed since it began investment operations. 26 PROSPECTUS 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, distribution fees, as a percentage of average daily net assets, are as follows:
MAXIMUM FOR FISCAL YEAR ENDING MAY 31, 1998 Capital Growth Fund .68% Value Income Stock Fund .33% Mid-Cap Equity Fund .43% Balanced Fund .28% Sunbelt Equity Fund .43% International Equity Fund .33% International Equity Index Fund .38%
For Flex Shares, the maximum distribution fee is .75% of the average daily net assets of each Fund. For fiscal year ending May 31, 1998, distribution fees were: Capital Growth Fund .XX% Value Income Stock Fund .XX% Small Cap Equity Fund .XX% Mid-Cap Equity Fund .XX% Balanced Fund .XX% Sunbelt Equity Fund .XX% International Equity Fund .XX% International Equity Index Fund .XX%
PROSPECTUS 27 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. 28 PROSPECTUS NOTES PROSPECTUS 29 NOTES 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. 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 Balanced Fund - ------------- Balanced Fund X X X
B-2 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. B-5 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; 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. B-6 Futures Contracts and Options on Futures Contracts Futures contracts provide for the future sale by one party and purchase by another party of a specified amount of a specific security at a specified future time and at a specified price. An option on a futures contract gives the purchase the right, in exchange for a premium, to assume a position in a futures contract at a specified exercise price during the term of the option. A Fund may use futures contracts, and related options for bona fide hedging purposes, to offset changes in the value of securities held or expected to be acquired. They may also be used to minimize fluctuations in foreign currencies or to gain exposure to a particular market or instrument. A Fund will minimize the risk that it will be unable to close out a futures contract by only entering into futures contracts which are traded on national futures exchanges and for which there appears to be a liquid secondary market. Index futures are futures contracts for various indices that are traded on registered securities exchanges. An index futures contract obligates the seller to deliver (and the purchaser to take) an amount of cash equal to a specific dollar amount times the difference between the value of a specific index at the close of the last trading day of the contract and the price at which the agreement is made. Although futures contracts by their terms call for actual delivery or acceptance of the underlying securities, in most cases the contracts are closed out before the settlement date without the making or taking of delivery. Closing out an open futures position is done by taking an opposite position ("buying" a contract which has previously been "sold" or "selling" a contract which has previously been "purchased") in an identical contract to terminate the position. Brokerage commissions are incurred when a futures contract is bought or sold. 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. B-7 Utilization of futures transactions by the Funds does involve the risk of imperfect or no correlation where the securities underlying futures contracts have different maturities than the fund securities being hedged. It is also possible that the Funds could both lose money on futures contracts and experience a decline in value of its fund securities. There is also the risk of loss by the Funds of margin deposits in the event of the bankruptcy of a broker with whom the Funds have an open position in a futures contract or related option. Most futures exchanges limit the amount of fluctuation permitted in futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day's settlement price at the end of a trading session. Once the daily limit has been reached in a particular type of contract, no trades may be made on that day at a price beyond that limit. The daily limit governs only price movement during a particular trading day and therefore does not limit potential losses because the limit may prevent the liquidation of unfavorable positions. Futures contract prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of future positions and subjecting some futures traders to substantial losses. GICs A GIC is a general obligation of the issuing insurance company and not a separate account. The purchase price paid for a GIC becomes part of the general assets of the issuer, and the contract is paid at maturity from the general assets of the issuer. Generally, GICs are not assignable or transferable without the permission of the issuing insurance company. For this reason, an active secondary market in GICs does not currently exist and GICs are considered to be illiquid investments. High Yield Securities High yield securities, commonly referred to as junk bonds, are debt obligations rated below investment grade, i.e., below BBB by 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 B-8 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. 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 or better by S&P or Baa or better 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 B-9 thirty-year fixed rate mortgages, graduated payment mortgages, adjustable rate mortgages, and floating mortgages. Government Pass-Through Securities These are securities that are issued or guaranteed by a U.S. Government agency representing an interest in a pool of mortgage loans. The primary issuers or guarantors of these mortgage-backed securities are the Government National Mortgage Association ("GNMA"), Fannie Mae, and the Federal Home Loan Mortgage Corporation ("FHLMC"). Fannie Mae and FHLMC obligations are not backed by the full faith and credit of the U.S. Government as GNMA certificates are, but Fannie Mae and FHLMC securities are supported by the instrumentalities' right to borrow from the U.S. Treasury. GNMA, Fannie Mae, and FHLMC each guarantees timely distributions of interest to certificate holders. GNMA and Fannie Mae also guarantee timely distributions of scheduled principal. In the past, FHLMC has only guaranteed the ultimate collection of principal of the underlying mortgage loan; however, FHLMC now issues mortgage-backed securities (FHLMC Gold PCS) which also guarantee timely payment of monthly principal reductions. Government and private guarantees do not extend to the securities' value, which is likely to vary inversely with fluctuations in interest rates. 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 B-10 are collateralized mortgage obligations ("CMOs") and real estate mortgage investment conduits ("REMICs"). CMOs CMOs are securities collateralized by mortgages, mortgage pass-throughs, mortgage pay-through bonds (bonds representing an interest in a pool of mortgages where the cash flow generated from the mortgage collateral pool is dedicated to bond repayment), and mortgage-backed bonds (general obligations of the issuers payable out of the issuers' general funds and additionally secured by a first lien on a pool of single family detached properties). CMOs are rated in one of the two highest categories by S&P or Moody's. Many CMOs are issued with a number of classes or series which have different expected maturities. Investors purchasing such CMOs are credited with their portion of the scheduled payments of interest and principal on the underlying mortgages plus all unscheduled prepayments of principal based on a predetermined priority schedule. Accordingly, the CMOs in the longer maturity series are less likely than other mortgage pass-throughs to be prepaid prior to their stated maturity. Although some of the mortgages underlying CMOs may be supported by various types of insurance, and some CMOs may be backed by GNMA certificates or other mortgage pass-throughs issued or guaranteed by U.S. Government agencies or instrumentalities, the CMOs themselves are not generally guaranteed. REMICs REMICs are private entities formed for the purpose of holding a fixed pool of mortgages secured by an interest in real property. REMICs are similar to CMOs in that they issue multiple classes of securities and are rated in one of the two highest categories by S&P or Moody's. Investors may purchase beneficial interests in REMICs, which are known as "regular" interests, or "residual" interests. Guaranteed REMIC pass-through certificates ("REMIC Certificates") issued by Fannie Mae or FHLMC represent beneficial ownership interests in a REMIC trust consisting principally of mortgage loans or Fannie Mae, FHLMC or GNMA-guaranteed mortgage pass-through certificates. For FHLMC REMIC Certificates, FHLMC guarantees the timely payment of interest. GNMA REMIC Certificates are backed by the full faith and credit of the U.S. Government. Stripped Mortgage-Backed Securities Stripped mortgage-backed securities are securities that are created when a U.S. Government agency or a financial institution separates the interest and principal components of a mortgage-backed security and sells them as individual securities. The holder of the "principal-only" security (PO) receives the principal payments made by the underlying mortgage-backed security, while the holder of the "interest-only" security (IO) receives interest payments from the same underlying security. The prices of stripped mortgage-backed securities may be particularly affected by changes in interest rates. As interest rates fall, prepayment rates tend to increase, which tends to reduce prices of IOs and increase prices of POs. Rising interest rates can have the opposite effect. B-11 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 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 B-12 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 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 B-13 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 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. B-14 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 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 B-15 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. 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 B-16 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 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 B-17 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). 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 B-18 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. 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. 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. B-19 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. 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 B-20 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. 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 $___ billion as of _________, 1998. The Advisory B-21 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 $7,586,108 $5,346,850 $2,181,008 $1,602,546 Fund U.S. Government Securities $1,935,898 $2,068,133 $ 518,656 $ 577,384 Money Market Fund Tax-Exempt Money Market $1,687,976 $1,422,777 $ 673,486 $ 685,205 Fund Investment Grade Bond Fund $4,147,888 $3,868,222 $ 644,859 $ 709,139 Investment Grade Tax-Exempt $1,081,635 $ 917,948 $ 190,250 $ 202,552 Bond Fund Short-Term Bond Fund $ 485,613 $ 361,936 $ 138,732 $ 149,827 Florida Tax-Exempt Bond Fund1 $ 220,701 $ 107,618 $ 72,605 $ 72,476 Georgia Tax-Exempt Bond $ 181,715 $ 83,243 $ 63,837 $ 63,991 Fund2 U.S. Government Securities $ 91,748 $ 16,097 $ 58,637 $ 53,312 Fund3 Short-Term U.S. Treasury $ 83,694 $ 36,729 $ 72,064 $ 72,116 Securities Fund
B-22
Fees Paid Fees Waived or Reimbursed ----------------------------------------------- ------------------------------------------- Fund 1998 1997 1996 1998 1997 1996 - --------------------------------- ------------ ------------ ------------ ------------ ----------- ----------- C> Limited-Term Federal Mortgage $ 540,017 $ 224,595 $ 150,604 $ 119,538 Securities Fund Capital Growth Fund $ 12,775,800 $ 12,099,047 $ 1,227,247 $ 1,408,275 Sunbelt Equity Fund $ 4,399,351 $ 3,424,453 $ 442,535 $ 465,317 Value Income Stock Fund $ 12,025,425 $ 9,447,738 $ 392 $ 318,958 Mid-Cap Equity Fund $ 3,008,690 $ 2,057,932 $ 318,871 $ 318,958 Balanced Fund $ 1,025,089 $ 823,692 $ 151,557 $ 166,361 - --------------------------------- ----------- ------------ ------------ ----------- ----------- ----------- Small Cap Equity Fund $ 273,710 * $ 48,251 * Emerging Markets Equity Fund $ 84,210 * $ 52,769 * - --------------------------------- ----------- ------------ ------------ ----------- ----------- ----------- International Equity Fund $ 4,336,172 $ 746,780 $ 157,567 $ 151,947 - --------------------------------- ----------- ------------ ------------ ----------- ----------- ----------- International Equity Index Fund $ 578,197 $ 740,676 $ 80,147 $ 144,349 - --------------------------------- ----------- ------------ ------------ ----------- ----------- ----------- - --------------------------------- ----------- ------------ ------------ ----------- ----------- -----------
*Not in operation during the period. 1 STI Capital Management, advisor to the Florida Tax Exempt Bond Fund reimbursed expenses of $7,846 for the fiscal year ended May 31, 1994. 2 SunTrust Bank, Atlanta, advisor to the Georgia Tax-Exempt Bond Fund reimbursed expenses of $4,536 for the fiscal year ended May 31, 1994. 3 Trusco Capital Management, Inc., advisor to the U.S. Government Securities Fund, reimbursed expenses of $27,216. Banking Laws Current interpretations of federal banking laws and regulations: o prohibit SunTrust and the Advisors from sponsoring, organizing, controlling, or distributing the Funds' shares; but o 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. B-23 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-), CoreFunds, Inc., CrestFunds, Inc., CUFUND, The Expedition Funds, FMB Funds, Inc., First American Funds, Inc., First American Investment Funds, Inc., First American Strategy Funds, Inc., HighMark Funds, Marquis Funds(-Registered Trademark-), Monitor Funds, Morgan Grenfell Investment Trust, The Nevis Funds, Oak Associates Funds, The PBHG Funds, Inc., PBHG Advisor Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds, Santa Barbara Group of Mutual Funds, Inc., SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI International 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 $ 661,962 $315,880 $347,518 $449,492 Fund U.S. Government Securities $ 212,454 $219,380 $ 41,257 $ 72,463 Money Market Fund Tax-Exempt Money Market Fund $ 288,647 $274,701 $ 0 $ 0 Investment Grade Bond Fund $ 435,278 $443,569 $ 0 $ 0
B-24
Fees Paid Fees Waived ----------------------------------------------- --------------------------------------------- Fund 1998 1997 1996 1998 1997 1996 - -------------------------------------- --------------- ---------------- --------------- --------------- -------------- ------------- Investment Grade Tax-Exempt $ 115,500 $108,204 $ 0 $ 0 Bond Fund Florida Tax-Exempt Bond Fund $ 30,279 $ 19,989 $ 0 $ 0 Georgia Tax-Exempt Bond Fund $ 25,353 $ 16,304 $ 0 $ 0 Short-Term Bond Fund $ 64,664 $ 56,317 $ 0 $ 0 U.S. Government Securities Fund $ 13,641 $ 7,311 $ 0 $ 0 Short-Term U.S. Treasury $ 16,075 $ 12,012 $ 0 $ 0 Securities Fund Limited-Term Federal Mortgage $ 71,264 $ 37,854 $ 0 $ 0 Securities Fund Capital Growth Fund $ 817,905 $842,411 $ 0 $ 0 Sunbelt Equity Fund $ 283,101 $842,411 $ 0 $ 0 Value Income Stock Fund $1,009,167 $845,706 $ 0 $ 0 Mid-Cap Equity Fund $ 194,430 $147,613 $ 0 $ 0 Balanced Fund $ 83,063 $ 74,634 $ 0 $ 0 Small Cap Equity Fund $ 18,406 * $ 0 * Emerging Markets Equity Fund $ 6,932 * $ 0 * International Equity Fund $ 240,114 $ 50,404 $ 0 $ 0 International Equity Index Fund $ 48,464 $ 70,690 $ 0 $ 0 - -------------------------------------- --------------- ---------------- --------------- --------------- -------------- ------------- - -------------------------------------- --------------- ---------------- --------------- --------------- -------------- -------------
* 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. B-25 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 $ 32,358 $ 50,016 $ 62 $ 143 Georgia Tax-Exempt Bond Fund $ 6,999 $ 1,208 $ 97 $ 6 Florida Tax-Exempt Bond Fund $ 3,657 $ 1,386 $ 24 $ 14 Short-Term Bond Fund $ 617 $ 1,204 $ 0 $ 0 Investment Grade Tax-Exempt Bond Fund $ 14,487 $ 12,005 $ 20 $ 30 U.S. Government Securities Fund $ 766 $ 7,279 $ 3 $ 0 Short-Term U.S. Treasury Securities Fund $ 796 $ 2,641 $ 0 $ 9 Limited-Term Federal Mortgage Securities Fund $ 882 $ 4,067 $ 11 $ 50 Capital Growth Fund $ 264,747 $ 258,267 $ 958 $ 243 Sunbelt Equity Fund $ 36,784 $ 46,854 $ 47 $ 61 Value Income Stock Fund $ 335,991 $ 306,061 $ 100 $ 3,104 International Equity Fund -- $ 29,032 -- $ 85 International Equity Index Fund -- $ 19,058 -- $ 50 Mid-Cap Equity Fund $ 31,167 $ 91,344 $ 61 $ 197 Balanced Fund $ 13,525 $ 16,540 $ 0 $ 22 - -------------------------------------- --------------- ---------------- --------------- --------------- -------------- ------------- - -------------------------------------- --------------- ---------------- --------------- --------------- -------------- -------------
*Not in operation during the period. B-26 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 3.375% 2.925% 2.250% 1.350% Equity, Mid-Cap Equity, Balanced, Sunbelt Equity, International Equity Index, International Equity, U.S. Government Securities, Investment Grade Tax-Exempt Bond, Investment Grade Bond, and State 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 $ 5,684 $ 4,329 $ 0 $ 0 Georgia Tax-Exempt Bond Fund $ 2,915 $ 2,896 $ 0 $ 0 Florida Tax-Exempt Bond Fund $ 1,632 $ 153 $ 0 $ 0 Short-Term Bond Fund $ 1,678 $ 344 $ 0 $ 0 Investment Grade Tax-Exempt $ 10,407 $ 2,782 $ 0 $ 0 Bond Fund U.S. Government Securities Fund $ 2,823 $ 1,067 $ 0 $ 0 Short-Term U.S. Treasury $ 8,261 $ 3,687 $ 0 $ 0 Securities Fund Limited-Term Federal Mortgage $ 2,067 $ 1,442 $ 0 $ 0 Securities Fund Capital Growth Fund $ 18,958 $ 6,283 $ 0 $ 0 Sunbelt Equity Fund $ 8,144 $ 324 $ 0 $ 0
B-27
Aggregate Sales Charge Payable to Amount Retained by Distributor Fund Distributor - --------------------------------------- ------------------------------------------------ ----------------------------------------- 1998 1997 1996 1998 1997 1996 - --------------------------------------- -------------- --------------- --------------- ------------- ------------- ------------- Value Income Stock Fund $41,778 $ 10,574 $ 0 $ 0 International Equity Fund -- $ 60 -- $ 0 International Equity Index Fund -- $ 392 -- $ 0 Mid-Cap Equity Fund $10,239 $ 5,222 $ 0 $ 0 Balanced Fund $ 4,299 $ 713 $ 0 $ 0 - --------------------------------------- -------------- --------------- --------------- ------------- ------------- ------------- - --------------------------------------- -------------- --------------- --------------- ------------- ------------- -------------
*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-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, B-28 and dividend distribution and tax notices) to these customers with respect to investments in the Trust. Certain state securities laws may require those financial institutions providing such distribution services to register as dealers pursuant to state law. Although banking laws and regulations prohibit banks from distributing shares of open-end investment companies such as the Trust, according to an opinion issued to the staff of the SEC by the Office of the Comptroller of the Currency, financial institutions are not prohibited from acting in other capacities for investment companies, such as providing shareholder services. Should future legislative, judicial, or administrative action prohibit or restrict the activities of financial institutions in connection with providing shareholder services, the Trust may be required to alter materially or discontinue its arrangements with such financial institutions. The Trust has adopted the Investor Plan and the Flex Plan in each case in accordance with the provisions of Rule 12b-1 under the 1940 Act, which Rule regulates circumstances under which an investment company may directly or indirectly bear expenses relating to the distribution of its shares. Continuance of the Investor Plan and the Flex Plan must be approved annually by a majority of the Trustees of the Trust and by a majority of the disinterested Trustees. The Investor Plan and the Flex Plan require that quarterly written reports of amounts spent under the Investor Plan and the Flex Plan, respectively, and the purposes of such expenditures be furnished to and reviewed by the Trustees. The Investor Plan and the Flex Plan may not be amended to increase materially the amount which may be spent thereunder without approval by a majority of the outstanding shares of the affected class of shares of the Trust. All material amendments of the Plans will require approval by a majority of the Trustees of the Trust and of the disinterested Trustees. There is no sales charge on purchases of Flex Shares, but Flex Shares are subject to a contingent deferred sales charge if they are redeemed within one year of purchase. Pursuant to the Distribution Agreement and the Flex Plan, Flex Shares are subject to an ongoing distribution and service fee calculated on each of the Bond Funds', Tax-Exempt Bond Funds', Equity Funds' and Balanced Fund's aggregate average daily net assets attributable to its Flex Shares. For the fiscal years ended May 31, 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 $ 342,798 $ 273,316 U.S. Government Securities Money Market Fund $ 66,016 $ 44,107 Tax-Exempt Money Market Fund $ 89,912 $ 80,845 Investment Grade Bond Fund $ 94,495 $ 78,963 Investment Grade Tax-Exempt Bond Fund $ 100,819 $ 113,467 Short-Term Bond Fund $ 0 $ 5,067 Florida Tax-Exempt Bond Fund $ 0 $ 6,021 Georgia Tax-Exempt Bond Fund $ 0 $ 5,001
B-29
Distribution Fees - Amount Paid ------------------------------- Fund 1998 1997 1996 - ------------------------------------------------------- ---------------------- --------------------- --------------------- U.S. Government Securities Fund $ 1,150 $ 4,218 Short-Term U.S. Treasury Securities Fund $ 0 $ 8,499 Limited-Term Federal Mortgage Securities Fund $ 0 $ 2,360 Capital Growth Fund $ 1,109,436 $ 912,685 Sunbelt Equity Fund $ 80,282 $ 99,366 Value Income Stock Fund $ 437,882 $ 304,282 Mid-Cap Equity Fund $ 56,187 $ 51,485 Balanced Fund $ 2,390 $ 10,808 - -------------------------------------------------------- ---------------------- --------------------- --------------------- International Equity Fund $ 10,778 $ 0 International Equity Index Fund $ 8,005 $ 369 - -------------------------------------------------------- ---------------------- --------------------- --------------------- - -------------------------------------------------------- ---------------------- --------------------- ---------------------
*Not in operation during the period. For the fiscal years ended May 31, 1998, 1997 and 1996, the Funds paid the following amounts pursuant to the Flex Plan:
Distribution Fees - Amount Paid ------------------------------- Fund 1998 1997 1996 - ------------------------------------------------------- ---------------------- --------------------- --------------------- Investment Grade Bond Fund $ 29,558 $ 9,277 Investment Grade Tax-Exempt Bond Fund $ 36,489 $21,786 Short-Term Bond Fund $ 0 $ 0 Florida Tax-Exempt Bond Fund $ 5,962 $ 2,675 Georgia Tax-Exempt Bond Fund $ 20,094 $ 7,409 U.S. Government Securities Fund $ 15,260 $ 4,460 Short-Term U.S. Treasury Securities Fund $ 510 $ 321 Limited-Term Federal Mortgage Securities Fund $ 0 $ 169 Capital Growth Fund $ 201,520 $37,344 Sunbelt Equity Fund $ 27,568 $ 1,560 Value Income Stock Fund $ 433,655 $99,703
B-30
Distribution Fees - Amount Paid ------------------------------- Fund 1998 1997 1996 - ------------------------------------------------------- ---------------------- --------------------- --------------------- Mid-Cap Equity Fund $ 53,907 $10,115 Balanced Fund $ 28,723 $ 6,985 - -------------------------------------------------------- ---------------------- --------------------- --------------------- Small Cap Equity Fund N/A * International Equity Fund $ 18,519 $ 0 International Equity Index Fund $ 0 $ 580 - -------------------------------------------------------- ---------------------- --------------------- --------------------- - -------------------------------------------------------- ---------------------- --------------------- ---------------------
*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 serves as custodian for the International Equity, International Equity Index and Emerging Markets Equity Funds. INDEPENDENT PUBLIC ACCOUNTANTS , 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. B-31 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-), CoreFunds, Inc., CrestFunds, Inc., CUFUND, The Expedition Funds, FMB Funds, Inc., First American Funds, Inc., First American Investment Funds, Inc., First American Strategy Funds, Inc., HighMark Funds, Marquis Funds(-Registered Trademark-), 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, Santa Barbara Group of Mutual Funds, Inc., SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI International 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 Profit Funds Investment Trust, and Santa Barbara Group of Mutual 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 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. B-32 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. 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. B-33 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 - 1800 M Street, N.W. Washington, DC 20036. 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 "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 $__,____ N/A N/A $__,____ for service on two boards Wilton Looney, Trustee $__,____ N/A N/A $__,____ for service on two boards Champney A. McNair, $__,____ N/A N/A $__,____ for service on Trustee two boards F. Wendell Gooch, Trustee $__,____ N/A N/A $__,____ for service on two boards T. Gordy Germany, $__,____ N/A N/A $__,____ for service on Trustee two boards Dr. Bernard F. Sliger, Trustee $__,____ N/A N/A $__,____ for service on two boards Jesse S. Hall, Trustee $__,____ N/A N/A $__,____ for service on two boards Jonathan T. Walton, Trustee $__,____ N/A N/A $__,____ for service on two boards William H. Cammack, $__,____ N/A N/A $__,____ for service on Trustee two boards - ------------------------------- ------------ ------------------ ------------- -------------------------------- - ------------------------------- ------------ ------------------ ------------- --------------------------------
B-34 PERFORMANCE INFORMATION From time to time a Fund may advertise its performance. Performance figures are based on historical earnings and are not intended to indicate future performance. Classes of Shares and Performance The performance of the Trust's Investor Shares and Flex Shares will normally be lower than for Trust Shares because Investor Shares and Flex Shares are subject to distribution, service, and certain transfer agent fees not charged to Trust Shares. Because of their differing distribution expense arrangements, the performance of Flex Shares in comparison to Investor Shares will vary depending upon the investor's investment time horizon. Performance Comparisons Each Fund may periodically compare its performance to other mutual funds tracked by mutual fund rating services, to broad groups of comparable mutual funds, or to unmanaged indices. These comparisons may assume reinvestment of dividends but generally do not reflect deductions for administrative and management costs. COMPUTATION OF YIELD Seven-Day Yield The current yield of the Money Market Funds will be calculated daily based upon the seven days ending on the date of calculation (the "base period"). The yield is computed by determining the net change (exclusive of capital changes) in the value of a hypothetical pre-existing shareholder account having a balance of one share at the beginning of the period, subtracting a hypothetical charge reflecting deductions from shareholder accounts, and dividing such net change by the value of the account at the beginning of the same period to obtain the base period return and multiplying the result by (365/7). Realized and unrealized gains and losses are not included in the calculation of the yield. The effective compound yield of the Funds is determined by computing the net change (exclusive of capital changes) in the value of a hypothetical pre-existing account having a balance of one share at the beginning of the period, subtracting a hypothetical charge reflecting deductions from shareholder accounts, and dividing the difference by the value of the account at the beginning of the base period to obtain the base period return, and then compounding the base period return by adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the result, according to the following formula: Effective Yield = [(Base Period Return + 1)365/7] - 1. The current and the effective yields reflect the reinvestment of net income earned daily on portfolio assets. The Tax-Exempt Money Market Fund's "tax equivalent yield" and "tax equivalent effective yield" are calculated by determining the rate of return that would have to be achieved on a fully taxable investment to produce the after-tax equivalent of the Fund's yield, assuming certain tax brackets for a Shareholder. Tax-exempt yield is calculated according to the same formula except that E equals the interest exempt from federal income tax earned during the period. This tax-exempt yield is then translated into tax-equivalent yield according to the following formula: B-35 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 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 Investor _.__% _.__% N/A N/A Market Fund Trust _.__% _.__% N/A N/A U.S. Government Investor _.__% _.__% N/A N/A Securities Money Market Fund Trust _.__% _.__% N/A N/A Tax-Exempt Money Investor _.__% _.__% _.__% _.__% Market Fund Trust _.__% _.__% _.__% _.__%
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: Yield = (2 (a-b/cd + 1)6 - 1) where a = dividends and interest earned during the period; b = expenses accrued for the period (net of reimbursement); c = the average daily number of shares outstanding during the period that were entitled to receive dividends; and d = the maximum offering price per share on the last day of the period. For the 30-day period ended May 31, 1998, yields on the Funds other than the Money Market Funds were as follows:
Fund Class Yield - ------------------------------------ ---------------------------------------- ---------------------------------- Investment Grade Bond Fund Trust Class _.__% Investor Class _.__% Flex Shares _.__%
B-37
Fund Class Yield - ------------------------------------ ---------------------------------------- ---------------------------------- Investment Grade Tax-Exempt Bond Trust Class _.__% Fund Investor Class _.__% Flex Shares _.__% Short-Term Bond Fund Trust Class _.__% Investor Class _.__% Flex Shares _.__% Florida Tax-Exempt Bond Fund Trust Class _.__% Investor Class _.__% Flex Shares _.__% Georgia Tax-Exempt Bond Fund Trust Class _.__% Investor Class _.__% Flex Shares _.__% Short-Term U.S. Treasury Securities Trust Class _.__% Fund Investor Class _.__% Flex Shares _.__% U.S. Government Securities Fund Trust Class _.__% Investor Class _.__% Flex Shares _.__% Limited-Term Federal Mortgage Trust Class _.__% Securities Fund Investor Class _.__% Flex Shares _.__% Capital Growth Fund Trust Class _.__% Investor Class _.__% Flex Shares _.__% Sunbelt Equity Fund Trust Class _.__% Investor Class _.__% Flex Shares _.__%
B-37
Fund Class Yield - ------------------------------------ ---------------------------------------- ---------------------------------- Value Income Stock Fund Trust Class _.__% Investor Class _.__% Flex Shares _.__% Mid-Cap Equity Fund Trust Class _.__% Investor Class _.__% Flex Shares _.__% Balanced Fund Trust Class _.__% Investor Class _.__% Flex Shares _.__% Small Cap Equity Fund Trust Class _.__% Investor Class N/A Flex Class N/A Emerging Markets Equity Fund Trust Class N/A International Equity Fund Trust Class N/A Investor Class N/A Flex Shares N/A International Equity Index Fund Trust Class N/A Investor Class N/A Flex Shares N/A - ------------------------------------ ---------------------------------------- ---------------------------------- - ------------------------------------ ---------------------------------------- ----------------------------------
*Not in operation during the period. 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: 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-38 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 - _.__%, Georgia Tax-Exempt Bond Fund - _.__%, and Florida Tax-Exempt Bond Fund - -_.__%. 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 - _.__%, Georgia Tax-Exempt Bond Fund - _.__%, and Florida Tax-Exempt Bond Fund -_.__%. 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 - _.__%, Georgia Tax-Exempt Bond Fund - _.__%, and Florida Tax-Exempt Bond Fund -_.__%. 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 be calculated according to the following formula: P (1 + T)n = ERV, where P = a hypothetical initial payment of $1,000; T = average annual total return; n = number of years; and ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the designated time period as of the end of such period. From time to time, the Trust may include the names of clients of the 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. Based on the foregoing, the average annual total returns for the Funds from inception through May 31, 1998 and for the one-year and five-year periods ended May 31, 1998 were as follows:
Average Annual Total Return --------------------------- Fund Class One Year Five Since Years Inception - ---------------------------------------- ------------------------------ ------------- ------------- ----------------- Prime Quality Money Market Fund Trust1 _.__% _.__% _.__% Investor1 _.__% _.__% _.__%
B-39
Average Annual Total Return --------------------------- Fund Class One Year Five Since Years Inception - ---------------------------------------- ------------------------------ ------------- ------------- ----------------- U.S. Government Securities Money Trust1 _.__% _.__% _.__% Market Fund Investor1 _.__% _.__% _.__% Tax-Exempt Money Market Fund Trust1 _.__% _.__% _.__% Investor1 _.__% _.__% _.__% Investment Grade Bond Fund Trust3 _.__% _.__% _.__% Investor--With Sales Load2 _.__% _.__% _.__% Investor--Without Sales Load2 _.__% _.__% _.__% Flex--With Sales Load25 _.__% _.__% _.__% Flex--Without Sales Load25 _.__% _.__% _.__% Investment Grade Tax-Exempt Bond Trust5 _.__% _.__% _.__% Fund Investor--With Sales Load4 _.__% _.__% _.__% Investor--Without Sales Load4 _.__% _.__% _.__% Flex--With Sales Load26 _.__% _.__% _.__% Flex--Without Sales Load26 _.__% _.__% _.__% Short-Term Bond Fund Trust7 _.__% _.__% _.__% Investor--With Sales Load8 _.__% _.__% _.__% Investor--Without Sales Load8 _.__% _.__% _.__% Flex--With Sales Load28 _.__% _.__% _.__% Flex-Without Sales Load28 _.__% _.__% _.__% Florida Tax-Exempt Bond Fund Trust10 _.__% _.__% _.__% Investor--With Sales Load9 _.__% _.__% _.__% Investor--Without Sales Load9 _.__% _.__% _.__% Flex--With Sales Load26 _.__% _.__% _.__% Flex--Without Sales Load26 _.__% _.__% _.__%
B-40
Average Annual Total Return --------------------------- Fund Class One Year Five Since Years Inception - ---------------------------------------- ------------------------------ ------------- ------------- ----------------- Georgia Tax-Exempt Bond Fund Trust9 _.__% _.__% _.__% Investor--With Sales Load11 _.__% _.__% _.__% Investor--Without Sales Load11 _.__% _.__% _.__% Flex--With Sales Load31 _.__% _.__% _.__% Flex--Without Sales Load31 _.__% _.__% _.__% Short-Term U.S. Treasury Securities Trust7 _.__% _.__% _.__% Fund Investor--With Sales Load6 _.__% _.__% _.__% Investor--Without Sales Load6 _.__% _.__% _.__% Flex--With Sales Load27 _.__% _.__% _.__% Flex--Without Sales Load27 _.__% _.__% _.__% U.S. Government Securities Fund Trust21 _.__% _.__% _.__% Investor--With Sales Load20 _.__% _.__% _.__% Investor--Without Sales Load20 _.__% _.__% _.__% Flex-With Sales Load25 _.__% _.__% _.__% Flex--Without Sales Load25 _.__% _.__% _.__% Limited-Term Federal Mortgage Trust23 _.__% _.__% _.__% Securities Fund Investor--With Sales Load22 _.__% _.__% _.__% Investor--Without Sales Load22 _.__% _.__% _.__% Flex--With Sales Load25 _.__% _.__% _.__% Flex--Without Sales Load25 _.__% _.__% _.__% Capital Growth Fund Trust13 _.__% _.__% _.__% Investor--With Sales Load4 _.__% _.__% _.__% Investor--Without Sales Load4 _.__% _.__% _.__% Flex--With Sales Load26 _.__% _.__% _.__% Flex--Without Sales Load26 _.__% _.__% _.__%
B-41
Average Annual Total Return --------------------------- Fund Class One Year Five Since Years Inception - ---------------------------------------- ------------------------------ ------------- ------------- ----------------- Sunbelt Equity Fund Trust19 _.__% _.__% _.__% Investor--With Sales Load18 _.__% _.__% _.__% Investor--Without Sales Load18 _.__% _.__% _.__% Flex--With Sales Load29 _.__% _.__% _.__% Flex--Without Sales Load29 _.__% _.__% _.__% Value Income Stock Fund Trust15 _.__% _.__% _.__% Investor--With Sales Load14 _.__% _.__% _.__% Investor--Without Sales Load14 _.__% _.__% _.__% Flex--With Sales Load26 _.__% _.__% _.__% Flex--Without Sales Load26 _.__% _.__% _.__% Mid-Cap Equity Fund Trust17 _.__% _.__% _.__% Investor--With Sales Load16 _.__% _.__% _.__% Investor--Without Sales Load16 _.__% _.__% _.__% Flex--With Sales Load29 _.__% _.__% _.__% Flex--Without Sales Load29 _.__% _.__% _.__% Balanced Fund Trust19 _.__% _.__% _.__% Investor--With Sales Load18 _.__% _.__% _.__% Investor--Without Sales Load18 _.__% _.__% _.__% Flex--With Sales Load30 _.__% _.__% _.__% Flex--Without Sales Load30 _.__% _.__% _.__%
B-42
Average Annual Total Return --------------------------- Fund Class One Year Five Since Years Inception - ---------------------------------------- ------------------------------ ------------- ------------- ----------------- Small Cap Equity Fund Trust _.__% _.__% _.__% Flex--With Sales Load _.__% _.__% _.__% Flex--Without Sales Load _.__% _.__% _.__% Emerging Markets Equity Fund Trust12 _.__% _.__% _.__% International Equity Fund Trust33 _.__% _.__% _.__% Investor--With Sales Load32 _.__% _.__% _.__% Investor--Without Sales Load32 _.__% _.__% _.__% Flex--With Sales Load32 _.__% _.__% _.__% Flex--Without Sales Load32 _.__% _.__% _.__% International Equity Index Fund Trust24 _.__% _.__% _.__% Investor--With Sales Load24 _.__% _.__% _.__% Investor--Without Sales Load24 _.__% _.__% _.__% Flex--With Sales Load34 _.__% _.__% _.__% Flex--Without Sales Load34 _.__% _.__% _.__% - ---------------------------------------- ------------------------------ ------------- ------------- ----------------- - ---------------------------------------- ------------------------------ ------------- ------------- -----------------
1 Commenced operations 6/8/92 13 Commenced operations 7/1/92 25 Commenced operations 6/2/95 2 Commenced operations 6/11/92 14 Commenced operations 2/17/93 26 Commenced operations 6/2/95 3 Commenced operations 7/16/92 15 Commenced operations 2/12/93 27 Commenced operations 6/23/95 4 Commenced operations 6/9/92 16 Commenced operations 2/1/94 28 Commenced operations 6/21/95 5 Commenced operations 10/21/93 17 Commenced operations 2/2/94 29 Commenced operations 6/6/95 6 Commenced operations 3/18/93 18 Commenced operations 1/4/94 30 Commenced operations 6/15/95 7 Commenced operations 3/15/93 19 Commenced operations 1/3/94 31 Commenced operations 6/7/95 8 Commenced operations 3/22/93 20 Commenced operations 6/9/94 31 Commenced operations 6/7/95 9 Commenced operations 1/18/94 21 Commenced operations 7/31/94 32 Commenced operations 1/2/96 10 Commenced operations 1/25/94 22 Commenced operations 7/17/94 33 Commenced operations 12/1/95 11 Commenced operations 1/19/94 23 Commenced operations 6/7/94 34 Commenced operations 6/8/95 12 Commenced operations 1/31/97 24 Commenced operations 6/6/94
*Not in operation during 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. B-43 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"). 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 B-44 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. 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 B-45 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 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 B-46 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 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 B-47 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 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 B-48 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 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 B-49 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:
Total $ Amount Total $ Amount of Total $ % of Total % of Total Total Brokerage of Brokered Brokerage Amount of Brokerage Brokered Commissions Paid Transactions Commissions Paid Brokerage Commissions Transactions to SFS in Through in FYE 5/31/98 Commissions Paid to Effected Connection with Affiliates for Paid to Affiliated Through Repurchase FYE 5/31/98 Affiliates in Brokers in Affiliated Agreement FYE 5/31/98 FYE 5/31/98 Brokers Transactions for Fund FYE 5/31/98 FYE 5/31/98 - --------------------- ------------------ ------------------ ---------------- ----------------- -------------- ------------------ Prime Quality Money Market Fund U.S. Government Securities Money Market Fund Tax-Exempt Money Market Fund Investment Grade Bond Fund Investment Grade Tax- Exempt Bond Fund Capital Growth Fund Value Income Stock Fund Short-Term Bond Fund Short-Term U.S. Treasury Securities Fund Sunbelt Equity Fund
B-50
Total $ Amount Total $ Amount of Total $ % of Total % of Total Total Brokerage of Brokered Brokerage Amount of Brokerage Brokered Commissions Paid Transactions Commissions Paid Brokerage Commissions Transactions to SFS in Through in FYE 5/31/98 Commissions Paid to Effected Connection with Affiliates for Paid to Affiliated Through Repurchase FYE 5/31/98 Affiliates in Brokers in Affiliated Agreement FYE 5/31/98 FYE 5/31/98 Brokers Transactions for Fund FYE 5/31/98 FYE 5/31/98 - ---------------------- ----------------- ------------------ ---------------- ----------------- -------------- ----------------- Balanced Fund Mid-Cap Equity Fund Florida Tax-Exempt Bond Fund Georgia Tax-Exempt Bond Fund U.S. Government Securities Fund Limited-Term Federal Mortgage Securities Fund Small Cap Equity Fund Emerging Markets Equity Fund International Equity Index Fund International Equity Fund - ---------------------- ----------------- ------------------ ---------------- ----------------- -------------- ----------------- - ---------------------- ----------------- ------------------ ---------------- ----------------- -------------- -----------------
For the fiscal years ended May 31, 1998, 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 Fund 1997 1996 1997 1996 - ----------------------------------- ---------------- ----------------- ------------------- ---------------- Prime Quality Money Market Fund U.S. Government Securities Money Market Fund Tax-Exempt Money Market Fund Investment Grade Bond Fund
B-51
Total $ Amount of Brokerage Total $ Amount of Brokered Commissions Paid Commissions Paid to Affiliates Fund 1997 1996 1997 1996 - ---------------------------------------- ------------- ---------------- -------------- ----------------- Investment Grade Tax-Exempt Bond Fund Short-Term Bond Fund Short-Term U.S. Treasury Securities Fund Florida Tax-Exempt Bond Fund Georgia Tax-Exempt Bond Fund U.S. Government Securities Fund Limited-Term Federal Mortgage Securities Fund Capital Growth Fund Sunbelt Equity Fund Value Income Stock Fund Mid-Cap Equity Fund Balanced Fund Small Cap Equity Fund Emerging Markets Equity Fund International Equity Index Fund International Equity 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 298% Investment Grade Tax-Exempt Bond Fund 489% Short-Term U.S. Treasury Securities Fund 93% Short-Term Bond Fund 118%
B-52
Turnover Rate ------------------------------------------- Fund 1998 1997 - ------------------------------------------- ------------------ ----------------- U.S. Government Securities Fund 21% Limited-Term Federal Mortgage Securities Fund 133% Florida Tax-Exempt Bond Fund 135% Georgia Tax-Exempt Bond Fund 15% Capital Growth Fund 141% Value Income Stock Fund 105% Mid-Cap Equity Fund 152% Balanced Fund 197% Sunbelt Equity Fund 72% Emerging Markets Equity 24% International Equity Fund 139% International Equity Index Fund 2% - ------------------------------------------- ------------------ -----------------
*Not in operation during the period. DESCRIPTION OF SHARES The Declaration of Trust authorizes the issuance of an unlimited number of shares and classes of shares of the Funds each of which represents an equal proportionate interest in that Fund with each other share. Shares are entitled upon liquidation to a pro rata share in the net assets of the Funds. Shareholders have no preemptive rights. The Declaration of Trust provides that the Trustees of the Trust may create additional series of shares or classes of series. All consideration received by the Trust for shares of any additional series and all assets in which such consideration is invested would belong to that series and would be subject to the liabilities related thereto. Share certificates representing shares will not be issued. SHAREHOLDER LIABILITY The Trust is an entity of the type commonly known as a "Massachusetts business trust." Under Massachusetts law, shareholders of such a trust could, under certain circumstances, be held personally liable as partners for the obligations of the trust. Even if, however, the Trust were held to be a partnership, the possibility of the Shareholders' incurring financial loss for that reason appears remote because the Trust's Declaration of Trust contains an express disclaimer of Shareholder liability for obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by or on behalf of B-53 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-54 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
FUND NAME AND ADDRESS NUMBER OF SHARES % OF CLASS ---- ---------------- ---------------- ---------- Prime Quality Money Market Fund SunTrust Bank, Atlanta 1,609,356,679.020 94.99 P.O. Box 105504 Atlanta, GA 30348 US Government Securities Money SunTrust Bank, Atlanta 325,412,698.650 97.67 Market Fund P.O. Box 105504 Atlanta, GA 30348 Tax Exempt Money Market Fund SunTrust Bank, Atlanta 511,730,988.060 100.00 P.O. Box 105504 Atlanta, GA 30348 Investment Grade Bond Fund Trustman 49,952,014.275 67.29 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 16,189,007.837 21.81 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 4,796,379.599 6.46 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Investment Grade Tax Exempt Trustman 7,778,515.440 60.93 Bond Fund Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 3,145,851.016 24.64 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 1,842,376.829 14.43 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Capital Growth Fund Trustman 60,428,509.341 64.85 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870
B-55
FUND NAME AND ADDRESS NUMBER OF SHARES % OF CLASS ---- ---------------- ---------------- ---------- Trustman 19,249,301.684 20.66 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Value Income Stock Fund Trustman 73,908,310.191 60.34 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 28,900,428.203 23.60 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Short-Term U.S. Treasury Trustman 2,135,263.630 44.91 Securities Fund Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 1,809,873.671 38.07 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 697,950.907 14.68 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Short-Term Bond Fund Trustman 5,597,859.576 45.13 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 5,510,881.475 44.42 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Sunbelt Equity Fund Trustman 16,558,968.368 59.48 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 6,596,438.825 23.69 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 1,439,008.331 5.17 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870
B-56
FUND NAME AND ADDRESS NUMBER OF SHARES % OF CLASS ---- ---------------- ---------------- ---------- Mid-Cap Equity Fund Trustman 12,940,561.465 53.72 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 9,033,341.051 37.50 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Balanced Fund Trustman 9,085,673.015 63.09 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Florida Tax-Exempt Bond Fund Trustman 6,210,155.500 70.01 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 1,657,401.093 18.68 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 1,003,322.930 11.31 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Georgia Tax-Exempt Bond Fund Trustman 3,233,025.424 47.88 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 2,531,185.346 37.49 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 987,710.942 14.63 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 International Equity Index Fund Trustman 3,423,005.906 80.81 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 317,819.726 7.50 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870
B-57
FUND NAME AND ADDRESS NUMBER OF SHARES % OF CLASS ---- ---------------- ---------------- ---------- International Equity Fund Trustman 25,113,006.213 59.19 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 14,120,157.945 33.28 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 2,443,377.267 5.76 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 U.S. Government Securities Fund Trustman 1,630,225.728 48.73 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 920,281.854 27.51 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 765,646.506 22.89 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Limited Term Federal Mortgage Trustman 8,568,251.366 63.42 Securities Fund Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 4,259,794.585 31.53 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Emerging Markets Equity Fund Trustman 3,192,092.592 84.58 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870 Trustman 523,921.957 13.88 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 9,873,263.085 32.86 Mail Center 3144 P.O. Box 105870 Atlanta, GA 30348-5870
B-58 INVESTOR SHARES - ---------------
FUND NAME AND ADDRESS NUMBER OF SHARES % OF CLASS ---- ---------------- ---------------- ---------- Prime Quality Money Market BHC Securities Inc 390,278,936.760 87.15 Fund Attn: Cash Sweeps Dept. 2005 Market Street One Commerce Square, 11th Floor Philadelphia, PA 19103-7042 U.S. Government Securities BHC Securities Inc 28,641,582.200 50.73 Money Market Fund Attn: Cash Sweeps Dept. 2005 Market Street One Commerce Square, 11th Floor Philadelphia, PA 19103-7042 Akerman, Senterfitt & Eidson 4,592,405.150 8.13 Attorney Account P.O. Box 231 Orlando, FL 32802-0231 Tax Exempt Money Market Fund BHC Securities Inc 101,481,993.560 71.96 Attn: Cash Sweeps Dept. 2005 Market Street One Commerce Square, 11th Floor Philadelphia, PA 19103-7042 STCM 14,275,000.000 10.12 Omnibus Account P.O. Box 4418, Ctr.3910 Atlanta, GA 30302-4418 Investment Grade Bond Fund BHC Securities Inc. 1,641,162.068 53.64 Trade House Account Attn: Mutual Funds Dept One Commerce Square, 2005 Market Street Philadelphia, PA 19103-7042 Investment Grade Tax-Exempt BHC Securities Inc. 744,706.225 30.51 Bond Fund Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042 Capital Growth Fund BHC Securities Inc. 6,801,975.339 41.43 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042
B-59
FUND NAME AND ADDRESS NUMBER OF SHARES % OF CLASS ---- ---------------- ---------------- ---------- Value Income Stock Fund BHC Securities Inc. 8,556,241.295 56.25 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. 108,166.820 39.37 Securities Fund Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042 Clarence A. Rittenhouse & 64,212.090 23.37 Margaret S. Rittenhouse JT WROS 12993 Lampadaire Drive Creve Coeur, MO 63141-7361 International Investment 49,768.123 18.11 Conference Inc. Attn: Sandy Lawrence 6310 Sunset Drive Miami, FL 33143-4823 Short-Term Bond Fund BHC Securities Inc. 131,806.543 70.21 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042 Bartow Memorial Hospital 12,744.755 6.79 Foundation Inc. 1239 East Main Street Bartow, FL 33830-5005 Sunbelt Equity Fund BHC Securities Inc. 1,163,757.889 55.49 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042 Mid-Cap Equity Fund BHC Securities Inc. 1,244,190.233 69.06 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042 Balanced Fund BHC Securities Inc. 389,831.548 60.08 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042
B-60
FUND NAME AND ADDRESS NUMBER OF SHARES % OF CLASS ---- ---------------- ---------------- ---------- Florida Tax-Exempt Bond Fund BHC Securities Inc. 99,392.323 31.95 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042 Dexter Hawks & 33,203.647 10.67 Joanne Hawks JT WROS 26 Sea Lane - Cornfield Point Old Saybrook, CT 06745-1923 Mildred Meinhart Rast 31,192.296 10.03 821 Lake Port Boulevard Apt. #A404 Leesburg, FL 34748-7698 Georgia Tax-Exempt Bond Fund BHC Securities Inc. 212,520.534 58.09 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042 Patrick J. Doran & 30,574.457 8.36 Norma R. Doran JTTEN 2024 Fisher Trail NE Atlanta, GA 30345-3429 International Equity Index Fund BHC Securities Inc. 343,691.086 65.13 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042 Community First National 35,525.557 6.73 Bank RPO Tyler 401(k) RSP Attn: Kathy Lindstrom Main At Broadway Fargo, ND 58103-1906 International Equity Fund BHC Securities Inc. 892,500.100 75.33 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042 U.S. Government Securities Fund BHC Securities, Inc. 291,194.746 95.95 Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042
B-61
FUND NAME AND ADDRESS NUMBER OF SHARES % OF CLASS ---- ---------------- ---------------- ---------- Limited-Term Federal Mortgage BHC Securities Inc. 232,245.669 88.43 Securities Fund Trade House Account Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042
FLEX SHARES - -----------
FUND NAME AND ADDRESS NUMBER OF SHARES % OF CLASS ---- ---------------- ---------------- ---------- Short-Term U.S. Treasury BHC Securities Inc. 16,061.583 11.10 Securities Fund FAO 21558256 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042 BHC Securities Inc. 11,296.628 7.81 FAO 20216122 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042 BHC Securities Inc. 7,717.534 5.34 FAO 21180400 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042 BHC Securities Inc. 7,473.131 5.17 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. 22,672.641 13.51 FAO 21549889 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042 BHC Securities Inc. 9,569.326 5.70 FAO 21180400 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042
B-62
FUND NAME AND ADDRESS NUMBER OF SHARES % OF CLASS ---- ---------------- ---------------- ---------- BHC Securities Inc. 8,452.666 5.04 FAO 21107805 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042 Florida Tax-Exempt Bond Fund BHC Securities, Inc. 49,928.948 5.39 FAO 20951046 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042 BHC Securities Inc. 149,253.731 16.10 FAO 20439207 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042 Georgia Tax-Exempt Bond Fund BHC Securities Inc. 70,097.430 8.27 FAO 21141197 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042 International Equity Index Fund BHC Securities Inc. 28,461.638 26.79 FAO 20519082 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042 BHC Securities, Inc. 5,833.097 5.49 FAO 21119083 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042 BHC Securities, Inc. 5,550.052 5.22 FAO 21549889 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042 U.S. Government Securities Fund BHC Securities, Inc. 23,786.547 5.88 FAO 21180443 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7042
B-63
FUND NAME AND ADDRESS NUMBER OF SHARES % OF CLASS ---- ---------------- ---------------- ---------- Limited-Term Federal Mortgage BHC Securities Inc. 11,124.956 7.24 Securities Fund FAO 21838525 Attn: Mutual Funds Dept One Commerce Square 2005 Market Street Philadelphia, PA 19103-7042
EXPERTS - ------- The financial statements as of May 31, 1998 have been audited by _________________, Independent Public Accountants, as indicated in their report dated July ___, 1998 with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report. B-64 STI CLASSIC FUNDS PART C: OTHER INFORMATION Post-Effective Amendment No. 24 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 filed herewith. (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) Not applicable (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) Not applicable. (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 herewith. 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 -- -- Director Hunting F. Deutsch -- -- Director Anthony R. Gray -- -- Chairman & Chief Investment Officer James R. Wood -- -- President Daniel Jaworski -- -- Senior Vice President Elliott A. Perny -- -- Executive Vice President & Chief Portfolio Manager Stuart F. Van Arsdale -- -- Senior Vice President Jonathan D. Rich -- -- Director Robert Buhrmann -- -- Senior Vice President Larry M. Cole -- -- Senior Vice President L. Earl Denney -- -- Executive Vice President Thomas A. Edgar -- -- Senior Vice President
C-3
Name of Connection with Name Other Company Other Company ---- ------------- --------------- Daniel G. Shannon -- -- Senior Vice President Ronald Schwartz -- -- Senior Vice President Ryan R. Burrow Catalina Lighting Director/25% owner Senior Vice President Mills A. Riddick -- -- Senior Vice President Christopher A. Jones -- -- Senior Vice President David E. West -- -- 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 Gaylord O. Coan Gold Kist, Inc. President & CEO Director Hindsight Corp. Director A.D. Correll Georgia-Pacific Corporation President & CEO Director R.W. Courts, II Atlantic Realty Company President Director Ronald S. Crowding -- -- A.W. Dahlberg The Southern Company President Director William W. Gaston Gaston & Gaston General Partner Director Gaston Development Co., Inc. President Charles B. Ginden -- -- Director
C-4
Name of Connection with Name Other Company Other Company ---- ------------- --------------- Roberto C. Goizueta The Coca-Cola Company Chairman of the Director Board Edward P. Gould Trust Company of Georgia Chairman of the Director Board T. Marshall Hahn, Jr. Georgia-Pacific Honorary Chairman Director Corporation Jesse Hill, Jr. Atlanta Life Insurance President Director Company L. Phillip Humann SunTrust Banks, Inc. President & Director Services Resources Treasurer Corporation William B. Johnson The Ritz Carlton Hotel Chairman of the Director Company Board Hicks J. Lanier Oxford Industries, Inc. Chairman of the Board Director & President Pinehill Development Co. 30% owner Joseph L. Lanier, Jr. Dan River, Inc. Chairman of the Director Board Braelan Group Chairman Robert R. Long Trust Company Bank President Director Arthur L. Montgomery -- -- Director H.G. Patillo Patillo Construction Chairman of the Director Company Board 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 Robert W. Scherer -- -- Director Charles R. Shufeldt -- -- Executive Vice President Donald Wayne Thurmond -- -- Senior Vice President James B. Williams SunTrust Banks, Inc. Chairman of the Director Board Gerald T. Adams -- -- Senior Vice President James R. Albach -- -- Group Vice President Virginia D. Anderson -- -- Assistant Vice President Christina Bird -- -- First Vice President Edward Burgess -- -- Vice President Gay Cash -- -- Vice President Krista Lee Cosgrove -- -- Trust Officer Mark Elam -- -- Vice President
C-6
Name of Connection with Name Other Company Other Company ---- ------------- --------------- Joseph B. Foley, Jr. -- -- First Vice President Thomas R. Frisbie -- -- Group Vice President Molly Guenther -- -- Assistant Vice President Benjamin S. Harris -- -- Vice President Jethro H. Irby, III -- -- First Vice President V. Jere Koser -- -- Group Vice President Richard A. Makepeace -- -- Assistant Vice President Sally S. McKinley -- -- Assistant Vice President James B. Murphy, III -- -- Vice President James E. Russell -- -- Vice President Mark Stancil -- -- Assistant Vice President David E. Thompson -- -- Vice President Charles C. Watson -- -- Group Vice President
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 International Trust August 30, 1988 The Advisors' Inner Circle Fund November 14, 1991 The Pillar Funds February 28, 1992 CUFUND May 1, 1992 CoreFunds, Inc. October 30, 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 Marquis Funds-Registered Trademark- August 17, 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 FMB Funds, Inc. March 1, 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 June 29, 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 has duly caused this Post-Effective Amendment No. 24 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 29th day of July, 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 July 29, 1998 - ------------------------------ F. Wendell Gooch * Trustee July 29, 1998 - ------------------------------ Daniel S. Goodrum * Trustee July 29, 1998 - ------------------------------ Jesse S. Hall * Trustee July 29, 1998 - ------------------------------ Wilton Looney * Trustee July 29, 1998 - ------------------------------ Champney A. McNair * Trustee July 29, 1998 - ------------------------------ T. Gordy Germany * Trustee July 29, 1998 - ------------------------------ Bernard F. Sliger * Trustee July 29, 1998 - ------------------------------ Jonathan T. Walton * Trustee July 29, 1998 - ------------------------------ William H. Cammack * Controller, Treasurer & July 29, 1998 - ------------------------------ Chief Financial Officer Carol Rooney /s/ Mark Nagle President & Chief July 29, 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 filed herewith. 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 Not applicable. 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 Not applicable 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 filed herewith C-15 EX-99.D4 2 EXHIBIT 99.D4 Exhibit 99.D4 INVESTMENT ADVISORY AGREEMENT AGREEMENT made this 20th day of December, 1993, by and between STI Classic Funds, a Massachusetts business trust (the "Trust"), and Trust Company Bank, (the "Adviser"). WHEREAS, the Trust is an open-end, diversified management investment company registered under the Investment Company Act of 1940, as amended, consisting of several series of shares, each having its own investment policies; and WHEREAS, the Trust has retained SEI Financial Management Corporation (the "Administrator") to provide administration of the Trust's operations, subject to the control of the Board of Trustees; WHEREAS, the Trust desires to retain the Adviser to render investment management services with respect to its Georgia Tax-Exempt Bond Fund and such other funds as the Trust and the Adviser may agree upon (the "Portfolios"), and the Adviser is willing to render such services: NOW, THEREFORE, in consideration of mutual covenants herein contained, the parties hereto agree as follows: 1. Duties of Adviser. The Trust employs the Adviser to manage the investment and reinvestment of the assets, and to continuously review, supervise, and administer the investment program of the Portfolios, to determine in its discretion the securities to be purchased or sold, to provide the Administrator and the Trust with records concerning the Adviser's activities which the Trust is required to maintain, and to render regular reports to the Administrator and to the Trust's Officers and Trustees concerning the Adviser's discharge of the foregoing responsibilities. The Adviser shall discharge the foregoing responsibilities subject to the control of the Board of Trustees of the Trust and in compliance with such policies as the Trustees may from time to time establish, and in compliance with the objectives, policies, and limitations for each such Portfolio set forth in the Trust's prospectus and statement of additional information as amended from time to time, and applicable laws and regulations. The Adviser accepts such employment and agrees, at its own expense, to render the services and to provide the office space, furnishings and equipment and the personnel required by it to perform the services on the terms and for the compensation provided herein. 2. Portfolio Transactions. The Adviser is authorized to select the brokers or dealers that will execute the purchases and sales of portfolio securities for the Portfolios and is directed to use its best efforts to obtain the best net results as described in the Trust's prospectus and statement of additional information from time to time. The Adviser will promptly communicate to the Administrator and to the officers and the Trustees of the Trust such information relating to portfolio transactions as they may reasonably request. It is understood that the Adviser will not be deemed to have acted unlawfully, or to have breached a fiduciary duty to the Trust or be in breach of any obligation owing to the Trust under this Agreement, or otherwise, solely by reason of its having directed a securities transaction on behalf of the Trust to a broker-dealer in compliance with the provisions of Section 28(e) of the Securities Exchange Act of 1934. 3. Compensation of the Adviser. For the services to be rendered by the Adviser as provided in Sections 1 and 2 of this Agreement, the Trust shall pay to the Adviser compensation at the rate specified in the Schedule(s) which are attached hereto and made a part of this Agreement. Such compensation shall be paid to the Adviser at the end of each month, and calculated by applying a daily rate, based on the annual percentage rates as specified in the attached Schedule(s), to the assets. The fee shall be based on the daily net assets for the month involved. All rights of compensation under this Agreement for services performed as of the termination date shall survive the termination of this Agreement. 4. Other Expenses. The Adviser shall pay all expenses of preparing (including typesetting), printing and mailing reports, prospectuses, statements of additional information, and sales literature to prospective clients to the extent these expenses are not borne by the Trust under a distribution plan adopted pursuant to Rule 12b-1. 5. Excess Expenses. If the expenses for any Portfolio for any fiscal year (including fees and other amounts payable to the Adviser, but excluding interest, taxes, brokerage costs, litigation, and other extraordinary costs) as calculated every business day would exceed the expense limitations imposed on investment companies by any applicable statute or regulatory authority of any jurisdiction in which Shares are qualified for offer and sale, the Adviser shall bear such excess cost. However, the Adviser will not bear expenses of the Trust or any Portfolio which would result in the Trust's inability to qualify as a regulated investment company under provisions of the Internal Revenue Code. Payment of expenses by the Adviser pursuant to this Section 5 shall be settled on a monthly basis (subject to fiscal year end reconciliation) by a reduction in the fee payable to the Adviser for such month pursuant to Section 3 and, if such reduction shall be insufficient to offset such expenses, by reimbursing the Trust. 6. Reports. The Trust and the Adviser agree to furnish to each other, if applicable, current prospectuses, proxy statements, reports to shareholders, certified copies of their financial statements, and such other information with regard to their affairs as each may reasonably request. 7. Status of Adviser. The services of the Adviser to the Trust are not to be deemed exclusive, and the Adviser shall be free to render similar services to others so long as its services to the Trust are not impaired thereby. The Adviser shall be deemed to be an independent contractor and shall, unless otherwise expressly provided or authorized, have no authority to act for or represent the Trust in any way or otherwise be deemed an agent of the Trust. 8. Certain Records. Any records required to be maintained and preserved pursuant to the provision of Rule 31a-1 and Rule 31a-2 promulgated under the Investment Company Act of 1940 which are prepared or maintained by the Adviser on behalf of the Trust are the property of the Trust and will be surrendered promptly to the Trust on request. 9. Limitation of Liability of Adviser. The duties of the Adviser shall be confined to those expressly set forth herein, and no implied duties are assumed by or may be asserted against the Adviser hereunder. The Adviser shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission in carrying out its duties hereunder, except a loss resulting from willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties hereunder, except as may otherwise be provided under provisions of applicable state law which cannot be waived or modified hereby. (As used in this Paragraph 9, the term "Adviser" shall include directors, officers, employees and other corporate agents of the Adviser as well as that corporation itself). 10. Permissible Interests. Trustees, agents, and shareholders of the Trust are or may be interested in the Adviser (or any successor thereof) as directors, partners, officers, or shareholders, or otherwise; directors, partners, officers, agents, and shareholders of the Adviser are or may be interested in the Trust as Trustees, shareholders or otherwise; and the Adviser (or any successor) is or may be interested in the Trust as a shareholder or otherwise. In addition, brokerage transactions for the trust may be effected through affiliates of the Adviser if approved by the Board of Trustees, subject to the rules and regulations of the Securities and Exchange Commission. 11. Duration and Termination. This Agreement, unless sooner terminated as provided herein, shall remain in effect until [two years from date of execution], and thereafter, for periods of one year so long as such continuance thereafter is specifically approved at least annually (a) by the vote of a majority of those Trustees of the Trust who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval, and (b) by the Trustees of the Trust or by vote of a majority of the outstanding voting securities of each Portfolio; provided, however, that if the shareholders of any Portfolio fail to approve the Agreement as provided herein, the Adviser may continue to serve hereunder in the manner and to the extent permitted by the Investment Company Act of 1940 and rules and regulations thereunder. The foregoing requirement that continuance of this Agreement be "specifically approved at least annually" shall be construed in a manner consistent with the Investment Company Act of 1940 and the rules and regulations thereunder. This Agreement may be terminated as to any Portfolio at any time, without the payment of any penalty by vote of a majority of the Trustees of the Trust or by vote of a majority of the outstanding voting securities of the Portfolio on not less than 30 days nor more than 60 days written notice to the Adviser, or by the Adviser at any time without the payment of any penalty, on 90 days written notice to the Trust. This Agreement will automatically and immediately terminate in the event of its assignment. Any notice under this Agreement shall be given in writing, addressed and delivered, or mailed postpaid, to the other party at any office of such party. As used in this section 11, the terms "assignment", "interested persons", and a "vote of a majority of the outstanding voting securities" shall have the respective meanings set forth in the Investment Company Act of 1940 and the rules and regulations thereunder; subject to such exemptions as may be granted by the Securities and Exchange Commission under said Act. 12. Notice. Any notice required or permitted to be given by either party to the other shall be deemed sufficient if sent by registered or certified mail, postage prepaid, addressed by the party giving notice to the other party at the last address furnished by the other party to the party giving notice: if to the Trust, at 680 East Swedesford Road, Wayne, PA and if to the Adviser at 13. Severability. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. 14. Governing Law. This Agreement shall be governed by the laws of the Commonwealth of Massachusetts. A copy of the Declaration of Trust of the Trust is on file with the Secretary of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Trust as Trustees, and is not binding upon any of the Trustees, officers, or shareholders of the Trust individually but binding only upon the assets and property of the Trust. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the day and year first written above. STI Classic Funds By: /s/ Kevin P. Robins ------------------- Trust Company Bank By: /s/ Gerard T. Adams ------------------- Amended Schedule A to the Investment Advisory Agreement between STI CLASSIC FUNDS and Trust Company Bank Pursuant to Article 3, the Trust shall pay the Adviser compensation at an annual rate as follows: Portfolio Fee (in basis points) Georgia Tax-Exempt Bond Fund .65% EX-99.P 3 EXHIBIT 99-P Exhibit 99.P STI CLASSIC FUNDS POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned Trustee of STI Classic Funds (the "Trust"), a business trust organized under the laws of the Commonwealth of Massachusetts, hereby constitutes and appoints Mark Nagle, Joseph M. O'Donnell and Kevin Robins, and each of them singly, a true and lawful attorney-in-fact and agent with full power of substitution and re-substitution, to sign for and in the name of the undersigned, place and stead, and in the capacity indicated below, to sign any and all Registration Statements and all amendments thereto relating to the offering of the Trust's shares under the provisions of the Investment Company Act of 1940 and/or the Securities Act of 1933, each such Act as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission, and any appropriate securities commission of the several states, granting unto said attorneys-in-fact and agents, and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto executed and sealed this document as of the date set forth below. /s/ William H. Cammack July 9, 1998 - --------------------------------- ------------------- Signature of Trustee Date William H. Cammack - --------------------------------- Print Name STI CLASSIC FUNDS POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned Trustee of STI Classic Funds (the "Trust"), a business trust organized under the laws of the Commonwealth of Massachusetts, hereby constitutes and appoints Mark Nagle, Joseph M. O'Donnell and Kevin Robins, and each of them singly, a true and lawful attorney-in-fact and agent with full power of substitution and re-substitution, to sign for and in the name of the undersigned, place and stead, and in the capacity indicated below, to sign any and all Registration Statements and all amendments thereto relating to the offering of the Trust's shares under the provisions of the Investment Company Act of 1940 and/or the Securities Act of 1933, each such Act as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission, and any appropriate securities commission of the several states, granting unto said attorneys-in-fact and agents, and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto executed and sealed this document as of the date set forth below. /s/ Jonathan T. Walton July 3, 1998 - --------------------------------- ------------------- Signature of Trustee Date Jonathan T. Walton - --------------------------------- Print Name STI CLASSIC FUNDS POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned Trustee of STI Classic Funds (the "Trust"), a business trust organized under the laws of the Commonwealth of Massachusetts, hereby constitutes and appoints Mark Nagle, Joseph M. O'Donnell and Kevin Robins, and each of them singly, a true and lawful attorney-in-fact and agent with full power of substitution and re-substitution, to sign for and in the name of the undersigned, place and stead, and in the capacity indicated below, to sign any and all Registration Statements and all amendments thereto relating to the offering of the Trust's shares under the provisions of the Investment Company Act of 1940 and/or the Securities Act of 1933, each such Act as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission, and any appropriate securities commission of the several states, granting unto said attorneys-in-fact and agents, and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto executed and sealed this document as of the date set forth below. /s/ Jesse Hall July 4, 1998 - --------------------------------- ------------------- Signature of Trustee Date Jesse Hall - --------------------------------- Print Name STI CLASSIC FUNDS POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned Trustee of STI Classic Funds (the "Trust"), a business trust organized under the laws of the Commonwealth of Massachusetts, hereby constitutes and appoints Mark Nagle, Joseph M. O'Donnell and Kevin Robins, and each of them singly, a true and lawful attorney-in-fact and agent with full power of substitution and re-substitution, to sign for and in the name of the undersigned, place and stead, and in the capacity indicated below, to sign any and all Registration Statements and all amendments thereto relating to the offering of the Trust's shares under the provisions of the Investment Company Act of 1940 and/or the Securities Act of 1933, each such Act as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission, and any appropriate securities commission of the several states, granting unto said attorneys-in-fact and agents, and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto executed and sealed this document as of the date set forth below. /s/ F. W. Gooch July 6, 1998 - --------------------------------- ------------------- Signature of Trustee Date F. W. Gooch - --------------------------------- Print Name STI CLASSIC FUNDS POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned Trustee of STI Classic Funds (the "Trust"), a business trust organized under the laws of the Commonwealth of Massachusetts, hereby constitutes and appoints Mark Nagle, Joseph M. O'Donnell and Kevin Robins, and each of them singly, a true and lawful attorney-in-fact and agent with full power of substitution and re-substitution, to sign for and in the name of the undersigned, place and stead, and in the capacity indicated below, to sign any and all Registration Statements and all amendments thereto relating to the offering of the Trust's shares under the provisions of the Investment Company Act of 1940 and/or the Securities Act of 1933, each such Act as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission, and any appropriate securities commission of the several states, granting unto said attorneys-in-fact and agents, and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto executed and sealed this document as of the date set forth below. /s/ Bernard F. Sliger July 6, 1998 - --------------------------------- ------------------- Signature of Trustee Date Bernard F. Sliger - --------------------------------- Print Name STI CLASSIC FUNDS POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned Trustee of STI Classic Funds (the "Trust"), a business trust organized under the laws of the Commonwealth of Massachusetts, hereby constitutes and appoints Mark Nagle, Joseph M. O'Donnell and Kevin Robins, and each of them singly, a true and lawful attorney-in-fact and agent with full power of substitution and re-substitution, to sign for and in the name of the undersigned, place and stead, and in the capacity indicated below, to sign any and all Registration Statements and all amendments thereto relating to the offering of the Trust's shares under the provisions of the Investment Company Act of 1940 and/or the Securities Act of 1933, each such Act as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission, and any appropriate securities commission of the several states, granting unto said attorneys-in-fact and agents, and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto executed and sealed this document as of the date set forth below. /s/ T. Gordy Germany July 3, 1998 - --------------------------------- ------------------- Signature of Trustee Date T. Gordy Germany - --------------------------------- Print Name STI CLASSIC FUNDS POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned Trustee of STI Classic Funds (the "Trust"), a business trust organized under the laws of the Commonwealth of Massachusetts, hereby constitutes and appoints Mark Nagle, Joseph M. O'Donnell and Kevin Robins, and each of them singly, a true and lawful attorney-in-fact and agent with full power of substitution and re-substitution, to sign for and in the name of the undersigned, place and stead, and in the capacity indicated below, to sign any and all Registration Statements and all amendments thereto relating to the offering of the Trust's shares under the provisions of the Investment Company Act of 1940 and/or the Securities Act of 1933, each such Act as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission, and any appropriate securities commission of the several states, granting unto said attorneys-in-fact and agents, and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto executed and sealed this document as of the date set forth below. /s/ Champney A. McNair July 11, 1998 - --------------------------------- ------------------- Signature of Trustee Date Champney A. McNair - --------------------------------- Print Name STI CLASSIC FUNDS POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned Trustee of STI Classic Funds (the "Trust"), a business trust organized under the laws of the Commonwealth of Massachusetts, hereby constitutes and appoints Mark Nagle, Joseph M. O'Donnell and Kevin Robins, and each of them singly, a true and lawful attorney-in-fact and agent with full power of substitution and re-substitution, to sign for and in the name of the undersigned, place and stead, and in the capacity indicated below, to sign any and all Registration Statements and all amendments thereto relating to the offering of the Trust's shares under the provisions of the Investment Company Act of 1940 and/or the Securities Act of 1933, each such Act as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission, and any appropriate securities commission of the several states, granting unto said attorneys-in-fact and agents, and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto executed and sealed this document as of the date set forth below. /s/ Wilton D. Looney July 6, 1998 - --------------------------------- ------------------- Signature of Trustee Date Wilton D. Looney - --------------------------------- Print Name STI CLASSIC FUNDS POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned Trustee of STI Classic Funds (the "Trust"), a business trust organized under the laws of the Commonwealth of Massachusetts, hereby constitutes and appoints Mark Nagle, Joseph M. O'Donnell and Kevin Robins, and each of them singly, a true and lawful attorney-in-fact and agent with full power of substitution and re-substitution, to sign for and in the name of the undersigned, place and stead, and in the capacity indicated below, to sign any and all Registration Statements and all amendments thereto relating to the offering of the Trust's shares under the provisions of the Investment Company Act of 1940 and/or the Securities Act of 1933, each such Act as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission, and any appropriate securities commission of the several states, granting unto said attorneys-in-fact and agents, and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto executed and sealed this document as of the date set forth below. /s/ Daniel S. Goodrum July 3, 1998 - --------------------------------- ------------------- Signature of Trustee Date Daneil S. Goodrum - --------------------------------- Print Name STI CLASSIC FUNDS POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or officer of STI Classic Funds (the "Trust"), a business trust organized under the laws of The Commonwealth of Massachusetts, hereby constitutes and appoints David G. Lee and Kevin P. Robins, and each of them singly, his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, to sign for him or her and in his or her name, place and stead, and in the capacity indicated below, to sign any or all amendments (including post-effective amendments) to the Fund's Registration Statement on Form N-1A under the provisions of the Investment Company Act of 1940 and the Securities Act of 1933, each such Act as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and seal as of the date set forth below. /s/ Carol Rooney Date: 6/24/97 - ---------------------------------------- ------- Carol Rooney Controller, Treasurer & Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----